John's Finance Corner: Inflation, Housing, and Jobs

John's Finance Corner: Inflation, Housing, and Jobs

Inflation Progress and Core PCE Insights

It appears we’re seeing a deceleration in the fight against inflation. The Personal Consumption Expenditures (PCE) inflation report for October showed a 0.2% increase from the previous month, with year-over-year data rising from 2.1% to 2.3%. The Federal Reserve’s preferred measure, Core PCE, rose by 0.3% month-over-month, and the year-over-year reading increased from 2.7% to 2.8%. While these figures indicate a slight increase, Core PCE remains near the lowest levels we've seen in over three years. As we move forward, the inflation numbers are expected to improve as they replace the higher figures from last year, potentially benefiting Treasury Bonds and mortgage rates in early 2025.

New Home Sales Decline

New home sales experienced a notable decline between September and October. Signed contracts on new homes decreased by 17.3%, with 610,000 units marking the lowest level since November 2022. Compared to October 2023, signed contracts were down by 9.4%. However, it’s important to consider that a significant portion of this decline occurred in the South, an area recently impacted by consecutive hurricanes. Additionally, rising mortgage rates during this period and buyers opting to wait until after the election also contributed to this slowdown.

Third Quarter GDP and Employment Trends

The Third Quarter GDP report showed the economy grew by 2.8%, a positive sign of resilience. Initial jobless claims fell by 2,000 from the previous week, reaching a seven-month low. However, continuing claims rose by 9,000, with an estimated 1.907 million people still receiving benefits after their initial claims were processed.

Looking Ahead: A Pivotal Week

The week following the Thanksgiving holiday promises to be significant, with potentially market-moving data on the horizon. This Jobs Week, we'll receive crucial updates from the Jolts, ADP, and BLS employment data. Fed Chair Powell will be speaking mid-week, and we’ll also see the latest figures on the unemployment rate, earnings data, and jobless claims. These releases could lead to a volatile week for the bond market, determining the near-term trajectory of mortgage rates as we approach December and the first quarter of 2025.

Stay tuned for further updates as we continue to navigate these economic challenges and monitor the latest data.

John Lamberg

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