Focus Turns to Upcoming FOMC, NFP Release
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Economics Research1 Nov 2024
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US: Consumer spending keeps economy moving. The Fed’s latest Beige Book noted that US economic activity has changed little across most districts since early September, contrasting with recent positive economic data. Many contacts highlighted the uncertainty surrounding the US elections on 5 Nov, leading to cautious sentiment and business delays in investing and hiring. Backing the Beige Book’s cautious findings was the Bank of Canada’s outsized 50 bps rate cut last week. Canada is highly dependent on the US economy, the destination of most of its exports, especially oil and gas.

With the Fed in a pre-Federal Open Market Committee (FOMC) blackout, weaker US nonfarm payrolls (NFP) tonight could reinvigorate expectations for two Fed cuts in November and December. US initial jobless claims have risen on a four-week moving average basis to 239k for the week ending 18 Oct, the highest since early August. The Jobs Opening and Labor Turnover Survey (JOLTS) reported that job openings fell to 7.44 mn in September, its worst level since Jan 2021. Amid moderating US labour market data, US consumer confidence rebounded in October, increasing to a nine-month high.

US gross domestic product increased at a 2.8% annualised rate in the third quarter, according to the advance estimate released by the US Bureau of Economic Analysis, below the 3.1% estimate and 3.0% increase in real GDP in the second quarter. The increase in real GDP primarily reflected increases in consumer spending, exports, and federal government spending.

The current Fed rate cutting trajectory differs from the Fed’s hiking cycle that started in Dec 2016, following the Presidential election of Donald Trump. Given the Fed’s observation that fewer job vacancies lead to higher unemployment rates, we think the Fed may lower rates by 25 bps to 4.50-4.75% at next week’s FOMC meeting.

Figure 1: Confidence index reflects resilient consumer spending
Source: Bloomberg, DBS




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