Month-In-Review: November 2024

Despite the Fed engaging in a policy pivot beginning in September and resulting in 75bps of cuts thus far, bond yields rose throughout October. As investors welcomed stronger-than-expected data on the consumer and the broader economy with topline growth near 3%, expectations for a soft landing continue to rise. Yet, hotter reads on price pressures coupled with fears of further deficit spending, as well as the potential for sizable tax cuts and higher tariffs posing further inflationary risks under a new regime in Washington has markets reevaluating the downside opportunity for further rate cuts. As a result, longer-term yields rose markedly with the 10-year reaching a peak of 4.30% on October 30th. After all, initially buoyed by fears of emerging weakness in jobs creation, further indications of a “solid” economy will likely result in a more tepid pace of policy adjustment from the Fed looking out to 2025. 

Market Activity and Commodities

• Equities – Stocks ended higher in November following an increase in October. Beginning at 5,705.44, the S&P 500 rose 5.7% in November to close at 6,032.38, a record high. The Dow, meanwhile, increased 7.5% from 41,763.46 to 44,910.65, another record high and its best performing month of the year. Additionally, the Nasdaq gained 6.2% in November, closing at 19,218.17 after notching another record high on the 11th. Since the start of the year, the Dow is up 19.1%, with the S&P rising 26.4%, and the Nasdaq gaining 28.0%.
• Treasuries – Treasury yields declined slightly in November after rising in October. The 2-year Treasury yield closed out November at 4.15%, down 2bps since October’s close. The 10-year Treasury yield, meanwhile, decreased 12bps from 4.29% to 4.17% in November.
• Commodities     

(Nov 29) – Oil prices fell in November as worries over a wider conflict in the Middle East were somewhat soothed following a ceasefire deal between Iran-backed Hezbollah and Israel. Oil prices fell 1.8% in November to $68.00 a barrel.

National Growth and Outlook

• NFIB Small Business Optimism (Nov 12) – The NFIB Small Business Optimism Index rose from 91.5 to a reading of 93.7 in October, surpassing the expected increase to 92.0 and matching the highest reading since early 2022.
• Leading Index (Nov 21) – The Leading Index fell 0.4% in October, slightly more than the 0.3% decline expected and following a 0.3% decrease in September. Over the past 12 months, the Leading Index dropped 4.1%, marking the 28th consecutive annual decline.
• Chicago Fed National Activity Index (Nov 25) – The Chicago Fed National Activity Index unexpectedly declined from -0.27 to a reading of -0.40 in October, the fifth consecutive negative print and the lowest reading in nine months. The Chicago Fed Index draws on 85 economic indicators; a reading below zero indicates below-trend growth in the national economy and a sign of easing pressures on future inflation. In October, 30 of the 85 monthly individual indicators made positive contributions, while 55 made negative contributions.
• GDP (Nov 27) – GDP was unrevised at a 2.8% gain on an annualized basis in the second-round Q3 report, as expected. At 2.8%, this is roughly in line with a 3% pace in Q2, and a welcome improvement from a 1.6% growth rate at the start of the year. The four-quarter average, furthermore, also remained unchanged at 2.7%. In the details of the report, personal consumption was revised down two-tenths to a 3.5% gain in the second-round Q3 report, still, however, the fastest increase in three quarters. Goods consumption was revised lower from a 6.0% gain to a lesser 5.6% increase in the second-round Q3 report, reflecting downward revisions in durables consumption from an 8.1% to 7.6%, and in nondurables consumption from 4.9% to 4.6%. Services consumption, meanwhile, was unrevised at 2.6%, a four-quarter low. On the other hand, gross private investment – a gauge of business spending – was revised up from +0.3% to a 1.1% gain, due to a larger buildup in inventories than previously reported. Inventories rose by $64.1B in Q3 (up from the previously reported $60.2B), albeit still down from the $71.7B gain reported in Q2. Excluding inventories, fixed investment was revised up from a 1.3% rise to a larger 1.7% gain in the second-round Q3 report, still, however, the weakest quarterly pace since Q4 2022. Nonresidential investment – including office buildings and factories – was revised up 0.5% to a 3.8% gain, thanks to an upward revision in intellectual property investment from +0.6% to +2.5%. Equipment investment, however, was revised down from 11.1% to 10.6%, and structures investment was revised lower by 0.7% for a larger 4.7% drop in the second-round Q3 report. Residential investment, meanwhile, was revised up a tenth of a percentage point for a lesser 5.0% decline, still, however, marking the largest quarterly drop since Q4 2022. On the trade side, exports were revised down from an 8.9% gain to a 7.5% increase, while imports were revised down a full percentage point to a 10.2% gain in the second-round Q3 report. Thus, excluding the sizable drag from inventories, real final sales rose 3.0% in Q3 after a 1.9% rise in Q2. Meanwhile, excluding inventories and trade, real final sales to domestic purchases rose a whopping 3.5%, a three-quarter high. Finally, government consumption was unrevised at a 5.0% gain in the second-round Q3 report. Federal spending was revised down from a 9.7% gain to a smaller 8.9% increase, due to a downward revision to national defense spending from a 14.9% gain to a smaller 13.9% increase, and a downward revision to nondefense spending from a 3.2% increase to a smaller 2.5% gain. State and local spending, meanwhile, was revised up from +2.3% to 2.7%, a two-quarter high.

