There was some clear relief in consumer inflation in October, which is a welcome development for households and policymakers alike. The headline consumer price index rose "just" 0.4% during the month, which was below the Bloomberg consensus expectation for a 0.6% gain and caused the yearago pace to fall back to 7.7%, or the lowest annual rate of inflation in nine months (chart). Core prices also rose a more muted 0.3% during the month as core goods prices declined 0.4% amid an easing in supply chain constraints, which have boosted retail inventories. Core services prices rose 0.5% during the month, which is still quite fast compared to the pre-pandemic run rate but a bit softer than we anticipated.
Overall, October's moderation in inflation is welcome, but with the core CPI up at an annualized rate of 5.8% between July and October, there remains a long way to go before inflation returns to a rate the Fed will tolerate. The way back down to the Committee's 2% inflation goal will also likely be bumpy with services inflation particularly difficult to stomp out. The October CPI report reduced the likelihood of another 75 bps rate hike in December, but we expect policymakers to remain biased toward overtightening rather than under-tightening for the foreseeable future.
The FOMC noted for the first time it will consider the cumulative degree of tightening and the lags inherent in monetary policy when deciding on future rate moves at its November policy meeting. Chair Powell also emphasized the Committee is not done tightening yet. We take this communication and the lower-than-expected gain in inflation as evidence that the Fed will continue to hike rates, but at a slower pace, and we forecast the FOMC will hike the federal funds rate by 50 bps at its next monetary policy meeting.
This Week's State Of The Economy - What Is Ahead? - 30 October 2020
Wells Fargo Economics & Financial Report / Oct 27, 2020
Real GDP jumped a record 33.1% during Q3, beating expectations. A 40.7% surge in consumer spending drove the gain.
This Week's State Of The Economy - What Is Ahead? - 27 August 2021
Wells Fargo Economics & Financial Report / Aug 30, 2021
In other economic news, output continues to ramp up across the U.S., even as the resurgence in COVID cases is leading to some pullback in consumer engagement.
This Week's State Of The Economy - What Is Ahead? - 31 January 2025
Wells Fargo Economics & Financial Report / Feb 03, 2025
The U.S. economy is growing at a healthy clip. Real GDP expanded by 2.3% in the fourth quarter, bringing the annual growth rate to 2.8% in 2024. For context, the economy grew at an average annual rate of 2.4% during the 2010-2019 economic expansion.
This Week's State Of The Economy - What Is Ahead? - 21 October 2020
Wells Fargo Economics & Financial Report / Oct 21, 2020
Mobility is continuing to trickle lower in several major developed market economies. The U.K., France, Italy and Canada have all seen some further modest declines in retail/recreation visits.
This Week's State Of The Economy - What Is Ahead? - 4 October 2019
Wells Fargo Economics & Financial Report / Oct 05, 2019
Survey evidence flashed signs of contraction in the manufacturing sector and indicated weakness spreading to the services side of the economy, while employers added a less-than-expected 136K jobs in September.
This Week's State Of The Economy - What Is Ahead? - 17 January 2025
Wells Fargo Economics & Financial Report / Jan 20, 2025
The Consumer Price Index ended the year at 2.9% year-over-year, which is a minor improvement from its 3.1% rate in January 2024 and points to stalled progress on the road back to the Federal Reserve\'s 2% inflation target.
This Week's State Of The Economy - What Is Ahead? - 23 September 2020
Wells Fargo Economics & Financial Report / Sep 22, 2020
European activity is surging. Germany and Italy are leading the way, but France is close behind despite an ongoing rise in cases. The Google data are a bit outdated, but are hard to reconcile with today’s weak Eurozone services PMI figures.
This Week's State Of The Economy - What Is Ahead? - 11 February 2022
Wells Fargo Economics & Financial Report / Feb 14, 2022
Deep thought for the week, if a tree falls in the forest, or an Olympics occurs, and no one is there to hear it or see it, did it really occur?
This Week's State Of The Economy - What Is Ahead? - 11 September 2020
Wells Fargo Economics & Financial Report / Sep 14, 2020
In the holiday-shortened week, analysts’ attention remained on the progress of the labor market. Recent jobless claims data remain stubbornly high and point to a slowing jobs rebound.
This Week's State Of The Economy - What Is Ahead? - 15 November 2019
Wells Fargo Economics & Financial Report / Nov 16, 2019
Retail sales beat expectations and rose 0.3% in October, reflecting the ongoing strength of the consumer. Control group sales, a major input to GDP, also increased 0.3%.
