The economy is growing while US inflation declines

 The economy is growing while US inflation declines

For the first time in 3.5 years, US prices dropped in November, bringing the yearly inflation rate below 3% and boosting forecasts for a March interest rate decrease by the Federal Reserve.

For the first time in 3.5 years, US prices dropped in November, bringing the yearly inflation rate below 3% and boosting forecasts for a March interest rate decrease by the Federal Reserve.

For the first time in over three and a half years, US prices declined in November, bringing the yearly inflation increase under 3% and heightening expectations on the financial markets of a Federal Reserve interest rate drop in March of next year.

Additionally, the Commerce Department's data released on Friday demonstrated the ongoing easing of underlying inflation pressures. As the year draws to a close, lower inflation has increased family income, supporting consumer spending and the economy as a whole.

It was just another piece of statistics showing how a flexible labor market has contributed to the economic expansion's longevity. The economy has beaten the grave forecasts of business authorities and analysts that there would be a recession by the end of 2022.

Sal Guattari, senior economist at Toronto's BMO Capital Markets, stated that Fed Chairman Jerome Powell received the best present of the year. "At least as of now, the outcome is turning out better than both the Fed and almost everyone had anticipated at the start of the year. It is now only a question of time, even if the Fed will not act quickly to lower rates."

According to the Bureau of Economic Analysis of the Commerce Department, last month's inflation rate decreased by 0.1% based on the personal consumption expenditures (PCE) price index. Following stable readings in October, this was the PCE price index's first monthly fall since April 2020.

Energy costs decreased by 2.7% and food prices by 0.1%. The PCE price index increased 2.6% in the year ending in November, after a 2.9% increase in October. October was the lowest annual PCE price index since March 2021—that is, below 3%.

According to Reuters surveyed economists, the PCE price index is predicted to grow 2.8% annually and stay stable this month.

When volatile food and energy components are excluded, the PCE price index increased by 0.1% in November, matching the rise from October.

After increasing 3.4% in October, the so-called core PCE price index increased 3.2% year over year, which was the least since April 2021. With regard to its 2% inflation objective, the Fed monitors PCE pricing measures.

The government said on Thursday that the third quarter saw an increase in core PCE inflation of 2.0% annually. The core PCE inflation rate for the six months increased to 1.9% after marginally increasing in November.

According to economists, a stable monthly inflation estimate of 0.2% is required to bring inflation back to the Fed's objective. Based on CME Group's FedWatch tool, financial markets anticipate a 75% likelihood of a rate drop at the Fed's policy meeting on March 19–20.

A different research released on Friday by the University of Michigan revealed that consumer sentiment rose in December, reversing all of the previous four months' dips, indicating that the decrease in inflation is improving the attitude of many Americans.

The news was welcomed by President Joe Biden, whose popularity has suffered due to his dissatisfaction with the high cost of living.

This is a result of the diligent work our joint efforts to maintain American employment and improve our supply chains have yielded. This is amazing development, according to a statement from Biden.

Wall Street saw higher stock prices. In relation to a currency basket, the dollar declined. The price of US Treasury bonds increased.

Spending by consumers went up.

The US Federal Reserve maintained rate stability this week, and officials hinted in fresh economic forecasts that the record monetary policy tightening of the last two years is ending and that cheap borrowing costs will return in 2024. The Fed has increased its policy rates by 525 basis points since March 2022, bringing them to the current range of 5.25%–5.50%.

Due to the job market's continued tightness, salaries increased by 0.6% last month, more than offsetting the impact of government assistance cuts, such as those to Medicaid, Social Security, and food stamps, on personal income. Individual earnings increased by 0.4%.

Positive signs for spending may be seen in the savings rate, which rose to 4.1% from 4.0% last month.

After deducting taxes and inflation, household income increased by 0.4%, after a 0.3% increase in October.

This made it possible for Americans to begin shopping for Christmas gifts early in the year. Over two-thirds of all economic activity in the United States is attributed to consumer expenditure, which increased 0.2% in October and 0.1% last month.

After increasing by 0.1% in October, overall consumer expenditure increased by 0.3% when adjusted for inflation. This week's data supported a rise in "real consumer spending," which takes into account construction permits and single-family dwelling starts, indicating that the economy was picking up steam after first emerging. o Changing throughout the first trimester of pregnancy.

A third data from the Census Bureau of the Commerce Department supports this, indicating that orders for durable goods climbed by 5.4%, offsetting a 5.1% decrease in October.

Despite the fact that new house sales in November dropped 12.2% to a seasonally adjusted annual rate of 590,000 units, a one-year low, according to the Census Bureau's fourth report, the drop seemed to be transitory given the dearth of available pre-owned properties. That is probably going to occur. The decline in mortgage rates from 23-year highs will aid in the support of new house sales.

The fourth quarter's GDP growth is expected to vary from a low of 1.1% to a high of 2.8% annually. In the third quarter, the economy expanded at a 4.9% annual pace.

The head economist of Pittsburgh, Pennsylvania's PNC Financial, Gus Faucher, said that "the U.S. economy looks to do well into 2024." "Recession-free in 2024."