Employment

• Initial Jobless Claims

(Nov 7) – Initial jobless claims ticked up 3k to 221k in the week ending November 2, in line with expectations and a two-week high. The four-week average, however, fell 10k from 237k to 227k. Continuing claims, or the number of people claiming ongoing unemployment benefits, increased from 1.85M to 1.89M in the week ending October 26, the highest level since November 2021 and likely a reflection of hurricane-related disruptions.

(Nov 14) – Initial jobless claims fell 4k to 217k in the week ending November 9, the lowest since May, suggesting the temporary impact from the recent hurricanes has largely dissipated from the data. The four-week average, meanwhile, declined from 227k to 221k, also the lowest since May. Continuing claims, or the total number of people claiming ongoing unemployment, fell from 1.88M to 1.87M in the week ending November 2.

(Nov 21) – Initial jobless claims unexpectedly fell 7k from 219k to 213k in the week ending November 16, the lowest level since April as many employers likely sought to keep current workers ahead of the holidays. According to the median forecast, jobless claims were expected to rise to 220k. The four-week average, meanwhile, declined from 222k to 218k. Continuing claims, or the total number of people claiming ongoing unemployment, however, jumped from 1.88M to 1.91M in the week ending November 9, the highest in three years.

(Nov 27) – Initial jobless claims fell 2k to 213k in the week ending November 23, the lowest level since the end of April. The four-week average also declined, falling 1k to 217k. Continuing claims, or the total number of people claiming ongoing unemployment, rose 9k to 1.907M in the week ending November 16, the highest since 2021.

• Nonfarm Payrolls (Nov 1) – Nonfarm payrolls rose by 12k in October, significantly shy of the 100k gain expected, weakness primarily reflecting the recent hurricanes. October’s 12k rise marks the weakest monthly print since December 2020 when the economy was in lockdown during COVID, pulling the three-month average down from 148k to 104k. September payrolls, furthermore, were revised down 31k to 223k, again likely reflecting the impact of the hurricanes with some companies late to report. Thus, with additional revisions to previous months, the overall change in nonfarm payrolls (October data + net revisions) was -100k, the first monthly decline since December 2020. In the details of the report, private payrolls fell by 28k in October, the first negative print since December 2020. Goods-producing payrolls dropped by 37k, due to a 46k decline in manufacturing payrolls, the third month of decline despite an 8k rise in construction payrolls. Private service producing payrolls, on the other hand, rose in October, albeit minimally, up 9k following a 169k gain in September. Education and health payrolls led the gain in October, rising 57k following a 95k gain in September. Government payrolls rose 40k, the largest gain in two months, and information payrolls increased 3k in October, matching the gain in September. On the other hand, financial services payrolls were unchanged, while trade and transport payrolls slipped 1k, due to a 6k decline in retail trade payrolls. Also, leisure and hospitality payrolls declined 4k, the largest decline in six months, and professional and business services payrolls plunged 47k, due to a 49k drop in temporary help payrolls (the fifth consecutive month of decline).
• Participation Rate (Nov 1) – The labor force participation rate unexpectedly declined one tenth of a percentage point to 62.6% in October, a four-month low. According to the median forecast, the participation rate was expected to remain steady at 62.7%.
• Unemployment Rate (Nov 1) – Household employment fell by 368k in October following a 430k gain in September. The labor force decreased by a lesser 220k following a 150k rise in September. Thus, the unemployment rate remained at 4.1% in October for the second consecutive month, as expected.
• Average Hourly Earnings (Nov 1) – Average hourly earnings rose 0.4% in October, a tenth of a percentage point more than expected and following a downwardly revised 0.3% increase in September. Year-over-year, wages rose 4.0%, up from a 3.9% gain in September and the largest annual increase in five months.
• Average Weekly Hours (Nov 1) – The average workweek remained at 34.3 hours in October for the third consecutive month

