This week, the Federal Reserve’s preferred inflation data was released, and the results met expectations. This, along with recent GDP estimates, employment reports, and personal income/spending figures, paints a stable economic picture. It suggests that we may be on track for the Federal Reserve’s next round of rate cuts. The Federal Reserve has consistently stated its 2% inflation target and current figures show inflation at 2.1%. This indicates that a ‘soft landing’ for the economy could be within reach.

PCI Index

Prices in the U.S. rose modestly in September, but not enough to suggest inflation is rekindling or to prevent the Federal Reserve from cutting interest rates. The Fed’s preferred PCE index moved up 0.2% last month, the government said Thursday. That matched the forecast of economists polled by The Wall Street Journal.

The increase in inflation in the past 12 months slowed to 2.1% from 2.3%, leaving it just a hair above the Fed’s 2% target.

Consumer Spending

Consumer spending and incomes both rose in September, signaling continued strength in the primary driver of the U.S. economy. Household spending increased by a solid 0.5% for the month, surpassing the 0.4% rise economists had anticipated in a Wall Street Journal poll. Incomes also grew by 0.3% in September. Overall, consumer spending surged by 3.7% in the third quarter, marking the largest increase in a year and a half.

GDP (Estimates)

The U.S. grew at a brisk 2.8% annual pace in the third quarter, powered by another sharp increase in consumer spending that appears primed to extend a four-year-old economic expansion into next year.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.28% with the current rate at 5.99%
• 30-Yr FRM rates saw an increase of 0.18% with the current rate at 6.72%

MND Rate Index

• 30-Yr FHA rates saw a 0.26% increase for this week. Current rates at 6.62%
• 30-Yr VA rates saw a 0.26% increase for this week. Current rates at 6.64%
  

Jobless Claims

Initial Claims were reported to be 216,000 compared to the expected claims of 228,000. The prior week landed at 227,000.

What’s Ahead

Next week, the Federal Reserve is set to announce another rate decision, followed by several other important reports. These include final manufacturing figures from S&P Global PMI data, the University of Michigan Consumer Sentiment report, and Consumer Credit reports.

This week saw relatively light activity, primarily focused on discussions with the Federal Reserve Board. The only truly notable report released was the Consumer Sentiment Report, which happily reported that sentiment had risen for the month of October. Meanwhile, the Federal Reserve’s latest Beige Book survey noted a slight decline in manufacturing activity.

Consumer Sentiment (Final)

Confidence among Republicans in a potential Donald Trump victory helped drive consumer sentiment to a six-month high less than two weeks before the U.S. presidential election. The University of Michigan reported on Friday that the initial October reading of consumer sentiment rose to 70.5, up slightly from 70.1 in the previous month—marking the highest level since April.

Federal Reserve’s Beige Book

The Federal Reserve’s latest Beige Book survey of conditions across the country continued to paint a weak picture, with nine out of 12 regional district banks reporting flat or a slight decline in activity. Most districts reported declining manufacturing activity and consumers were reported to be on the hunt for bargains.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.08% with the current rate at 5.71%
• 30-Yr FRM rates saw an increase of 0.10% with the current rate at 6.54%

MND Rate Index

• 30-Yr FHA rates saw a 0.23% increase for this week. Current rates at 6.36%
• 30-Yr VA rates saw a 0.24% increase for this week. Current rates at 6.38%
  

Jobless Claims

Initial Claims were reported to be 227,000 compared to the expected claims of 245,000. The prior week landed at 242,000.

What’s Ahead

With such a light release schedule the previous week, we should be returning to a heavier release schedule next week. The most relevant and impactful reports are job releases, personal income, non-farm payrolls, S&P Manufacturing PMI final statistics, and JOLTS job change openings.

The release of last week’s inflation data has left this week with very few significant data updates. The most important information will come from various Federal Reserve members speaking on different topics. They have consistently emphasized that they will closely monitor the data to decide whether further rate cuts are needed in their upcoming rate decision meeting. Much of the market is optimistic that rate cuts will continue. Additionally, several smaller retail sales data releases are expected soon, which will provide insight into the current strength of the economy.

Retail Sales

Retail sales increased 0.4% in September, with strength in a broad range of categories that overcame weak gas and auto spending, the U.S. Commerce Department said Wednesday. Economists polled by the Wall Street Journal had forecast a 0.3% gain.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.22% with the current rate at 5.63%
• 30-Yr FRM rates saw an increase of 0.14% with the current rate at 6.44%

MND Rate Index

• 30-Yr FHA rates saw a 0.01% increase for this week. Current rates at 6.13%
• 30-Yr VA rates saw a 0.01% increase for this week. Current rates at 6.14%
  

Jobless Claims

Initial Claims were reported to be 241,000 compared to the expected claims of 260,000. The prior week landed at 260,000.

What’s Ahead

A surprisingly light week ahead once again, with only the Federal Reserve’s Beige book and S&P Preliminary numbers for the Producer Manufacturing Index.

The CPI and PPI reports delivered their data, showing inflation figures slightly below expectations. However, the positive impact of these reports was tempered by hawkish comments from Federal Reserve members during recent meetings. Despite this, the overall outlook remains optimistic, as further rate cuts are anticipated. Lending partners have also responded positively, significantly lowering their lending rates over the past month.

