PCE Inflation Data Out Today; Leading Economic Index Still Pointing to a Recession

PCE Inflation Data Out Today; Leading Economic Index Still Points to Recession By Michael Maloney

Good day. The last key inflation reading of the year will be released today, and economists expect the U.S. core personal-consumption expenditures price index for November to show a 3.3% rise from a year ago, according to a Wall Street Journal poll. That would be slowdown from a 3.5% jump in October. Meanwhile, a closely followed U.S. economic index continued to flash recession, and the government's reading on U.S. third-quarter economic growth was trimmed to 4.9% from a previous estimate of 5.2%.

Please note: The Central Banking newsletter is taking a break for the holidays next week and will return Jan. 2. See you in the new year!

Now on to today's news and analysis.

Top News What to Watch in Spending Report: Inflation Closing In on Fed's Target

Inflation retreated further in November and consumers picked up their spending as moods improved, forecasters said, adding to signs that price pressures can be contained without a recession .

Economists surveyed by The Wall Street Journal estimate that the core personal-consumption expenditures price index, which excludes volatile food and energy categories, rose 0.1% in November from the previous month, a slowdown from 0.2% in October. That would be the slowest rise since August. On the year, they estimate core inflation cooled to 3.3% in November, from 3.5% in the previous month.

Inflation Outlook Is Clouded by Shipping ( Barron's ) Economy Still Appears Headed for Recession, Leading Index Signals

The Conference Board Leading Economic Index declined 0.5% in November, falling for the 20th month in a row and continuing to signal a recession ahead. The figure matched the forecast of economists polled by the Wall Street Journal. The last time the index-a gauge of 10 indicators designed to show whether the economy is getting better or worse-fell so many times in a row was during the recession from the end of 2007 through 2009. ( MarketWatch )

U.S. Economy Weaker GDP Data Weighs on Treasury Yields

U.S. economic growth wasn't as strong in the third quarter as expected, prompting a bond rally that is pushing yields lower. Third-quarter GDP growth came in at 4.9%, according to a third estimate from the Bureau of Economic Analysis. The previous estimate was 5.2%.

Jobless Claims Inch Up to 205,000

The number of Americans who applied for unemployment benefits last week inched up to 205,000, indicating layoffs remain very low during the holiday season and jobs aren't especially hard to find. ( MarketWatch )

Mortgage Rates Fall to 6-Month Low

Mortgage rates dropped to their lowest level since June , offering some reprieve to a housing market that has been battered by higher borrowing costs. The average rate on the standard 30-year fixed mortgage fell about a quarter percentage point to 6.67%, according to a survey of lenders released Thursday by mortgage-finance giant Freddie Mac.

Return of Student-Loan Payments Has Been a Logistical Nightmare

Surprise bills, long waits and conflicting information are frustrating many student loan borrowers as President Biden touts debt relief to voters.

Key Developments Around the World China's Big Banks Cut Deposit Rates as Growth Plateaus

China's biggest banks are lowering the deposit rates offered to savers, a move that could pave the way for the central bank to make interest-rate cuts to spur economic growth.

Angola to Leave OPEC After Production Quota Dispute

Angola said it is leaving the Organization of the Petroleum Exporting Countries, according to official news agency Angop, after a recent dispute over oil production quotas.

U.K. Economy Shrank in Third Quarter, as Recession Signals Loom

The U.K.'s economy contracted 0.1% on quarter in the July-to-September period with a downward revision to the previous quarter, indicating that the country could be stuck in a period of subdued economic performance.

The New Swedish Playbook for Financing Green Business

In Sweden's far north, two investors are rolling out a playbook that could break the financial bottleneck that has bedeviled emerging green industries.

Canada Retail Sales Rise 0.7% in October

Canadian retail spending flattened last month heading into the holiday season, according to an advance estimate of receipts released Thursday by Statistics Canada, following a 0.7% rise in October.

The Newest Get Rich Quick Trade: Indian Stocks

India's booming stock market is attracting millions of individual investors hoping to get rich quick. More than 11 million new accounts were opened with the National Stock Exchange of India in 2023 through the end of August.

Financial Regulation Roundup Banks, Law Enforcement to Have Access to New Ownership Database

The Treasury's Financial Crimes Enforcement Network will start providing law enforcement agencies and financial institutions access to its beneficial ownership database in phases beginning in February. The move is part of FinCEN's plan to implement the Corporate Transparency Act, in an effort to stop criminals and terrorists from using anonymous shell companies to hide dirty money.