Consumer Activity and Confidence

• Vehicle Sales (Nov 1) – Vehicle sales rose from 15.77m to a 16.04m unit pace in October, the highest level since May 2021. According to the median forecast, sales were expected to rise to 15.80m. Over the past 12 months, vehicle sales rose 3.5% from 15.50m units.
• Consumer Credit (Nov 7) – Consumer credit increased $6.0b in September, about half of the $12.2b increase expected and following a $7.6b gain in August.
• Retail Sales (Nov 15) – Retail sales rose 0.4% in October, a tenth of a percentage point more than expected and following an upwardly revised 0.8% increase in September (revised up from a 0.4% gain initially reported). Year-over-year, retail sales increased 2.9% in October, the largest annual gain in three months. Car sales rose 1.6% in October following a 0.2% increase the month prior, and gasoline stations sales ticked up 0.1% in October following two consecutive months of decline. Excluding autos, retail sales rose 0.1% at the start of Q4 and climbed 2.7% over the past 12 months. Excluding autos and gasoline, retail sales rose 0.1% in October and increased 3.8% year-over-year. Finally, excluding food, autos, building materials and gasoline station sales, control group sales fell 0.1% in October, down from the 1.2% gain in September and the first monthly decline since August. Over the past 12 months, however, control group sales rose 3.6% following a 4.1% annual gain in September. In the details of the report, food and beverage sales rose 0.1%, and general merchandise sales increased 0.2%, despite a 0.2% decline in department store sales. Also, non-store retailer sales gained 0.3%, and building materials sales ticked up 0.5% at the start of the fourth quarter. Additionally, eating and drinking sales rose 0.7% following a 1.2% gain in September, and electronics sales jumped 2.3% in October following two consecutive months of decline. On the other hand, clothing sales declined 0.2%, and health and personal care sales fell 1.1% in October, as did sporting goods sales. Also, furniture sales fell 1.3%, and miscellaneous sales slipped 1.6% in October.

University of Michigan Consumer Sentiment

• (Nov 8) – The University of Michigan Consumer Sentiment Index rose from 70.5 to 73.0 in the preliminary November report, surpassing the expected gain to 71.0 and marking a seven-month high. In the details of the report, a gauge of current conditions declined slightly from 64.9 to 64.4, while a gauge of future expectations increased from 74.1 to 78.5 in the preliminary November report, the highest reading since July 2021.
• (Nov 22) – The University of Michigan Consumer Confidence Index was unexpectedly revised lower from 73.0 to a reading of 71.8 in the final November report, albeit still the highest reading in seven months. According to the median forecast, the index was expected to be revised even higher to a reading of 73.9. In the details of the report, a gauge of current conditions was revised down from 64.4 to 63.9, a two-month low, and a gauge of future expectations was revised lower from 78.5 to 76.9 in the final November print. Despite downward revisions, at 76.9, this still marks the highest reading since March.
• Consumer Confidence (Nov 26) –The Conference Board’s Consumer Confidence Index rose 2.1 points to 111.7 in November, the highest level in more than a year. In the details of the report, a gauge of current conditions rose from 136.1 to 140.9, an eight-month high, and a gauge of future expectations rose to 91.9 from 89.1, an almost three-year high.
• Consumer Spending and Income (Nov 27) – Personal income rose 0.6% in October, double the 0.3% rise expected and the largest monthly gain in seven months. Consumer spending, meanwhile, increased 0.4% in October, as expected, albeit down from the 0.6% rise the month prior. Year-over-year, consumer spending increased 5.4%, a three-month high, while personal income rose 5.3% in October, also a three-month high. Adjusting for inflation, real consumer spending rose 0.1%, a tenth of a percentage point less than expected, and real income jumped 0.4% in October, the largest monthly gain since May. Over the past 12 months, real spending rose 3.0%, down from the 3.1% annual gain in September, while real disposable personal income gained 2.9% in October, the most in three months.

