Economic Outlook - November 2024
- Preliminary estimates for third quarter GDP (gross domestic product) showed the U.S. economy grew at an annualized pace of 2.8% during the period, below most economic forecasts and lower than the 3% growth seen in the second quarter. While the report does suggest that growth is moderating, the data confirms that the U.S. expansion has continued despite elevated interest rates. Recent reports have been skewed by weather events, but generally dismiss long-standing worries of an eventual economic slowdown.
- U.S. hiring in October advanced at the slowest pace since 2020. Non-farm payroll increased by 12,000 last month and hiring over the previous two months was weaker than previously thought. The Federal Reserve noted during their last meeting that inflation was moderating and acknowledged as much when they lowered the short-term interest rates by a half-percentage point. While the October payroll estimates were affected by the hurricanes and a labor strike (most likely understating job growth), the unemployment rate remained unchanged at 4.1%. All combined, the reports should ease some concerns regarding the state of the labor market and likely locks the Federal Reserve into a more gradual pace of interest rate reductions going forward (assuming inflation continues to moderate).
- The Consumer Price Index (CPI) increased 2.4% on an annualized basis, in September, a slight deceleration from August. It was the smallest 12-month increase since February 2021. Inflation is trending in the right direction, but remains above the Federal Reserve’s desired target range – one reason why we believe the Fed will continue on a moderate pace of rate reductions.
- The U.S. consumer continues to spend, underscoring a resilient economy that is now getting a boost from the Federal Reserve. U.S. retail sales increased 0.4% in September and 1.7% year-over-year. The report shows that the U.S. consumer, who powers about two-thirds of all economic activity in the U.S., remains optimistic about the economy.
- The U.S. budget deficit grew to $1.833 trillion for fiscal 2024, the largest deficit outside of the COVID era, as interest on the federal debt exceeded $1 trillion dollars. The sizable fiscal 2024 budget gap of 6.4% of gross domestic product (up from 6.2% a year earlier) could pose a problem for the next presidency regardless of who controls the office. We believe it could be the financial markets that force the issue to be addressed.
Sources: Bloomberg, Bureau of Labor Statistics, Institutional Brokers’ Estimate System (I/B/E/S), FactSet, U.S. Federal Reserve, Dow Jones Publishing
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