More signs of a slowdown

In a thankfully holiday-shortened week, markets treaded water. Both stock and bond prices were biased slightly higher, though on slowing trading volume. 

Data pointed to further slowing. The index of leading economic indicators for October again turned down, as it has since the Federal Reserve started raising its key federal funds rate in early 2022. In addition, the Chicago Fed national activity index was sharply below expectations in October, due primarily to production-related and employment indicators.

The Fed released the minutes from its Nov. 1 FOMC meeting last week. To no one’s surprise, participants agreed they would proceed carefully and consider raising rates absent sufficient progress toward their inflation objective. Upside risks to inflation remain, but they noted consumers in the low-to-moderate income categories are increasingly coming under pressure due to high prices for food and other essentials. In short, they are in no hurry to ease policy.

Consumer confidence in November fell from October’s level, according to the University of Michigan sentiment survey. More favorable current assessments and expectations of personal finances were offset by worsening expectations of future business conditions. Troubling for the Fed, year-ahead inflation expectations increased from 4.2% in October to 4.5% in November, despite consumers taking note of falling gasoline prices and the continuing slowdown in inflation more broadly. Respondents upgraded views of their finances, but indicated they remain concerned about employment prospects in the year ahead.