Inflation

• CPI (Nov 13) – The CPI (Consumer Price Index) rose 0.2% in October, as expected and following a similar increase in September. Year-over-year, consumer prices rose 2.6%, also as expected and up from the 2.4% annual increase in September. At 2.6%, this marks the largest annual increase in three months and the first time since March that the annual rate was higher than the previous month’s rate. Food prices rose 0.2%, while energy prices were unchanged in October following two consecutive months of decline. Excluding food and energy costs, the core CPI rose 0.3% in October, as expected and following a similar gain in September. Year-over-year, the core CPI increased 3.3% for the second consecutive month. In the details of the report, transportation prices rose 0.3%, due to a 2.7% gain in used cars and truck prices. New vehicle prices, meanwhile, were unchanged in October. Additionally, airline fares rose 3.2% following a similar gain the month prior. Meanwhile, shelter prices rose 0.4% with a 0.4% gain in the OER, up from the 0.3% rise in September. Also, medical care prices rose 0.3%, and recreation prices increased 0.4% in October, as did other goods and services costs. On the other hand, commodities prices were unchanged, while education and communication prices fell 0.3%, and apparel prices dropped 1.5% in October. Another iteration of inflation, the supercore – defined as core services excluding housing – rose 0.3% in October following a 0.4% rise the month prior. Over the past 12 months, the supercore increased 4.4%, up from the 4.3% annual increase in September and the largest annual gain in two months.
• PPI (Nov 14) – The PPI (Producer Price Index) rose 0.2% in October, as expected and following a 0.1% increase from September. Year-over-year, producer prices rose 2.4% in October, slightly more than the 2.3% increase expected and up from the 1.9% annual gain in September. At 2.4%, this marks the largest annual increase since July. Food prices fell 0.2% and energy prices decreased 0.3% in October, marking the third consecutive monthly decline. Excluding food and energy costs, the core PPI rose 0.3%, a tenth of a percentage point more than expected and following a 0.2% increase in September. Year-over-year, the core PPI increased 3.1% in October, up from the 2.9% annual gain in September and the largest annual increase in four months. Additionally, services costs rose 0.3%, due to a 0.1% rise in trade costs, and a 0.5% gain in transportation and warehousing costs in October.
• PCE (Nov 27) – The PCE (Personal Consumption Expenditures) rose 0.2% in October, as expected and following a similar sized gain in September. Year-over-year, headline inflation increased 2.3%, up from the 2.1% gain in September and the largest annual increase in two months. Excluding food and energy, the core PCE rose 0.3% in October, as expected, and following a similar increase in September. Over the past 12 months, core inflation increased 2.8%, also as expected, and an uptick from the 2.7% annual gain in September. October’s 2.8% annual gain now marks the fastest pace of core inflation since April. Another iteration of inflation, the supercore PCE – a measure of core services excluding shelter – rose 0.4% in October and increased 3.5% on an annual basis, an uptick from the 3.2% gain in September and marking a six-month high.

Manufacturing and Production Activity

• ISM Manufacturing (Nov 1) – The ISM Manufacturing Index unexpectedly declined from 47.2 to 46.5 in October, a 15-month low. October’s reading of 46.5 marks the seventh consecutive month in contraction (a reading below 50). According to the median forecast, the index was expected to rise to 47.6. In the details of the report, new orders rose one point to 47.1, employment rose by 0.5 points to 44.4 in October, a two-month high albeit still marking the fifth consecutive month below 50, and prices paid jumped by 6.5 points to 54.8, averaging 53.2 over the past six months. On the other hand, backlog of orders fell 1.8 points to 42.3, production slipped from 49.8 to 46.2, the largest monthly decline since April 2021, and supplier deliveries fell from 52.2 to 52.0. Also, inventories dropped from 43.9 to 42.6 at the start of Q4.
• ISM Services (Nov 5) – The ISM Services Index unexpectedly rose from 54.9 to 56.0 in October, the fourth consecutive month of expansion (a reading above 50) and the highest reading since May 2022. In the details of the report employment jumped from 48.1 to 53.0, the highest reading since August 2023 and averaging 49.3 over the past six months, and supplier deliveries rose 4.3 points to 56.4 in October, the highest reading since July 2022. On the other hand, new orders declined two points to 57.4 in October, prices paid ticked down from 59.4 to 58.1, and the change in inventories decreased from 58.1 to 57.2 in October. Also, business activity declined from 59.9 to 57.2, a two-month low, and backlog of orders fell from 48.3 to 47.7 in October.
