US session's data reviewed - Nomura

Analysts at Nomura broke down the US session's data.

Key Quotes:

"PCE deflators: Core PCE inflation was +0.2% (+0.207%) m-o-m in October, in line with the consensus of 0.2% but slightly higher than our forecast of +0.179% on an unrounded basis. Moreover, revisions to the prior months were positive, but the upward revisions were concentrated in September as core PCE inflation for September was revised up to +0.2% (+0.151%) m-o-m, from a preliminary number of +0.1% (+0.129%). On a 12- month basis, core PCE inflation remained at 1.4% in October but inched up to 1.447%, from 1.358% in September and 1.306% in August, on an unrounded basis. 

Personal income and spending: Both nominal income and spending increased at a healthy pace in October. Personal income increased 0.4% m-o-m, slightly above expectations (Nomura and Consensus: 0.3%). Personal spending rose 0.3%, in line with market consensus but slightly lower than our forecast (Nomura: 0.4%, Consensus: 0.3%), after a downwardly-revised 0.9% increase for September (previously reported as a 1.0% increase). The slowdown from the previous month suggests post-hurricane replacement demand has mostly receded. In particular, spending on autos fell 0.8% in October after a sharp 8.6% increase in September, which was likely distorted by vehicle replacement demand following the hurricanes. Nominal spending on gasoline and fuels fell as retail gasoline prices declined from a weather-driven high in September. Elsewhere, for most other product categories, consumer spending rose at a steady pace. Healthy job creation and low unemployment will likely remain supportive for elevated momentum in Q4. 

GDP tracking update: The increase in real consumer spending in October was slightly weaker than we expected and September was revised down. This implies less real personal consumer expenditure growth in Q4. As a result, we lowered our Q4 real GDP tracking estimate by 0.2pp to 2.4% q-o-q saar. 

Chicago PMI: November’s Chicago PMI points to continued expansion in the business sector during Q4, albeit at a marginally slower pace. The headline index fell 2.3pp to 63.9, close to our expectations but slightly above market consensus (Nomura: 64.0, Consensus: 63.0). The employment index increased 10.4pp to 57.1, returning to the expansionary territory after a transitory reading below 50 during October. The new orders index declined to 63.2 but remains well-within expansionary territory. The deliveries index jumped sharply by 6.8pp, likely reflecting strong demand during the month. In contrast to earlier readings of elevated supplier deliveries indices in various business surveys, we think this spike is unlikely to be weather-related and instead reflects positive economic momentum. 

Initial jobless claims: Initial jobless claims decreased marginally to 238k for the week ending 25 November. Continuing claims increased 42k to 1957k for the week ending 18 November, the second weekly increase above 40k. However, by historical standards, continuing claims remain low, and this increase could be related to the transitory spike in initial claims from a few weeks ago. Overall, labor market activity remains healthy, although the uptick in continuing claims could indicate some moderation in the job finding rate for unemployed workers in November."