The core personal consumption price index increased by 0.2% in October, which was significantly less than expected. Over the previous year, the index grew by 5%. Personal income increased by 0.7% for the month, far more than the 0.4% forecast. Spending increased by 0.8%, as predicted. Weekly claims for unemployment insurance reached 225,000, down 16,000 from the prior week and under the forecast of 235,000.

According to a report released on Thursday by the Commerce Department, inflation increased in October in about line with expectations, suggesting that price increases may be beginning to level down.

The Federal Reserve’s preferred pricing indicator, the core personal consumption expenditures price index, which excludes food and energy, was up 0.2% for the month and was up 5% from a year ago. While the annual rise was in line, the monthly growth fell short of the 0.3% Dow Jones prediction.

Daily Chart with Inflation Data Overlay

Additionally, the gains show a slowdown from September, which showed a monthly increase of 0.5% and an annual growth of 5.2%. Headline PCE, which includes food and energy, increased by 0.3% on the month and by 6% annually. The yearly gain slowed from the 6.3% rate, but the monthly increase was the same as in September.

Additionally, the agency said that personal income increased by 0.7% for the month, exceeding the 0.4% forecast, and spending increased by 0.8%, as predicted.

Another significant statistic showed that during November, a closely watched indicator of manufacturing activity had its lowest reading in 2.5 years.

A result of 49% was recorded for the ISM Manufacturing Index, which reflects the percentage of companies reporting expansion during the time period. The reading fell by 1.2 percentage points from October and was at its lowest level since May 2020, when the Covid pandemic was first reported.

The main inhibitors on the index were declines in imports and order backlogs. When compared to the carefully monitored pricing index, which fell 3.6 points to 43% and indicated that inflation is slowing, the employment index also declined, falling 1.6 points to 48.4%, which is contraction territory.

Market Reaction

Following Thursday morning’s data, most markets declined. The Dow Jones Industrial Average fell more than 250 points in early trade, while smaller declines were seen in the S&P 500 and Nasdaq Composite.

The US Dollar Index was last observed down 0.75% on the day at 105.05. The US Dollar continued to lose strength against its competitors.

The release of the data is critical since it coincides with the Fed’s current drive to raise interest rates in an effort to reduce inflation.

Chairman Jerome Powell said in a speech on Wednesday that there are some indications that price hikes are slowing down, but he cautioned that more convincing evidence is required before the central bank can alter its stance on monetary policy. However, he did say that he expects the rate increases to begin to decline, maybe as early as December.

The future of inflation is “very unpredictable,” according to Powell.

Unemployment Claims

In other economic news on Thursday, the Labor Department announced that weekly unemployment claims were 225,000, down 16,000 from the prior week and under the 235,000 projection, 

According to Challenger, Gray & Christmas, an outplacement company, anticipated layoffs rose 127% on a monthly basis in November and were up 417% from a year earlier. The company emphasized that despite the enormous increase, the year-to-date number of layoffs is the second-lowest ever in a data collection that goes back to 1993.

While prices for energy-related products and services jumped 2.5%, food inflation increased by 0.4%. The Fed is keenly observing the labor market for more indications of slower inflation. The number of continuing claims jumped by 57,000 to 1.61 million, the highest level since February, as unemployment claims had been heading slightly higher.

US Non-farm Payrolls

The US non-farm payrolls report for the month of November is to be the focus of attention at the conclusion of this week. On Friday at 8:30 a.m. ET, the Labor Department is expected to release a report on non-farm payrolls, the unemployment rate, and hourly wages. 

According to Dow Jones, economists anticipate that the economy created 200,000 new jobs in November. In comparison to the 261,000 it added in October; it would represent a drop. Meanwhile, it was anticipated that the unemployment rate would have stayed the same at 3.7%.

While the average hourly wage was anticipated to rise by 0.3% month over month, the annual rate of increase was anticipated to have decreased by 0.1 percentage points to 4.6%.

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