US consumers finished the year off with a bang, with this morning\u2019s personal income and outlays report pointing to continued resilience amongst households. The pace of personal spending and income rose 0.7% and 0.4% month over month (m\/m) in December, 2 tenths of a percent hotter on the former and in-line with estimates on the latter. While both figures accelerated by 0.1% from November\u2019s results, outlays exceeded earnings, causing the personal savings rate to fall from 4.1% to 3.8% during the period, a 2-year low. Driving expenditures were real m\/m increases, or volume gains, of 1.1%, 0.5% and 0.3% across durable goods, nondurables and services.<\/p>\n\n\n\n The Fed\u2019s preferred inflation figures arrived exactly as expected, but they picked up steam on a monthly basis. The Personal Consumption Expenditures (PCE) price index increased 0.3% m\/m and 2.6% year over year (y\/y), exceeding the 0.1% and 2.4% from the prior month. Similarly, the core version of the indicator advanced 0.2% m\/m and 2.8% y\/y, accelerating from 0.1% in November while the annualized number was unchanged. Costs for energy, nondurable goods, services and food rose 2.7%, 0.5%, 0.3% and 0.2% m\/m while charges for durables slipped 0.4%.<\/p>\n\n\n\n Economic growth last quarter didn\u2019t exclude workers, ladies and gentlemen, with the employment cost index accelerating its pace of gains. The critical indicator covering both wages and benefits rose 0.9% quarter over quarter (q\/q) to finish off 2024, meeting the median estimate and ramping up from 0.8% in the prior three-month period. Employer charges were led by wages rising 0.9% while benefits ticked higher by 0.8%.<\/p>\n\n\n\n Manufacturing conditions in the Chicago area remain subdued this month, according to the city\u2019s chapter of the Institute for Supply Management (ISM). The Chicago Purchasing Managers\u2019 Index for Manufacturing rose from 36.9 to 39.5 in January, narrowly missing the projected 40. While the headline figure achieved its first uptick since October, it\u2019s the 14th consecutive monthly result under the contraction-expansion threshold of 50. The shallower rate of decline, meanwhile, was driven by stronger new orders, which drove up production levels but relative positivity was countered by reduced headcounts, falls in supplier deliveries, contracting backlogs and softer charges.<\/p>\n\n\n\n Canada\u2019s economy contracted in November as both services and goods-producing sectors declined. The 0.2% m\/m fall was worse than expectations calling for half that number and compares to the positive 0.3% rate in the month prior. The nation is expected to enter a more significant economic downturn if 25% tariffs are placed on exports to its top trade partner, the US.<\/p>\n\n\n\n Turning to the Asia-Pacific region, Japan\u2019s industrial production figures posted a modest improvement while retail sales slipped. Industrial production rose 0.3% m\/m while retail sales declined 0.7% m\/m in December. The former met estimates while the latter slipped by a tenth of a percent less than anticipated. Manufacturing activity was led by the production machinery category and electronic parts and devices segment, but the automobile, electrical machinery and communication electronics equipment areas were a drag. Separate reports issued on the real estate sector reflected an 8.1% y\/y increase in construction orders amidst a 2.5% y\/y decline in housing starts, compared to the previous month\u2019s -10.2% and -1.8%.<\/p>\n\n\n\n The price gauge for the country\u2019s city-capital arrived exactly as expected with the headline and core Tokyo CPI coming in at 3.4% and 2.5% for this month compared to the December\u2019s 3% and 2.4%.<\/p>\n\n\n\n The unemployment rate ticked down to 2.4% in December, while economists were expecting an unchanged 2.5%.<\/p>\n\n\n\n In Singapore, business confidence improved in the manufacturing sector, rising to 16 in the fourth quarter from 10 in the prior three-month period. Upbeat sentiment regarding electronics, semiconductors, chemicals and general manufacturing offset some of the declines associated with for precision and transportation engineering.\u00a0<\/p>\n\n\n\n Australia wrapped up 2024 with input prices climbing 0.8% during the fourth quarter, according to the Producer Price Index. The result was lower than the economist expectation of 1% and the third quarter\u2019s 0.9% increase. For the full year, prices climbed 3.7% compared to 3.0% in 2023. Price gains eased in most sectors except for accommodation, with strong demand causing an 8.3% q\/q jump.\u00a0<\/p>\n\n\n\n In the country\u2019s housing market, credit to acquire shelter grew 0.5% last month, matching rates of October and November. Debt for owner-occupied housing increased 0.4% while investor debt was up 0.6%. Total private debt increased 0.6%, the same rate as in November.