Consumer Resilience

Last week PCE headline inflation came in at 6.2%, slightly better than expected but still much higher than the Federal Reserve’s 2% inflation target. In the week ahead we will be tracking data from the October employment report. The consensus expects non-farm payrolls to come in at 200,000 jobs (vs. 263,000 jobs in September) and for the unemployment rate to rise slightly to 3.6%. The goods sector—which encompasses housing, car sales, and durable goods (in other words: purchases that often require financing)—is showing signs of slowing down. However, it’s a completely different story in the services sector, which makes up about 80% of GDP. There, we are seeing solid growth across the board—from air travel and hotel bookings to the number of consumers eating in restaurants and going to Broadway shows. The bottom line is that the overall economy is still relatively strong and consumer services in particular continue to show robust growth. As such, we can expect to see more interest rate hikes from the central bank.

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