• Empire Manufacturing (Nov 15) – The Empire Manufacturing Index jumped from -11.9 to +31.2 in November, the highest reading since December 2021. In the details of the report, prices received rose from +10.8 to +12.4, new orders increased from -10.2 to +28.0, and inventories climbed from a reading of -7.5 to +1.0 in November. On the other hand, prices paid ticked down from +29.0 to +27.8, and the number of employees decreased from +4.1 to +0.9. Additionally, the six-month general business conditions index declined from +38.7 to +33.2 in November, a two-month low.
• Industrial Production (Nov 15) – Industrial production declined 0.3% in October, a tenth of a percentage point less than expected and following a 0.5% decrease the month prior.
• Capacity Utilization (Nov 15) – Capacity utilization fell from 77.4% to 77.1% at the start of the fourth quarter, largely due to declining output in manufacturing activity as a result of the Boeing strike.
• Business inventories (Nov 15) – Business inventories rose 0.1% in September, a tenth of a percentage point less than expected and following a 0.3% increase the month prior. Over the past 12 months, inventories rose 2.2%, the smallest annual gain in three months.
• Philly Fed Business Outlook Survey (Nov 21) – The Philadelphia Fed Business Outlook Index unexpectedly dropped into negative territory from a reading of +10.3 to -5.5 in November. According to the median forecast, the regional index was expected to decline to a reading of +8.0. In the details of the report, the number of employees improved from -2.2 to +8.6, a two-month high. On the other hand, new orders fell from +14.2 to +8.9 in November, the lowest reading in two months, and shipments decreased from +7.4 to +4.5 in November, also a two-month low. Additionally, prices paid declined from +29.7 to +26.6, averaging a reading of +26.1 over the past six months, and prices received decreased from +17.9 to +14.3 in November, a three-month low.
• Kansas City Fed Manufacturing Index (Nov 21) – The Kansas City Fed Manufacturing Index unexpectedly rose two points to a reading of -4 in November, the highest reading since December, albeit the 26th consecutive month of a negative print. According to the median forecast, the index was expected to decline to a reading of -5. In the details of the report, the number of employees increased from -2 to +1 in November, a six-month high. On the other hand, shipments slipped seven points to a reading of 0, prices paid declined from +19 to +5, and the volume of new orders declined from -5 to -9, the lowest reading in two months.
• Dallas Fed Manufacturing Index (Nov 25) – The Dallas Fed Manufacturing Activity Index rose slightly from -3.0 to a reading of -2.7 in November, the highest reading since April 2022, albeit the 31st consecutive month of a negative print. In the details of the report, employment rose from a reading of -5.1 to +4.9 in November, a four-month high, and hours worked increased from -5.5 to +0.3 in November. Also, the six-month general business outlook index improved from +29.6 to +31.2 in November, the highest reading since November 2021. On the other hand, new orders decreased from a reading of -3.7 to -11.9, averaging -6.5 over the past six months, production fell from +14.6 to -0.9, and capacity utilization dropped from +4.3 to -4.8 in November, a two-month low.
• Richmond Fed Manufacturing Index (Nov 26) – The Richmond Fed Index unexpectedly remained at a reading of -14 for the second consecutive month. According to the median forecast, the index was expected to rise three points to -11. In the details of the report, business conditions jumped from -4 to +10, the highest reading since February 2022, and employment increased from -17 to -10. On the other hand, shipments decreased from -8 to -12, and new orders edged down two points to -19.
• Durable Goods (Nov 27) – Durable goods orders rose 0.2% in October, falling short of the 0.5% gain expected, albeit the biggest gain in three months. Year-over-year, headline orders rose 2.7% in October, the largest annual gain in ten months. In other details, fabricated metals orders climbed 0.1%, machinery orders gained 0.3%, and electrical equipment orders increased 1.3%. On the other hand, primary metals orders fell 0.7%, and computers and electronics orders decreased 0.1% in October.
• Ex. Transportation Orders (Nov 27) – Transportation orders rose 0.5% following two consecutive monthly declines. Excluding transportation, durable goods orders rose 0.1% in October and increased 1.5% over the past 12 months, up from the 1.0% annual gain the month prior and the largest annual increase in six months.
• Capital Goods (Nov 27) – Capital goods orders rose 0.5% in October following a 1.4% decline the month prior. Nondefense capital goods orders also rose at the start of Q4, up 1.4% following a 3.5% drop in September. On the other hand, capital goods orders excluding aircraft and defense – a proxy for business investment – fell 0.2% in October, the weakest pace in three months. Year-over-year, however, business investment rose 0.6%, the largest annual gain in seven months.
• Chicago PMI (Nov 27) – The Chicago PMI fell from 41.6 to 40.2 in November, the lowest reading since May. In the details of the report, prices paid and supplier deliveries rose, signaling expansion, while production, inventories, new orders, employment, and order backlogs fell, signaling contraction.

