Macro Report

This Week’s Takeaway:

The market continues to experience gradual cooling of inflation, albeit not as rapidly as forecasts anticipated. This trend, coupled with resilient labor market data, suggests that reaching the FED’s 2% target will be a long process and could require restrictive rates longer than the market is pricing in.


CPI (Ex Food & Energy) YoY increased by 3.9%, a slight slowing from the prior month’s reading of 4.0%, but above market forecasts of 3.8%. CPI YoY grew by 3.4%, also slightly above expectations of 3.2%, however an increase from 3.1% the prior month. These figures overall indicate that inflation is cooling, just less than market forecasts, highlighting that getting inflation to the target 2.0% will be a long process.

The NY Fed 1-Year Inflation Expectations for December came in at 3.0%, a substantial cooling from November’s 3.4%, suggesting optimism for further disinflation ahead.

PPI (Ex Food & Energy) YoY rose by 1.8%, an easing from the 2% increase seen in November and below market estimates of 2.0%. This marked the lowest rate since December 2020, continuing the trend of disinflation in producer prices. While this is a promising topline trend, margins at the wholesale level have not been benefitting from this recent trend – which suggests that this low level of price inflation will not immediately trickle through to consumers.

Initial Jobless Claims remained unchanged at 202k, significantly below market expectations of a rise to 210k. Meanwhile, Continuing Claims fell to 1834k from 1855k the prior week, undercutting the census forecast of an increase to 1870k. This data, along with other recent job indicators, highlights the continued strength of the labor market, which provides the leeway for a continued hawkish stance from the FED.

Next Week’s Notes:

Next week’s data will provide insight into the manufacturing and housing sectors.

Both the Empire (NY) and Philly FED manufacturing surveys for January will be released with current expectations of improvement but continued contraction withing the sector. Industrial and manufacturing production data is expected to decrease slightly, down 0.1% for December as well.

Housing data is expected to show mixed results for December. After a remarkable upside surprise in November, housing starts are forecast to come back in line and below building permits, which are expected to increase slightly and remain in an overall uptrend since bottoming in January 2023. Furthermore, the December data for the NAHB housing market index (National Association of Homebuilders) is expected to tick slightly higher as is existing home sales, both driven by the fact that mortgage rates steadily declined over the entire month.

Finally, we will have an update on the weekly jobless claims data and the preliminary look at the University of Michigan consumer sentiment survey.