Q4 Economic Data Pointing Towards Weakness | Episode 078 | 11-30-2023

In today's episode of "Markets with Megan," we take a look into key economic indicators from October, focusing on personal income and spending, the labor market, inflation, and pending home sales. Despite personal income and spending hitting expectations, the personal savings rate edged up, though it remains notably lower than the 20-year average. Megan talks about the unchanged initial jobless claims but mentions a significant increase in continuing claims, signaling challenges in the labor market. The Fed's preferred gauge for inflation, the PCE core, showed that the year-over-year figure remains above the target range at 3.5%. Unfortunately, pending home sales took a hit, reaching their lowest level on record. These early indicators for the fourth quarter suggest a shift from the third quarter, with potential weaknesses coming. Tune in next time as we analyze ISM Manufacturing which is expected to be in contraction territory again. For any questions or comments, reach out to us at podcast at Verdence dot com. 

Hello, this is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors, coming to you today with our regular segment of Markets with Megan, and we have a lot to talk about today. It was a big economic day today. We have basically four different areas of the economy. I'm going to touch on the first one was personal income and spending. This data for October came in pretty much as expected Both rows at a very modest pace, so that kept the personal savings rate a little bit higher. It ticked up just by a tenth for the month. But just keep in mind, personal savings is still very low. It's been below the 20-year average now for quite some time. The 20-year average is about a 5.9 percent personal savings rate and we're now sitting about 3.8 percent. So again, consumers are getting squeezed here by higher prices, the slowing economy. This is being reflected in both income and spending.

In the labor market, we got initial jobless claims numbers too. They were basically unchanged from the last week. But the most important thing to take away from this was the continuing claims number. So continuing claims are those unemployed that are filing continuous claims, not initial claims for unemployment benefits. That jumped up to 1.92 million. It's the highest that we've seen since November of 2021.

Now, from the inflation standpoint, this was probably the most important data point as far as what the Fed's going to be looking at. The Fed's preferred inflation gauge, pce Core, that came out today Relatively tame. It came in line with as expected, but still on a year-over-year basis running about 3.5 percent, which is above the Fed's target range. Lastly, from a home sales standpoint, we've got pending home sales for the month of October. They fell again and unfortunately, the pending home sale index is now at the lowest level that it's been on record.

All of these indicators are some of the first economic data points we've gotten for the fourth quarter, or the month of October. We know we had a pretty solid third quarter with 5.2 percent GDP growth. These data that we're seeing thus far for October are showing that this probably is not going to continue into the fourth quarter. Our will be back with ISM manufacturing. That is expected to be in contraction territory again, but we'll be back with that and if you have any questions or comments, please feel free to reach out to podcast at Verdence dot com. Thank you.