Housing Market Activity

• Construction Spending (Nov 1) – Construction spending rose 0.1% in September following a similar increase in August. According to the median forecast, construction spending was expected to be unchanged. Over the past 12 months, construction spending rose 4.6%, the smallest annual gain since May of 2023.
• NAHB Housing Market Index (Nov 18) – The NAHB Housing Market Index unexpectedly rose three points to a reading of 46 in November, a seven-month high. According to the median forecast, the index was expected to remain at a reading of 43 in November for the second consecutive month.
• Building Permits (Nov 19) – Building permits declined 0.6% in October, pulling the annual pace down from 1.43M to 1.42M, a three-month low. Building permits were expected to rise 0.7% in October, according to Bloomberg. Single family permits rose 0.5%, while multi-family permits dropped 3.0% in October, the second consecutive monthly decline. Year-over-year, building permits fell 7.7% in October, the ninth consecutive annual decline and marking the largest annual drop since May.
• Housing Starts (Nov 19) – U.S. housing starts fell 3.1% in October, pulling the annual pace down from 1.35M to 1.31M, a three-month low. Starts were expected to decline a lesser 1.5%, according to the median forecast on Bloomberg. On a regional basis, starts fell in two of four regions of the country, dropping 32.9% in the Northeast and falling 8.8% in the South, as a result of hurricane-related impacts. Starts rose, however, 9.4% in the Midwest and 21.1% in the West in October. Single family starts dropped 6.9%, while multi-family starts jumped 9.6% in October, the strongest gain in three months. Year-over-year, housing starts fell 4.0% in October, the largest annual decline in three months.
• Existing Home Sales (Nov 21) – Existing home sales rose 3.4% in October from 3.83m to a 3.96m unit pace, surpassing the 2.9% rise expected and the highest level in three months. Year-over-year, existing home sales rose 2.9% in October, the first positive annual print following 38 consecutive months of decline. Due to a rise in sales, the months’ supply of existing homes ticked lower from 4.3 months to 4.2 months, averaging 4.2 months over the past three months. A four to seven-month supply is viewed as a healthy balance between demand and supply. Additionally, from a price standpoint, the median cost of a previously owned home climbed 4.0% in October from a year earlier to $407k, in line with the price the month prior. Home prices rose in all four regions of the country.
• New Home Sales (Nov 26) – New home sales plunged 17.3% in October from 738k to 610k, a two-year low as sales in the South fell 28% to the slowest pace since 2020 as a result of the recent hurricanes. Over the past 12 months, new home sales dropped 9.4%, the largest annual decline since March 2023. Due to a fall in new sales, the months’ supply of new homes rose from 7.7 to 9.5 months. From a price standpoint, the median cost of a newly constructed home rose 2.5% from the month prior to $437k, up from $427k in September and the highest in 14 months. Year-over-year, new home prices increased 3.8% in October.
• S&P/CS 20 City & National Index (Nov 26) – The S&P Case-Shiller 20 City Home Price Index rose 0.18% in September, falling short of the 0.30% gain expected and following a 0.33% increase in August. The 0.18% increase marks the smallest monthly rise since January. On the other hand, the National Home Price Index rose 0.33% in September, the largest monthly gain since February. Over the past 12 months, the 20-city index rose 4.58%, a one-year low, while the national index gained 3.90%, the smallest increase in thirteen months.
• FHFA House Price Index (Nov 26) – The FHFA House Price Index jumped 0.7% in September, more than double the 0.3% gain expected and following a 0.4% increase in August. At 0.7%, this marks a seven-month high.
• Pending Home Sales (Nov 27) – Pending home sales unexpectedly increased 2.0% in October following a 7.4% gain in September. According to the median forecast, a 2.0% decrease was expected. Over the past 12 months, pending home sales increased 6.6%, the largest annual increase since May of 2021.

Trade and Currency

• U.S. Dollar (Nov 29) – The U.S. dollar edged higher November, continuing from October’s gains. The dollar rose 1.7% to close at $105.74.
• Trade Balance (Nov 5) – The U.S. trade deficit jumped 19.2% from $70.8b to $84.4b in September, the widest since early 2022. In the details of the report, the value of imports increased 3.0% to $352.31b, while exports fell 1.2% in September to $267.95b.
• Import & Export Prices (Nov 15) – Import prices unexpectedly rose 0.3% in October, the largest monthly increase since March and following two consecutive monthly declines. According to the median forecast, import prices were expected to decline 0.1%. Export prices, meanwhile, unexpectedly jumped 0.8% at the start of Q4, the largest monthly gain since August 2023 and following a 0.6% decline the month prior. According to the median forecast, export prices were also expected to decline 0.1%. Over the past 12 months, import prices rose 0.8%, while export prices dropped 0.1% in October, the third consecutive annual decline.

Monetary Policy, Reports, and Commentary

• Atlanta Fed GDPNow Forecast

(Nov 27) – According to the Atlanta Fed’s GDPNow Q4 forecast, economic activity October through November is expected to expand at a 2.7% pace, roughly in line with the 2.8% gain report in the third quarter.

• Fed Speak/News

(Nov 9) – Among the first to speak in the aftermath of the Fed’s November rate announcement, Minneapolis Fed President Neel Kashkari reiterated a message of patience and the potential need for a slower pace of action than previously indicated. “It’s really going to depend not so much on near-term plans between Congress and the new administration — it really is about productivity and economic growth…If that is sustained and we are in a structurally more productive economy going forward, then that tells me we probably wouldn’t end up cutting quite as far,” Kashkari said.

(Nov 12) – Minneapolis Fed President Neel Kashkari said he still expects to move forward with a third round cut at the December meeting. However, the Fed will remain data dependent and ultimately the incoming inflation data will determine the Fed’s appropriate policy pathway. “If we saw inflation surprises to the upside between now and then, that might give us pause,” Kashkari said at a conference hosted by Yahoo Finance. “It’d be hard to imagine the labor market really heats up between now and December. There’s just not that much time.”

(Nov 14) – Fed Governor Adriana Kugler underscored the Fed’s ongoing focus on both sides of the central bank’s dual mandate, including stable prices and full employment, and that furthermore, a potential pause could be warranted should the data indicate one is necessary. “This combination of a continued but slowing trend in disinflation and cooling labor markets means that we need to continue paying attention to both sides of our mandate,” Kugler said at an event in Uruguay. She went on to say, “If any risks arise that stall progress or reaccelerate inflation, it would be appropriate to pause our policy rate cuts.”

