{"id":214937,"date":"2024-11-11T10:15:00","date_gmt":"2024-11-11T15:15:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=214937"},"modified":"2024-12-09T10:53:15","modified_gmt":"2024-12-09T15:53:15","slug":"economic-update-november-11-2024","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/economic-update-november-11-2024\/","title":{"rendered":"Economic Update: November 11, 2024"},"content":{"rendered":"\n

Growth<\/h2>\n\n\n\n

The U.S. economy expanded at a solid 2.8% saar, notching a second consecutive quarter of above trend growth. Consumer spending continued to power the economy forward, rising 3.7%, while government spending also looked strong. Business spending grew by a modest 0.3% with residential investment being a notable drag. With businesses likely rushing to build up inventory ahead of the port workers strikes in late September, imports jumped 11.9% and weighed on growth. Overall, despite concerns about the labor market and the manufacturing sector, economic momentum in the U.S. remains solid.<\/p>\n\n\n\n

Jobs<\/h2>\n\n\n\n

The October Jobs report showed the U.S. economy added an underwhelming 12,000 jobs last month, although hurricanes and strikes likely muddled the data. In fact, survey response rates were below average, an above average 512K people reported being out of work due to bad weather and BLS estimates suggest 44K workers were on strike during the survey week. Downward revisions were also gloomy, removing 112K jobs from the prior two months. Other details looked promising. The unemployment rate held steady at 4.1% while wages, likely biased higher by weather, rose by a solid 0.4% m\/m. While weaker than expected, this report was distorted, and overall data show that the labor market, while cooling, still looks solid.<\/p>\n\n\n\n

Profits<\/h2>\n\n\n\n

The 3Q24 earnings season is wrapping up with more than 80% of market cap having reported. Analysts are currently expecting pro forma earnings per share (EPS) of $59.57, representing growth of 4.2% y\/y and 1.4% q\/q. Growth sectors like information technology and communication services are likely to deliver another quarter of double digit earnings growth. Elsewhere, cyclical value sectors are projected to see earnings fall. Moving forward, lower rates and regulatory uncertainty should provide a boost to manufacturing-tied sectors along with financials as management teams ramp up investment. This means less focus on returning capital to shareholders, so sales growth will be an increasingly important driver of future earnings.<\/p>\n\n\n\n

Inflation<\/h2>\n\n\n\n

The September CPI report came in a touch hotter than expected, although inflation remained on its steady downward path. Headline inflation rose 0.2% m\/m and 2.4% y\/y, marking the slowest annual increase since early 2021, while core inflation rose 0.3% m\/m and 3.3% y\/y. In the details, food prices (+0.4% m\/m) rose at their fastest pace since early 2023. This was partially offset by lower energy prices, reflecting sharp declines in gasoline and fuel oils. Core goods ended a 6-month streak of deflation, driven by strength in apparel prices but remained benign. Elsewhere, shelter inflation came in below expectations, easing to 0.2% m\/m. Excluding shelter, higher auto insurance prices (+1.2%) and airfares (+3.2%) caused core services inflation to accelerate. Overall, while inflation could see some fits and starts, it remains on a well-paved, predictable path downward.<\/p>\n\n\n\n

Rates<\/h2>\n\n\n\n

At its November meeting, the FOMC unanimously voted to lower the federal funds rate by 25bps to a range of 4.50% to 4.75%. During the press conference, Chair Powell said that progress on disinflation and employment data led the decision, although the change in the statement language suggests the Fed acknowledges that disinflationary progress has somewhat plateaued above 2%. He didn’t provide too much forward guidance given the high level of uncertainty, causing markets to be less certain about the pace and destination of future cuts.<\/p>\n\n\n\n

Risks<\/h2>\n\n\n\n