Friday, December 5, 2025

Core PCE Is Cooling, but the Consumer Is Starting to Blink

The latest Personal Income & Outlays snapshot delivers a familiar soft-landing mix: inflation continues to drift lower, real spending remains positive, but the forward “fuel” for consumption—real disposable income—is losing momentum. When you add the sharp pullback in durable goods, the message is clear: the consumer is still moving, but not accelerating.

Below is a simple way to read your table: compare today’s pace (Monthly, 3-Mo MA, Annual) against the recent norm (Avg Monthly, Avg Annual). That gap tells you whether conditions are tightening or loosening relative to trend.

1) Core PCE inflation: improving, but not “done”

Core PCE (ex food & energy):

0.20% m/m
0.22% 3-month moving average
2.83% y/y
Versus 0.26% avg monthly and 3.24% avg annual

This is the disinflation story in one line: core inflation is running below its own recent average pace. That’s good news for “inflation risk,” but the level still matters. A 2.83% year-over-year reading is meaningfully below last cycle highs, yet still above the Fed’s 2% target.

The monthly and 3-month averages are especially important because they capture the more current trend. At 0.20–0.22%, inflation is closer to “normalizing” than “re-accelerating.”

Takeaway: Progress continues, but the bar for rate cuts is not only inflation falling—it’s inflation falling and staying near target with confidence.

2) Real PCE: still positive, but this month was soft

Real Personal Consumption Expenditures (Real PCE):

0.04% m/m
0.22% 3-month MA
2.14% y/y
Versus 0.18% avg monthly and 2.19% avg annual

The headline looks steady: 2.14% y/y is basically in line with its longer-run average. But the month-to-month print is weak (0.04%), and that’s worth noting because monthly momentum is often where turning points begin showing up first.

However, the 3-month moving average is still 0.22%, which suggests the broader trend in spending remains intact even if the latest month is a wobble.

Takeaway: The consumer is still spending in real terms, but the near-term pace is softer than normal.

3) Durable goods: the clearest sign of cooling demand

Real PCE: Durable Goods:

-0.60% m/m
0.25% 3-month MA
2.07% y/y
Versus 0.39% avg monthly and 4.72% avg annual

Durable goods are volatile—they swing with promotions, vehicle sales timing, and financing conditions. Still, -0.60% in one month is a meaningful drop, and the longer comparison tells the deeper story:

Durables have gone from “high-growth” to “normal growth.” The year-over-year rate (2.07%) is less than half the longer-run average (4.72%). That gap matters because durables often reflect the areas most sensitive to interest rates and credit.

Takeaway: Higher rates are still doing their job—especially on big-ticket, credit-dependent purchases.

4) Real disposable income: slowing support for future spending

Real Disposable Personal Income:

0.06% m/m
0.15% 3-month MA
1.95% y/y
Versus 0.27% avg monthly and 3.17% avg annual

This is the part of the table I’d watch the closest.

Real consumption can stay resilient for a while even when income slows—people can draw down savings, shift spending mix, or use credit. But over time, spending trends tend to follow income trends. With real disposable income running well below its average monthly and annual pace, it suggests the consumer’s “runway” is shortening.

Takeaway: If income growth doesn’t re-accelerate, spending growth usually cools next.

The macro message: soft landing, but with visible friction

Put all four rows together and you get a consistent narrative:

Inflation is easing (core PCE below its trend).
Real spending remains positive (still solid year-over-year).
Durables are cooling (rate sensitivity showing).
Income growth is slowing (future consumption risk rising).

This is exactly what a late-cycle soft-landing phase often looks like: inflation improves, overall activity holds up, but the most rate-sensitive categories show fatigue first—and income becomes the key constraint.

What I’m watching next

If you want to build a “next release checklist,” here are the items that will confirm whether the soft month in spending is noise or signal:

Does Real PCE rebound from 0.04% m/m, or does it stay soft?
Do durables stabilize after -0.60%, or do they keep sliding?
Does real disposable income move back toward its average pace?
Does the 3-month core PCE trend keep drifting toward ~0.17% m/m territory (a pace consistent with 2% inflation over time)?

Bottom line

Inflation is moving in the right direction, but the consumer is beginning to show more sensitivity—especially in durable goods—and income growth is slowing. That combination doesn’t scream recession, but it does suggest the economy is transitioning from “resilient” to “more balanced,” where growth is still positive but less forgiving.

Thursday, November 27, 2025

The U.S. economy is currently characterized by a "K-shaped" divergence

The U.S. economy is currently characterized by a "K-shaped" divergence, showcasing robust growth in private production and digital services, while facing downturns in the public sector, retail, and agriculture. This situation illustrates an economy that is expanding through industrial and technological progress while struggling with challenges related to consumption and government activities.

1. **Production-Driven Growth**

The economic upswing is primarily driven by a notable increase in Private Goods-Producing Industries, which saw a 2.46% growth in the most recent quarter. This suggests a softening in supply chain issues or a replenishment cycle boosting physical output.

- **Mining Surge**: The mining sector has emerged as the leader, experiencing 6.56% growth, likely spurred by elevated commodity prices and heightened demand for essential minerals and energy resources.

- **Manufacturing Strength**: Manufacturing has shown resilience, with Nondurable Goods increasing by 3.75%, indicating strong consumption for products such as fuel, food, and chemicals. Durable Goods also experienced a steady increase of 2.14%, signaling persistent business investment.