(Nov 14) – Taking the stage at a Dallas Fed event, Federal Reserve Chairman Jerome Powell characterized recent domestic activity as “remarkably good,” potentially affording Committee members the flexibility to lower rates at a controlled and tempered pace, as there is no “hurry” to adjust rates lower. "The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully. Ultimately, the path of the policy rate will depend on how the incoming data and the economic outlook evolve,” Powell said. Highlighting the ongoing disinflationary improvement in the U.S., Powell was clear that more progress is still needed to meet the Feds 2% goal, and that the Committee is committed to finishing the job. “With labor market conditions in rough balance and inflation expectations well anchored, I expect inflation to continue to come down toward our 2 percent objective, albeit on a sometimes-bumpy path,” Powell said.

(Nov 19) – Kansas City Fed President Jeffrey Schmid expressed uncertainty about the future pathway of rates and just how many more rate cuts will be needed. Speaking at an event in Omaha, Nebraska, Schmid said, “While now is the time to begin dialing back the restrictiveness of monetary policy, it remains to be seen how much further interest rates will decline or where they might eventually settle.”

(Nov 20) – Speaking at an event in West Palm Beach, Florida, Fed Governor Michelle Bowman echoed a “cautious” approach to future rate cuts. “I would prefer to proceed cautiously in bringing the policy rate down to better assess how far we are from the end point, while recognizing that we have not yet achieved our inflation goal and closely watching the evolution of the labor market,” said Bowman. Recall, Bowman was the sole dissent at the September meeting when the Fed opted for a larger, 50bp rate cut.

(Nov 21) – Speaking to Barron’s, New York Fed President John Williams noted there is still more work to do to bring inflation back down to the Fed’s 2% target, but the progress has been solid. He noted that while there has been “a significant decline in inflation toward our 2% goal. Obviously [we’re] not quite there yet.” He went on to say, “I expect it will be appropriate over time to bring the fed funds rate down closer to more-normal or neutral levels.”

(Nov 21) – Speaking in a moderated Q&A in Indianapolis, Chicago Fed President Austan Goolsbee noted that he sees rates moving “a fair bit lower.” “My view is that the long arc over the last year and a half shows inflation is way down and on its way to 2%. Labor markets have cooled to something close to stable full employment,” Goolsbee said.

(Nov 25) –Minneapolis Fed President Neel Kashkari said on Bloomberg Television it’s “reasonable” to consider another rate cut at the December meeting. “Right now, knowing what I know today, still considering a 25-basis-point cut in December — it’s a reasonable debate for us to have.”

(Nov 25) – Chicago Fed President Austan Goolsbee spoke on an appearance on Fox Business. Raising the bar from simply a strong or solid economy, Goolsbee said barring signs of an economy “overheating,” the Fed should move forward with additional easing in December and beyond. “Barring some convincing evidence of overheating, I don’t see the case for not continuing to have the fed funds rate decline…How fast that happens will be determined by the outlook and conditions.”

• November 7 FOMC Rate Decision and Press Conference

As expected, the Fed opted to cut rates 25bps in November, taking the federal funds rate to a range of 4.50% to 4.75%. Marking now the second consecutive reduction in policy, the November cut is a notably smaller reduction following an outsized 50bp cut out of the gate in September. In the details of the statement, the Fed maintained a relatively positive assessment of conditions. The overall economy, the Fed says, remains “solid.” The labor market too remains solid, according to the November statement, although conditions have generally “eased.” The unemployment rate has moved higher, but still remains “low,” a somewhat amended assessment from the September language noting, “Job gains have slowed.” On the inflation front, the Fed removed language regarding achieving “greater confidence” that inflation is moving sustainably toward 2%, although the statement noted inflation has “made progress” toward the central bank's target pace. In other words, inflation continues to improve, further abating from a recent peak in Q2 2022. Although remaining above 2%, Fed officials recognize there is still more ground to cover before declaring mission accomplished. Going forward, the Fed will remain, as always, data dependent, with the statement noting, “The Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.” Additionally, according to the November statement, the Committee judges that the risks to achieving its employment and inflation goals are “roughly in balance,” mimicking the language in the September statement. The statement, furthermore, noted, “The economic outlook is uncertain, and the committee is attentive to the risks to both sides of its dual mandate.” The decision was unanimous with all 12 members voting in favor of a 25bp cut. During the press conference, Chair Powell reiterated a data-dependent position, noting that “nothing in the economic data suggests the Committee has any need to be in a hurry” to cut rates further. Furthermore, Powell did not commit to a timeline for future cuts. “By December, we’ll have more data, I guess one more employer report, two more inflation reports and lots of other data, and we’ll make a decision as we get to December,” Powell said. Additionally, when asked if he would step down if President-elect Donald Trump’s administration asked him to, Powell simply replied “no.”

