US Economic Data Paints Complex Picture for Policymakers and Investors
US economic data released this week has painted a complex picture for policymakers and investors. Inflation, measured by core PCE prices, rose 0.2% month on month in August but consumer spending jumped 0.9%, suggesting demand remains firm.
The combination of these two factors gives the Federal Reserve room to maneuver, but not a clear exit strategy. The bond market needs evidence of a broader slowdown before lower inflation can translate into sustained declines in yields.
US GDP grew at an annualized rate of 2.2% in Q2, above the previous estimate of 1.5%, with strong consumption and investment indicating domestic demand is firmer than earlier data suggested.
The September jobs report was a major disappointment, with only 29,000 jobs added, far below expectations. Unemployment rose to 4.2% and annual wage growth eased to 3.0%. The weak labor market has significantly reduced the likelihood of an October rate hike.