Explainer-Charting Fed economic data flow According to Reuters

© Reuters. PHOTO: The exterior of the Marriner S. Eccles Federal Reserve Board Building is seen in Washington, DC, U.S., June 14, 2022. REUTERS/Sarah Silbiger/File Photo

(Reuters) – The final month of 2023 was marked by a flurry of data on the health of the U.S. economy and the state of price increases, which many Federal Reserve officials saw as a reassuring sign that their long fight against inflation was on track to end. “soft landing”.

The year began with a general expectation among economists and many Fed officials themselves that a recession would develop under the weight of the central bank’s aggressive rate hikes. It ended with many believing that the outcome was preventable.

In addition, Fed officials signaled at their last meeting of the year that the rate hike cycle was not only over—a new rate cut cycle is likely in 2024.

Of course, the relatively benign run of numbers that set the stage for this is now history, and how soon officials can turn to this policy key depends on what the 2024 data brings.

The onslaught begins in the first two weeks of the year with headline data on the labor market, consumer spending and inflation due for the start of the year.

Here’s a guide to some of the numbers shaping the political debate:

INFLATION (PCE released Dec. 22; next CPI release Jan. 11):

Year-on-year inflation, the Fed’s preferred personal consumption expenditure price index, fell to 2.6% in November, and on a monthly basis, prices fell for the first time since April 2020. The “core” index, excluding food and energy prices, also fell to 3.2%, the lowest this key the inflation trend indicator is from April 2021.

At their last meeting of the year, Fed officials forecast continued improvement in both measures in 2024.

Another gauge, the consumer price index, fell to 3.1% year-on-year in November, while the core rate was steady at 4.0%. However, annualized monthly rate measures over the past several months show that these gauges continue to decline.

RETAIL (released December 14; next release January 17):

Retail sales rose 0.3% in November, the latest in a series of “upward surprises” the economy has delivered over the course of the year. “Core” sales, which exclude gasoline, autos, building materials and food services and are more in line with estimates of economic growth, also beat forecasts for a 0.4% gain in the latest sign of U.S. consumer resilience. Based on the trend, the rate of consumer spending is slowing in a way the Fed hopes to see as it watches for signs that the rapid rate hikes it has put in place have started to dampen overall demand for goods and services.

EMPLOYMENT (issued December 8, next issue January 5):

Job growth jumped to 199,000 in November from 150,000 the previous month, and the unemployment rate fell to 3.7% from 3.9%.

Even after the end of labor strikes involving about 40,000 workers, the latest employment report showed continued steady job growth. In addition to the improved labor supply, with the number of available workers rising by more than half a million in the month, the report is consistent with the Fed’s view that the economy can continue to expand while inflation also declines.

The pace of year-over-year wage growth also continued to slow, although at a 4.0% annual rate it remains higher than many Fed officials see as consistent with price stability.

FREELANCE JOB (released December 5th, next release January 3rd):

Fed Chairman Jerome Powell is closely watching the Labor Department’s Job Vacancy and Labor Turnover Survey (JOLTS) for information on the imbalance between labor supply and demand, and in particular, the number of job openings for each jobless person looking for one. . The ratio fell sharply to 1.34 to 1 in October, the lowest since August 2021, when the economy was in the early stages of a pandemic recovery. October’s number is close to the 1.2-to-1 level seen just before the health crisis. Other aspects of the survey, such as quit rates, have also returned to pre-pandemic levels.