Regulators Took a Beating in 2023. AI Will Be Their Next Challenge.

This time last year, global regulators could hardly have predicted the omnicrisis about to unfold. Had they known the chaos in geopolitics and markets that would rock 2023, they might have had a sleepless Christmas. Supervisors have overseen everything from the collapse of Credit Suisse to greenwashing scandals, cyber attacks, a near-collapse in Chinese real estate, global money-laundering and crypto fraud. Now, top watchdogs predict another major challenge on the horizon: getting to grips with artificial intelligence. ( Financial News )

Forward Guidance Friday (all times ET)

8:30 a.m.: U.S. income, spending and personal-consumption expenditures price index for November; U.S. durable goods for November; Canada gross domestic product for October

10 a.m.: University of Michigan consumer survey, final for December; U.S. new-home sales for November

Research Weak U.K. GDP Data Raises Expectation of BOE Rate Cut in Early 2024

Weaker-than-expected U.K. GDP data raises the possibility of a Bank of England rate cut in early 2024, Roberto Rossignoli, head of research at European digital wealth manager Moneyfarm, says in a note. "Considering this GDP report and the recent Consumer Price Index (CPI) figures showing a drop in inflation to 3.9% in November, there is an increased likelihood of an interest rate cut in early 2024," he says. Markets fully price in a BOE rate cut in May, Refinitiv data show. (Dow Jones Newswires)

Sterling Seen Weakening on Rising Expectations of BOE Rate Cut

Sterling is expected to decline in the near term on growing expectations that the Bank of England will cut interest rates in the first half of 2024 as U.K. inflation eases, says MUFG senior currency analyst Lee Hardman in a note. "The faster decline in inflation poses downside risks to our near-term pound forecasts," he says. Markets fully price in a BOE rate cut in May, Refinitiv data shows. (Dow Jones Newswires)

Commentary This Stat Could Transform How You View Economic Growth

As the world ages, gross domestic product per capita-the size of the economy divided by population-is becoming less useful. A new paper suggests focusing on GDP per working-age adult instead. Japan best illustrates this: When shifting the focus, it goes from laggard to leader, the WSJ's Josh Zumbrun writes.

Bitcoin Rose on Rumors in 2023. How to Predict What Comes Next.

A price run-up ahead of what are expected to be the first approvals of spot bitcoin ETFs could set up a hangover for 2024 , the WSJ's Telis Demos writes.

Executive Insights

Here is our weekly roundup of stories from across WSJ Pro that we think you'll find useful. They are unlocked for WSJ subscribers.

Thrift stores are guessing you'll be happy with a secondhand gift this Christmas.

Some retailers are using AI to steer certain ads away from shoppers most likely to return products.

Walgreens's new CIO will try to turn things around after a rocky year in the pharmacy chain's IT department that was marked by layoffs, disruption and low morale.

Adobe's acquisition of Figma succumbed to pressure from regulators who want to protect innovation. Tech experts are split over whether that will work- or have the opposite effect .

Basis Points The Philadelphia Fed said its gauge of regional business activity fell to negative 10.5 in December from negative 5.9 in the prior month. Economists polled by the Wall Street Journal had expected a negative 4 reading for December. This is the 17th negative reading in the past 19 months. ( MarketWatch ) Factory activity in the central U.S. contracted for the fourth consecutive month in December, albeit only marginally and slower than recent months, as expectations for future output showed signs of improvement. The Kansas City Fed said the Tenth District manufacturing survey's composite index was minus one in December, up from minus two in November and minus eight in October. (Dow Jones Newswires) Retail sales in the U.K. picked up more than expected in November amid Black Friday discounting and cooling inflation. Total retail-trade volume rose by 1.3% over the month compared with October, according to figures released Friday by the Office for National Statistics. Sales had been expected to climb by 0.5%, according to a consensus of economists' projections compiled by The Wall Street Journal. Sales in October were flat compared with the month prior, according to revised figures that lifted a previous estimate for a slight decline. (DJN) Feedback Loop

This newsletter was compiled by Michael Maloney in New York and Nihad Ahmed in Barcelona.

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12-22-23 0717ET