This week, despite being shortened by holidays, brings a significant flow of economic data following the reopening of the U.S. government. While some figures may reflect delayed reporting, they offer insight into how the third quarter concluded. Retail sales for September are expected to show solid growth, driven largely by higher-income consumers. This trend aligns with recent corporate earnings from Walmart and Gap, which have seen stronger demand among affluent shoppers. In contrast, Home Depot has observed a slowdown in high-value home improvement projects, suggesting a divergence in consumer spending behavior across income groups.
Additional data releases include the Producer Price Index (PPI) for September, the Federal Reserve’s Beige Book, and the weekly jobless claims report. These indicators will help shape market expectations ahead of the Federal Open Market Committee meeting on December 9-10.
Key developments to watch:
(1) Regional manufacturing surveys from the Dallas and Richmond Fed districts may reinforce signs of improvement seen in earlier reports from New York, Philadelphia, and Kansas City. If the trend holds, the national Manufacturing Purchasing Managers’ Index (M-PMI) could surpass the 50.0 threshold, indicating expansion.
(2) Retail activity remained robust in September, as reflected in the Redbook Retail Sales Index. A notable boost came from auto sales, which reached an annualized rate of 16.4 million units. This surge was partly fueled by consumers rushing to buy electric vehicles before tax incentives expired at month-end.
(3) The September PPI will be closely watched, especially after the Consumer Price Index (CPI) came in lower than expected. Rising tariffs could have kept upward pressure on producer prices, potentially making inflation readings hotter than anticipated.
(4) The November Consumer Confidence Index will provide timely insight into public sentiment, particularly regarding job availability. Early signals suggest that workers may be finding it increasingly difficult to secure employment.
(5) Weekly unemployment claims continue to indicate a low level of layoffs. However, there are signs that the duration of unemployment may be increasing, as seen in the September jobs report, which showed strong payroll growth but a rise in the unemployment rate to 4.4 percent.
— news from Yardeni QuickTakes
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ECONOMIC WEEK AHEAD: November 24-28
During this holiday-shortened week, investors will receive a cornucopia of data now that the government is open again. Some of the data will be a bit stale. But they should indicate how Q3 ended for the economy. n nSeptember’s retail sales report (Tue) should show a solid increase, with strength in spending by higher-income shoppers more than offsetting the weakness in spending by lower-income workers. This dichotomy is supported by healthy corporate earnings from Walmart and Gap, which have prioritized higher-income shoppers. Home Depot, meanwhile, is finding that many higher-value purchases and remodeling projects are being scaled back. n nAlso out this week are September’s PPI (Tue), the Fed’s Beige Book (Wed), and weekly jobless claims (Wed). n nHere are the reports that might move the markets and influence the Fed’s thinking as the December 9-10 Federal Open Market Committee meeting approaches: n n(1) Business surveys. The remaining two of the business surveys conducted by five of the Fed regional banks will come out for the Dallas (Mon) and Richmond (Tue) districts. They might confirm that business improved in November, as shown by the surveys for NY, Philly, and Kansas City. If so, then November’s national M-PMI might rise above 50.0 (chart). n n(2) Retail sales. September’s retail sales growth remained relatively strong according to the Redbook Retail Sales Index (chart). Another positive development that month was strong auto sales, reaching 16.4 million units (saar). A surge in demand notably drove this performance as buyers rushed to purchase electric vehicles (EVs) before the expiration of consumer tax credits at the end of the month. n n(3) PPI. September’s producer price index (Tue) will garner considerable attention at the Fed, particularly after the September CPI surprised to the downside. The PPI might be hotter than expected if tariffs continued to push goods inflation higher (chart). n n(4) Consumer confidence. November’s Consumer Confidence Index survey will be among the most timely indicators. We will be focusing on the job availability responses (chart). They are likely to show that jobs are getting harder to find. n n(5) Unemployment insurance. The weekly unemployment claims report (Wed) has been signaling that layoffs remain low, but it may be taking longer for unemployed workers to find a job (chart). September’s employment report also sent a mixed message, as the payroll gain exceeded expectations but the unemployment rate rose to 4.4%.