1. GROSS DOMESTIC PRODUCT • Real GDP rose by 4.9% during the third quarter of 2023, its fastest pace since the fourth quarter of 2021, according to the advanced estimate from the Bureau of Economic Analysis (BEA). • Continuing the post-pandemic storyline, robust consumer spending largely drove the increase in output but was also accompanied by increases in the other key components: net exports, residential investment, and government spending. • Consumer spending rose 4.0% during the third quarter, following a tepid 0.8% in Q2. According to the BEA report, consumption accounted for 55% of the total increase in GDP. • Stocks reacted little to the news, as markets forecasted an increase of 4.7% during the quarter — not far off from the eventual tally. Still, the substantial GDP numbers, alongside a continued decline in core-inflation prices, further complicate the Federal Reserve’s next steps as they try to tame inflation while keeping the US economy afloat.
2. CPI INFLATION • According to the Bureau of Labor Statistics, the Consumer Price Index rose by 0.4% month-over-month in September, following a 0.6% increase in August. The index is up by 3.7% over the past 12 months. • Prices rose more than the consensus expectations as shelter continued to place upward pressure on overall prices, accounting for over half of the total increase. Still, several items in the index saw prices climb at their slowest pace in years, including food, which is at its lowest rate since March 2021. • Gasoline prices also played a significant role in the monthly rise in CPI, with the energy index increasing by 1.5% in September. • The indices for used cars and trucks, as well as apparel, decreased during the month. • Excluding food and energy, core-CPI cooled for six consecutive months to 4.1% annually and just 0.3% month-over-month. The slowdown in core inflation rates signals what Fed policymakers may do moving forward, considering their emphasis on these items in their rate-setting strategy.