<\/p>\n\n\n\n Sales of smartphones are moderating but consumers are increasingly splurging on streaming content and other services. Households are also boosting credit card use, including for international travel. In other matters, high inventory levels of computer chips are creating headwinds for Intel (INTC). Those are a few conclusions from the following earnings highlights:<\/p>\n\n\n\n Energy companies generated mixed results while Baker Hughes (BKR), which provides technology and services to petroleum companies, posted record high results. Exxon Mobil (XOM) and Chevron (CVX) said earnings fell 33% and 40% y\/y while revenues were flat and up more than 10% at both companies. The firms reported multi-year high levels of oil production and combined returned more than $63 billion to shareholders throughout 2024. Energy companies appear to be plowing ahead with plans to increase oil production, with Baker Hughes reporting that it has a $33.1 billion order backlog.<\/p>\n\n\n\n Markets are finishing up the month in stride with stocks and bonds starting off the year with gains. Today\u2019s action, meanwhile, features every major domestic equity benchmark in the green, lighter interest rates and a stronger greenback. Technology is leading the way so far this morning with the Nasdaq 100 up 1.5% while the S&P 500, Russell 2000 and Dow Jones Industrial counterparts are gaining by more modest amounts of 0.7%, 0.4% and 0.1%. Sector breadth is strongly positive with technology, communication services and consumer discretionary driving the train; they\u2019re gaining 1.4%, 1.1% and 0.8%. Energy and consumer staples are the only industries lower out of the major 11 and are losing 1.2% and 0.4%. Turning to Treasurys, the 2- and 10-year maturities are changing hands at 4.2% and 4.51%, a basis point (bp) softer on each. The greenback\u2019s index is up 10 bps against the backdrop, with the US dollar appreciating against the euro, franc, yen and yuan, but it is depreciating relative to the pound sterling and Aussie and Canadian tenders. Commodities are mixed as lumber and gold gain 5.4% and 0.5%, while copper, silver and crude oil slip 0.9%, 0.7% and 0.4%. Lumber, a top exporter for Ottawa, is gaining strongly on worries that the critical material may enter the crosshairs of US-Canada trade tensions.<\/p>\n\n\n\n This weekend\u2019s developments will be crucial as leaders in Washington, Mexico City and Ottawa negotiate ways to coexist without 25% import tariffs. The levy threatens to severely impact the Canadian and Mexican economies while it may lead to an inflationary uptick here in the states. Moreover, goods drove the entire disinflation train from 2022 and supply chain disruptions and reduced efficiencies may very well generate an uptick in US price pressures. But President Trump also wants lower interest rates immediately while he\u2019s apparently willing to accept higher charges for goods in the short term. Can Washington have its cake and eat it too? Perhaps, considering that similar conflicts during Trump 1.0 didn\u2019t generate inflationary pressures. But the path toward non-inflationary growth this time around is especially narrow absent trade acquiescence from major trade partners. <\/p>\n","protected":false},"excerpt":{"rendered":" Stocks are reaching to break all-time highs this morning following in-line inflation figures from the Fed\u2019s preferred price pressure gauges. <\/p>\n","protected":false},"author":903,"featured_media":218119,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[12711,18,6,8,9,26,3],"tags":[15347,18459,199,2053],"contributors-categories":[13760],"class_list":{"0":"post-218117","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-ibkr-economic-landscape","8":"category-macro","9":"category-north-america","10":"category-region","11":"category-securities","12":"category-text-articles","13":"category-traders-insight","14":"tag-personal-consumption-expenditure-pce-price-index","15":"tag-savings-rates","16":"tag-tariffs","17":"tag-wages","18":"contributors-categories-ibkr-macroeconomics"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"\n![\"Reduced](\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/01\/Picture1-36.png\")
<\/figure>\n\n\n\nPrices Accelerate Modestly<\/strong><\/h2>\n\n\n\n
![\"The](\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/01\/Picture2-27.png\")
<\/figure>\n\n\n\nWorkers Get Fatter Paychecks<\/strong><\/h2>\n\n\n\n
![\"Wage](\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/01\/Picture3-17.png\")
<\/figure>\n\n\n\nWindy City Reports Calm in Manufacturing<\/strong><\/h2>\n\n\n\n
Canada\u2019s Economy Contracts<\/strong><\/h2>\n\n\n\n
Industry Expands Marginally<\/strong><\/h2>\n\n\n\n
Singapore Business Sentiment Improves<\/strong><\/h2>\n\n\n\n
Australia Input Price Increases Ease<\/strong><\/h2>\n\n\n\n
Consumers Splurge on Streaming Contents<\/strong><\/h2>\n\n\n\n
\n
Energy Companies Push Ahead with Capacity Increases<\/strong><\/h2>\n\n\n\n
Equities Stage Broad Rally<\/strong><\/h2>\n\n\n\n
Trade Tensions Under the Spotlight<\/strong><\/h2>\n\n\n\n