• November 6-7 FOMC Meeting Minutes

According to the November FOMC meeting minutes, Federal Reserve officials are taking a more careful approach to future policy adjustments. “Participants anticipated that if the data came in about as expected, with inflation continuing to move down sustainably to 2% and the economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral stance of policy over time,” the minutes stated. Buoyed by concerns over potential mounting weakness in the labor market, the Fed opted for a “strong start” out the gate, cutting rates 50bps in September and another 25bps in November. Now, however, the Fed sees a slightly improved picture with the minutes stating that policy makers saw the downside risks to employment and growth as having “decreased somewhat.” Officials generally noted there was “no sign of rapid deterioration” in the jobs market. In addition, while encouraged by the decline in inflation from earlier peak levels, officials noted that core measures remain “somewhat elevated.” “Participants indicated that they remained confident that inflation was moving sustainably toward 2%, although a couple noted the possibility that the process could take longer than previously expected,” the minutes read. Finally, aside from the notion of the further rate cuts and the pace of additional policy easing, policy makers indicated uncertainty surrounding the so-called neutral level of rates whereby policy neither stimulates nor retards economic activity. “Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy restraint gradually,” according to the November minutes.

Domestic News and Activity

• Politics and the Biden/Incoming Trump Administrations

(Nov 8) – Former President Donald Trump was declared the victor of the 2024 presidential race after securing all of the swing states including Pennsylvania, North Carolina and Georgia. Republicans have also secured control of the Senate as well as the House. Speaking to supporters, Trump said, “We made history for a reason tonight.” "This will truly be the golden age of America. This is a magnificent victory for the American people that will allow us to 'Make America Great Again' for all Americans. Success will bring us together. We are going to start by all putting 'America First.' We have to fix it. I will not let you down. America's future will be bigger, better, bolder, richer, safer and stronger than it has ever been before.” Trade remains among Trump’s top priorities with promises to implement a series of tariffs and import restrictions aimed to increase domestic growth and promote reshoring. The Trump campaign also made promises on tax breaks for corporations and individuals, growing domestic energy production and eliminating excess government spending. 

(Nov 20) – The incoming Trump administration continued to announce key appointments, including Cantor Fitzgerald CEO Howard Lutnick as Commerce Secretary, and North Dakota Governor Doug Burgum as head of the Department of the Interior. For Treasury secretary, early reports indicated former Fed Governor Kevin Warsh and Apollo CEO Marc Rowan were being considered. Warsh served as a member of the Federal Reserve’s Board of Governors from 2006 to 2011, and prior to his role on the board, he served as Special Assistant to the President for Economic Policy and Executive Secretary of the White House National Economic Council from 2002-2006 under the Bush administration. Before his time at the White House and the Fed, Warsh worked in the Mergers & Acquisitions department at Morgan Stanley & Co from 1995-2002.

(Nov 25) – After quite a bit of uncertainty and conjecture, the Trump administration nominated Scott Bessent as Treasury Secretary, beating out former Fed Governor Kevin Warsh. Bessent, a Wall Street veteran who served as a partner at Soros Fund Management and later the founder of Key Square Group, has championed the Trump administration’s policies, supporting a focus to raise tariffs, reduce taxes and potentially aim to rein in annual deficits to 3% of gross domestic product. Bessent will also have a front row seat as the Trump administration seeks to replace Chairman Jerome Powell at the Fed when his term expires in May 2026, along with at least three other appointments to the board in the next four years when Adriana Kugler’s term ends in January 2026, Michael Barr’s term as Vice Chair for Supervision ends in July 2026, and Philip Jefferson’s term as Vice Chair concludes in September 2027. 

(Nov 26) – Incoming president Donald Trump reiterated his promise to increase barriers to international producers with an additional 10% tariff on Chinese goods, as well as an additional 25% tariff on all products from Canada and Mexico. Following the nomination of Scott Bessent as Treasury Secretary, investors were optimistic the administration could take a more tempered approach to tariffs, however, it appears the future president is now more than ever committed to more sizable restrictions.

International News and Activity 

• Euro Area

(Nov 19) – The overseas conflict between Russia and Ukraine entered a "dangerous new phase." According to reports, the Biden White House recently granted Ukraine long-run missile capabilities, a sizable shift in the administration’s longstanding opposition, which President Volodymyr Zelensky quickly deployed, striking a military base on Russian territory. In response, Moscow escalated its threat of a nuclear response to further attacks. Although, again, according to reports, the Biden administration indicated it will not adjust its current position at this time based on Russia’s response and a reduced nuclear threshold.

(Nov 20) – According to reports, Russian leaders indicated they were ready to speak with the incoming Trump administration regarding a possible cease-fire with Ukraine. Although, a Kremlin spokesperson, according to Bloomberg News, cautioned “freezing this conflict will not work for us.” The mixed messaging came amid earlier reports indicating the overseas conflict between Russia and Ukraine entered a "dangerous new phase."

-Lindsey Piegza, Ph.D., Chief Economist