Inflation continues to moderate while the U.S. labor market shows signs of resilience, keeping the economic outlook balanced. Global risks persist, but recent data revisions and international stimulus efforts suggest a cautiously optimistic trajectory for the remainder of the year.
Key Insights:
- PCE Deflator: The Federal Reserve’s preferred inflation gauge rose only 0.1% month-over-month in August, with a year-over-year rate of 2.2%. Core PCE inflation also increased 0.1% month-over-month, bringing the annual rate to 2.7%.
- Labor Market: Despite a dip in consumer confidence, unemployment pressures remain contained, with initial jobless claims retreating towards recent lows.
- U.S. GDP: Revisions to the national accounts data now place the personal savings rate at 4.8% in August, with Q3 real GDP tracking around +3%.
- Global Risks: Ongoing concerns over European manufacturing and a potential U.S. port strike are offset by China’s new fiscal and monetary stimulus efforts, which could drive local consumer demand.
- Monetary Policy: The Fed has moved towards a more neutral stance, with further rate cuts anticipated, depending on upcoming labor market data.
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