Clear as chowder Clear as chowder\images\insights\article\mmdt-weekly-Small.jpg October 27 2023 October 30 2023

Clear as chowder

Weekly Bond Commentary

Published October 30 2023

An economy running at 4.9% annual rate certainly doesn’t look like it’s falling into recession. 

Up from 2.1% in the second quarter, third-quarter GDP was boosted by consumer spending, increased inventory investment, exports, state and local government spending, and residential fixed investment. The only categories that offset these gains were nonresidential fixed investment and imports. Nominal GDP rose 8.5% in the quarter, as the prices component doubled from 1.7% in the second quarter to 3.5% in the third, leaving a real gain of 4.9%. Summing this all up: growth is likely to slow, as should price pressures.

The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures Index, rose 0.4% in September, the same as in August, and 3.4% over the last year. The core measure (excluding more volatile segments like food and energy prices) rose 0.3%, as expected, and slipped to 3.7% over the last year, down from 3.8%. These are slow but steady gains. 

In spite of their growing caution and concern about the economy, consumers dipped further into their savings to spend during September. The saving rate fell from 4.0% to 3.4%, while incomes grew by 0.3%, down from 0.4% in August, and spending rose 0.7%, up from 0.4% in August. According to the University of Michigan consumer survey, consumers translated the collective impact of negative issues, such as weaker stock markets, war in the Middle East and ongoing political woes, into a bleaker outlook. The Fed meets Nov. 1 amid this soup of mixed messages.  

Tags Markets/Economy . Fixed Income .

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

Gross Domestic Product (GDP) is a broad measure of the economy that measures the retail value of goods and services produced in a country.

Personal Consumption Expenditures Price Index (PCE): A measure of inflation at the consumer level.

The University of Michigan Consumer Sentiment Index is a measure of consumer confidence based on a monthly telephone survey by the University of Michigan that gathers information on consumer expectations regarding the overall economy.

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