On a late October morning, just days before the American midterm elections, two of the country's most closely watched economic measures told a split story. Prices measured by the gauge the Federal Reserve trusts most ticked upward in September, dashing hopes that inflation was cooling, while the economy grew faster in the third quarter than forecasters had anticipated. Beneath the stronger headline sits a quieter fact: households, once price changes are removed, were not spending more, and so the question of whether this growth will hold remains open.
Fed's Preferred Inflation Gauge Rises in September as Third-Quarter GDP Beats Expectations
Growth better than forecast, inflation moving the wrong way
Mark
Two reports landed together. Why does it matter that they point in different directions?
Mimi
Because growth beat expectations while the Fed's preferred inflation gauge rose in September. Strong growth plus firmer prices is the combination that makes a rate hike more plausible.
Mark
And the spending detail?
Mimi
The Honolulu Star-Advertiser noted that real consumer spending stalled. After accounting for prices, households weren't buying more.
Luke
Worth saying plainly: the material here doesn't give the size of the PCE increase or the GDP growth rate. We know direction, not magnitude.
Mark
So how firm is the talk of a year-end hike?
Mimi
Yahoo Finance said expectations for a hike are being kept in place. That's a market expectation, not a Fed decision.
Luke
Right. Nobody at the Fed is quoted here. The hike is an expectation attributed to markets and coverage, not a commitment.
Mark
What about the midterms?
Mimi
CNN and PBS both stressed the timing, that this is the last snapshot before the elections.
Luke
Timing is confirmed. Any effect on voters isn't reported, so we shouldn't assume one.
Mark
What settles it?
Mimi
The next inflation print and what the Fed says after the elections.
O Pulso
- Inflation reversed course in September just as voters were preparing to go to the polls.
- Third-quarter GDP beat expectations, yet real consumer spending stalled, leaving the growth story hollow at its core.
- Markets are pricing in the possibility that the Federal Reserve could raise interest rates again before year's end.
- Everything now hinges on the next inflation reading and on what the Fed says once the midterms are behind us.
On a late October morning, just days before the American midterm elections, two of the country's most closely watched economic measures told a split story. Prices measured by the gauge the Federal Reserve trusts most ticked upward in September, dashing hopes that inflation was cooling, while the economy grew faster in the third quarter than forecasters had anticipated. Beneath the stronger headline sits a quieter fact: households, once price changes are removed, were not spending more, and so the question of whether this growth will hold remains open.
The last major economic readings before the midterm elections landed together on a late October morning, and they pulled in different directions. The Personal Consumption Expenditures price index, the inflation measure the Federal Reserve watches most closely, rose in September, while third-quarter GDP came in stronger than economists had expected.
News outlets converged on a similar picture: growth looked firmer, but prices were heating up again just days before voters went to the polls. Some coverage tied the inflation rise directly to expectations that the Fed might raise rates before the year closes.
The complication lies in consumer spending. Real spending, which strips out price changes, stalled in September, meaning households were not actually buying more even as the headline growth figure impressed. Because consumer spending makes up the largest share of the American economy, that flat reading raises doubts about how lasting the quarter's strength will prove.
The inflation rise matters because it undercuts hopes that price pressures were easing. Strong growth gives the Fed room to hold rates high, and firmer prices give it reason to consider going higher. The reporting available does not say how voters will respond, nor does it give the precise size of the price increase, the annualized growth rate, or the extent of the spending stall.
Attention now turns to the next inflation reading and to the Fed's commentary after the elections. The data will show whether September was a single blip or the beginning of a firmer trend.
The last major economic readings before the midterm elections arrived together on a late October morning, and they did not point in the same direction. The Personal Consumption Expenditures price index, the inflation gauge the Federal Reserve watches most closely, rose in September. Third-quarter GDP, reported alongside it, came in stronger than economists had expected.
The headlines from several outlets framed the moment in similar terms. Fox Business reported that prices ticked higher in September. Yahoo Finance tied that rise to expectations that the Fed will raise interest rates before the year ends. CNN described the data as the last snapshot of the US economy before the midterms, showing stronger growth but higher inflation. PBS wrote that inflation was heating up again days before the elections.
The Honolulu Star-Advertiser added the detail that complicates the growth story: real consumer spending stalled. Real spending is adjusted for price changes, so a stall means households were not buying more in September once higher prices were accounted for. A GDP report that beats expectations can sit uneasily beside that, because consumer spending is the largest part of the American economy and a flat reading raises questions about how durable the third-quarter strength is.
The September rise in the PCE gauge matters because it cuts against hopes that price pressures were easing. The Fed looks to this measure when it decides whether to hold, cut or raise its policy rate. Stronger growth gives policymakers room to keep rates high, and firmer prices give them a reason to consider going higher. That combination is why the coverage keeps returning to the possibility of a year-end hike.
The timing adds a political layer, though the reporting available here does not say how voters will respond. The economic picture is arriving days before the midterms, and it is a mixed one: growth better than forecast, inflation moving the wrong way, and household spending that has stopped advancing in real terms.
The summaries available leave out several specifics. They do not give the size of the PCE increase, the annualized GDP growth rate, or the exact degree to which spending stalled. Those figures will matter in judging how much of a case the Fed has for tightening further.
What to watch next is the following inflation reading and the Fed's own commentary once the elections have passed. Markets are already weighing a year-end rate hike, and the next data will show whether September was a blip or the start of a firmer trend.
Citações Notáveis
The report was described as the last snapshot of the US economy before the midterms, showing stronger growth but higher inflation.— CNN
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