Key Takeaways
- U.S. September Producer Prices (PPI) rose 0.3% month-over-month (MoM) and 2.7% year-over-year (YoY), aligning with expectations for the headline figure but showing a softer core PPI increase.
- September U.S. Retail Sales advanced a modest 0.2% MoM, falling short of the 0.4% estimate, indicating a softening in consumer spending.
- Weekly ADP private payrolls for the four weeks ending November 8 saw a significant decline of 13,500 jobs, a sharper contraction than the previous period.
- Federal Reserve officials Miran and Treasury Secretary Bessent signaled a leaning towards interest rate cuts, with Miran advocating for "large interest rate cuts" due to overly tight monetary policy.
- Spot gold prices rose 0.2% to $4,147.33/oz following the release of U.S. economic data, reacting to the mixed signals and dovish Fed commentary.
The latest round of U.S. economic data presents a mixed picture, with producer prices largely meeting expectations while retail sales showed signs of cooling. Simultaneously, Federal Reserve officials offered dovish commentary, hinting at potential interest rate cuts, which spurred a rise in spot gold prices.
Producer Prices and Inflation Outlook
The U.S. Producer Price Index (PPI) for September increased by 0.3% month-over-month, matching economists' estimates and accelerating from the previous month's decline. On a year-over-year basis, the PPI rose 2.7%, also in line with expectations. However, the core PPI, excluding food and energy, rose by a more modest 0.1% MoM, falling short of the estimated 0.3% increase. The core PPI saw a 2.6% YoY increase, slightly below the 2.7% estimate. These figures suggest that while headline producer inflation remains steady, underlying price pressures might be easing.
Retail Sales Indicate Softening Consumer Demand
U.S. retail sales in September advanced by 0.2% month-over-month, a softer increase than the 0.4% consensus estimate and the 0.6% rise in August. Excluding automobiles, retail sales rose 0.3% MoM, meeting expectations but still a deceleration. The retail "control group" sales, a key input for GDP calculations, actually fell 0.1% MoM, significantly missing the estimated 0.3% rise. This data points to a potential slowdown in consumer spending, a critical component of economic growth.
Labor Market and Regional Activity Show Weakness
The labor market showed signs of weakening, with the U.S. ADP Private Payrolls reporting a change of -13,500 for the four weeks ending November 8, a notable decline from the previous -2,500. This suggests a more significant contraction in private sector employment. Concurrently, the Philadelphia Fed Non-Manufacturing Activity Index for November improved slightly to -16.3 from -22.2 previously, though it remains in contractionary territory.
Federal Reserve Officials Lean Towards Rate Cuts
Federal Reserve Governor Miran expressed a strong belief that the economy calls for "large interest rate cuts" and that the Fed should move to a neutral rate quickly. He also stated that the unemployment rate is rising because monetary policy is "too tight" and he does "not see an inflation problem". Treasury Secretary Bessent echoed a similar sentiment, noting that Fed governors appear to be leaning towards cutting rates. Bessent also indicated a "very good chance" that President Trump will announce a Fed Chair before Christmas, with the final interview round concluding today.
Gold Reacts to Economic Data and Dovish Signals
Spot gold prices responded to the economic data and Fed commentary by rising 0.2%, last trading at $4,147.33/oz. Gold, often seen as a safe-haven asset, tends to benefit from signs of economic slowdown and expectations of looser monetary policy, as lower interest rates reduce the opportunity cost of holding non-yielding assets.
International Trade and Geopolitical Notes
In international news, U.S. Treasury Secretary Bessent confirmed that Chinese soybean purchases are "right on schedule". Meanwhile, the EU and India reaffirmed their aim to conclude a Free Trade Agreement (FTA) by year-end, following recent foreign policy and security dialogues. On the geopolitical front, Bessent stated that President Xi and President Trump agreed that peace in Ukraine must move forward, with both nations agreeing to work together on peace amid the war. Reports also suggest the U.S. and Ukraine are finalizing a peace deal, though Russia is likely to reject changes.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.