At TM3 Wealth, it is important that you are well-informed about what is happening in the markets. Here are a few of the key topics of conversation that deserve the most attention this month. If you have any questions or would like to continue the conversation, please reach out.
Inflation was steady in November, rising in line with economists’ expectations, but signaling mixed progress on disinflation. The consumer price index (CPI) rose 0.3% from October, bringing the annual increase to 2.7%1. Core inflation, which strips out the volatility of food and energy prices, continued its steady climb, rising 0.3% for the fourth consecutive month1. Over the past year, core CPI has increased 3.3%, signaling that underlying inflationary pressures remain persistent1. Although shelter costs showed signs of cooling, they still accounted for nearly 40% of the overall rise in prices1. Grocery prices continue to be a pain point for consumers, with prices rising 0.5%, the largest increase since early 20231. While inflation has eased from its pandemic-era peak, progress has slowed, driving recent discussions about a more gradual approach to future Federal Reserve rate cuts.
On a more optimistic note, November brought robust job growth with 227,000 new jobs2. All sectors showed gains except retail, an unusual trend since retail hiring typically increases ahead of the holiday season2. Despite strong November job growth, the broader trend shows signs that the labor market is continuing to slowly weaken. Over the past three months, job growth has averaged 173,000, slower than earlier in the year2. The unemployment rate edged up to 4.2%, marking the highest long-term joblessness level in nearly three years2. Together, these signs provide more evidence that the labor market is losing momentum.
As 2024 comes to a close, the outlook for 2025 is positive, with strong momentum heading into the new year. One measure of this is the Atlanta Fed’s GDPNow forecast which, for the fourth quarter, accelerated to 3.3% 3 in the first half of December, well above the consensus estimate of 2.1% as of December 134. This boost was largely driven by a stronger-than-expected reading in November’s ISM Manufacturing Purchasing Managers’ Index (PMI)5. The PMI’s new orders component moved into expansion territory for the first time in eight months, signaling rising business confidence 5, despite the overall PMI remaining in contractionary territory. This could bolster optimism for the manufacturing sector’s stabilization after a prolonged downturn.
The bottom line: As we head into 2025, the economy appears to be likely to have a solid start, though macroeconomic and political risks remain. Ongoing progress on disinflation, along with a labor market that doesn’t rapidly soften, is essential. The Federal Reserve will closely monitor these data to guide its policy, with interest rate cuts expected to slow next year if inflation progress stalls. In addition, uncertainty remains around the potential changes to tax and trade policy. Despite these risks, the tailwinds behind the US’ current economic trends may mean it is well-positioned to continue leading the global economy into 2025.
Sources:
- Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
- Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.nr0.htm
- Federal Reserve Bank of Atlanta, https://www.atlantafed.org/cqer/research/gdpnow
- Survey of Economists conducted by Bloomberg
- Institute for Supply Management, https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/november/
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The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
The ISM (Institute for Supply Management) manufacturing index, also known as the purchasing managers’ index (PMI), is a monthly indicator of U.S. economic activity based on a survey of purchasing managers at manufacturing firms nationwide. It is considered to be a key indicator of the state of the U.S. economy. Formally called the Manufacturing ISM Report on Business, the survey is conducted by the Institute for Supply Management (ISM).
The Bureau of Labor Statistics (BLS) is an agency of the United States Department of Labor. It is the principal fact-finding agency in the broad field of labor economics and statistics and serves as part of the U.S. Federal Statistical System. BLS collects, calculates, analyzes, and publishes data essential to the public, employers, researchers, and government organizations.
The Federal Reserve Bank of Atlanta operates as a reserve bank. The Bank provides financial services, which includes distributing cash to banks, savings and loans, and other depository institutions within the United States.
The Institute for Supply Management (ISM) is the first and largest not-for-profit professional supply management organization worldwide. Founded in 1915, the U.S. based educational association serves professionals and organizations with interest in supply management, providing education, training, qualifications, publications, information, and research.
