Weekly economic and financial commentary

Summary

United States: Inflation Redux

• The descent in inflation remains slow-going. Stubborn services prices lifted the Consumer Price Index 2.6% annually in October, the first acceleration in this measure since Q1. Sticky inflation does not appear to be fazing consumers, who are heading into the holiday season with solid spending momentum. However, slower progress on inflation may prompt the Fed to reevaluate its pace of easing moving forward.

• Next week: Housing Starts (Tue.), Existing Home Sales (Thu.)

International: Mix of Economic Data from G10 and Emerging Economies

• This week welcomed a slate of economic data from several foreign economies. In the United Kingdom, the economy maintained a slow but positive pace of growth in the third quarter. Japanese GDP growth slowed by less than expected in Q3, which we view as consistent with our view for eventual further Bank of Japan monetary policy normalization. On the emerging economy side, Chinese economic activity data were mixed with some encouraging signs. Last, Mexico's central bank lowered its policy rate by 25 bps to 10.25% and offered some dovish-leaning commentary.

• Next week: Canada CPI (Tue.), Eurozone PMIs (Fri.)

Credit Market Insights: It Ain't Gettin' Any Easier

• Credit card balances continue to rise, and banks are tightening lending standards in the face of elevated borrowing costs. Looking ahead, most banks expect demand for credit cards to strengthen in the next six months due to increased spending needs and a lower use of accumulated savings.

Topic of the Week: Will Lower Rates Usher in a Manufacturing Rebound?

• As the Fed tightened monetary policy to combat the highest inflation in a generation, manufacturing firms were forced to focus on liquidity rather than investing capital as financing costs soared. Manufacturing’s malaise during the higher rate environment of the prior two years begs the question: Will lower rates bring about a rebound?

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