Consumer Credit

Consumer credit increased by $8.9 billion in August, following a revised $26.6 billion surge in July, the Federal Reserve reported on Monday. This represents a 2.1% annual growth rate in August, a slowdown from the 6.3% rise in the previous month. Economists surveyed by The Wall Street Journal had expected a larger increase of $13.2 billion in August.

CPI

U.S. wholesale prices were unchanged in September, pointing to subdued inflation in the economy. This suggests that a bigger-than-expected increase in consumer prices last month is unlikely to last. Economists polled by the Wall Street Journal had forecast a 0.1% increase.

PPI

A key measure of consumer inflation increased slightly more than expected in September, which could complicate the Federal Reserve’s plan to cut U.S. interest rates twice more this year. The ‘core’ consumer price index, which excludes food and energy, rose by 0.3% for the second consecutive month, according to a government report on Thursday. Wall Street analysts had predicted a smaller increase of 0.2% for this core inflation measure.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.16% with the current rate at 5.41%
• 30-Yr FRM rates saw an increase of 0.20% with the current rate at 6.32%

MND Rate Index

• 30-Yr FHA rates saw a 0.08% increase for this week. Current rates at 6.12%
• 30-Yr VA rates saw a 0.07% increase for this week. Current rates at 6.13%
  

Jobless Claims

Initial Claims were reported to be 258,000 compared to the expected claims of 230,000. The prior week landed at 225,000.

What’s Ahead

There will be a very light week ahead after the release of the CPI and PPI reports, with only regular jobs data to note.

Last week was a fairly light week, with the non-farm payroll data being the most significant release. The data showed that payrolls are growing at a faster rate than historical trends suggest, which could indicate that inflation is still above the Federal Reserve’s target. In contrast, the upcoming week has a busy schedule, with many important economic releases lined up back to back.

Non-Farm Payrolls

Hourly pay for American workers rose a sharp 0.4% in September – above expectations – to put the increase over the past 12 months at 4.0%. That’s up from 3.9% in the prior month. Wages are rising faster compared to the last few years before the pandemic. Wage gains rose just slightly over 3% on average in 2018 and 2019 before the coronavirus exploded.

If wages keep growing at a 4% rate, it could call into question the Fed’s view that labor costs will remain non-inflationary.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.09% with the current rate at 5.25%
• 30-Yr FRM rates saw a decrease of 0.04% with the current rate at 6.12%

MND Rate Index

• 30-Yr FHA rates saw a 0.25% increase for this week. Current rates at 6.04%
• 30-Yr VA rates saw a 0.26% increase for this week. Current rates at 6.06%
  

Jobless Claims

Initial Claims were reported to be 225,000 compared to the expected claims of 220,000. The prior week landed at 219,000.

What’s Ahead

Next week will be a heavy week, starting with key inflation reports like the CPI and PPI. These will be followed by the FOMC Minutes, Consumer Credit data, and the University of Michigan Consumer Sentiment report.

With the release of the PCE Index data, we are seeing the trend hold as inflation continues to slow down. This gives the Federal Reserve room to continue its rate cuts in the future. Following the positive news for inflation data, the GDP has also seen a larger-than-expected growth of 3% this quarter. The only data running against the tide is the Consumer Confidence reports, which reported to show that consumers are at their most anxious since 2021. We should expect a greater impact on the lending and broader markets ahead of the elections.

PCE Index

The Federal Reserve’s preferred PCE index inched up just 0.1% last month, the government said Friday. This matched the forecast of economists polled by The Wall Street Journal. The increase in inflation in the past 12 months slipped 2.2% from 2.5%, marking the lowest level since early 2021. The Federal Reserve is aiming to bring inflation down to 2% a year.

GDP Estimates (second)

The last of three updates on U.S. growth in the second quarter showed the economy expanded at a solid 3.0% annual pace — and there’s no sign it has taken a big turn for the worse. Gross domestic product, the official scorecard of the economy, was unchanged from the prior 3.0% estimate, the government said Thursday.

Consumer Confidence

Consumer confidence fell in September to a three-month low ahead of a pivotal U.S. election whose outcome could hinge on which presidential candidate voters think will do a better job on the economy. Americans were more worried about the job market in light of a steady rise in unemployment and greater difficulty in finding work. Another source of distress was the high cost of living after several years of severe inflation.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.01% with the current rate at 5.16%
• 30-Yr FRM rates saw a decrease of -0.01% with the current rate at 6.08%

MND Rate Index

• 30-Yr FHA rates saw a 0.09% increase for this week. Current rates at 5.79%
• 30-Yr VA rates saw a 0.08% increase for this week. Current rates at 5.80%
  

Jobless Claims

Initial Claims were reported to be 218,000 compared to the expected claims of 223,000. The prior week landed at 222,000.

What’s Ahead

Up next are the non-farm payrolls, a key indicator of the economy that shows whether wages are keeping up with inflation. Additionally, there will be production estimates from the Manufacturing Index and the usual job data releases.