2. **Digital Economy Decoupling**

The Information sector continues to excel, growing by 3.06% quarterly and 7.70% year-over-year. This underscores the digital economy’s (covering software, data processing, and AI infrastructure) separation from the overall business cycle, expanding at nearly three times the rate of the broader private economy (+2.24% YoY).

3. **Challenges in Consumption and Public Sector**

In spite of production growth, notable challenges remain within consumption-related and public service sectors.

- **Retail Decline**: Retail Trade fell by 2.13%, suggesting that produced goods are not converting into sales. This may indicate consumer weariness from high prices, resulting in inventory accumulation at the wholesale level (Wholesale Trade grew by +0.99%).

- **Federal Government Shrinkage**: The Federal Government sector shrank by 2.20%, exerting a negative impact on GDP. This corresponds with disruptions such as the recent 43-day federal government shutdown, which hindered federal output.

- **Agricultural Struggles**: The agricultural sector is experiencing significant contraction, declining 6.62% year-over-year. Increasing input costs (fertilizer, equipment) outpace commodity prices, combined with tariff pressures, have led to a "terms of trade" shock for the industry.

4. **Unclassified Growth**

The "Not Allocated by Industry" category witnessed a dramatic increase of 11.35% quarterly and 35.33% year-over-year. This substantial growth indicates value creation in areas not recognized by standard industrial classifications, probably originating from cross-border digital platforms or intellectual property movements.

**Conclusion**: The economy is growing but is notably imbalanced. It is fueled by a surge in "hard" assets (Mining/Manufacturing) and "soft" assets (Information), while transactional (Retail) and public (Federal Government) elements detract from overall performance.

https://gemini.google.com/share/e79aa93167cc

Friday, November 21, 2025

# U.S. Housing Market Update: October 2025

**More Inventory, Cooling Prices, Modest Sales Gains — and Mortgage Rates Holding Steady in the Low-to-Mid 6% Range**

The National Association of Realtors dropped its October 2025 Existing-Home Sales report on November 20, and the story remains the same one we’ve been telling all fall: the market is steadily normalizing.

We now have the most inventory in years, price growth has slowed to the tamest pace since the pandemic, sales are posting small but consecutive gains, and — crucially — mortgage rates have stayed remarkably calm in the low-to-mid 6% zone.

Taken together, this is the most buyer-friendly environment we’ve seen since early 2022.

### October Existing-Home Sales at a Glance

|---------------------------------------------------|----------------|-------------------|---------------|

| Total Existing-Home Sales | +1.2% | +0.8% | **+1.7%** |

| Existing Single-Family Home Sales | +0.8% | +0.6% | **+1.9%** |

| Median Sales Price – All Existing Homes | +0.7% | –0.8% | **+2.1%** |

| Median Sales Price – Single-Family Homes | +0.7% | –0.9% | **+2.2%** |

| Existing Home Sales: Months Supply | –2.2% | –1.5% | **+7.3%** |

| Single-Family Months Supply | 0.0% | –1.5% | **+10.3%** |

| Total Housing Inventory | –0.7% | –0.7% | **+11.0%** |

| Single-Family Housing Inventory | –0.8% | –1.0% | **+10.9%** |

### The Three Big Takeaways from the Sales Report

1. **Inventory is the standout performer**

Active listings are up ~11% year-over-year — the fastest growth in the entire report and the highest annual increase in years. Months’ supply is also climbing fast, especially for single-family homes.

2. **Price growth has cooled dramatically**

Annual median price gains of just ~2% are basically in line with long-run norms. Even more telling: the 3-month moving average for prices is now negative for the first time since early 2023.

3. **Sales are stabilizing**

Total sales rose 1.2% month-over-month (second straight gain) and are up 1.7% yoy. Volume is still ~25% below the 2021 peak, but the trend is finally pointing up.

### Current Mortgage Rate Snapshot (November 21, 2025)

|---------------------------------|---------------|--------------|------------|-----------------|

| Freddie Mac (Nov 20 weekly) | **6.26%** | +0.02 | +0.09 | ~6.72% |

| Mortgage News Daily (daily) | **6.34%**| –0.02 (today)| +0.12 | — |

Rates have been essentially flat for six weeks after touching 6.17% at the end of October — the lowest since early 2023.

### Why This Combination Matters Right Now

- Rising inventory + sub-6.5% rates = actual negotiating power for buyers. Multiple-offer frenzies are becoming rare outside the hottest neighborhoods.

- The “lock-in effect” is cracking: homeowners who locked in 3–4% mortgages in 2021–2022 are starting to list because the gap to current rates feels less painful, especially with home prices still near all-time highs.

- Regional differences are huge: Florida, Texas, and much of the Midwest/South have 5–7 months of supply and flat-to-falling prices in some metros. The Northeast and West Coast remain tighter (3–4 months supply) and are still seeing modest price gains.

### 2026 Outlook

Consensus from Fannie Mae, MBA, NAR, and most Wall Street economists:

|----------------|-----------------------|---------------------------|-----------------------|

| End of 2025 | 6.2–6.5% | +8–12% yoy | 2–3% |

| Mid-2026 | 5.8–6.2% | +10–15% yoy | 2–4% |

Bottom line: We’re in the sweet spot of a soft landing. No crash, no new frenzy — just a gradual return to normal seasonality, more choices, and affordable financing by historical standards.

If you’ve been waiting on the sidelines, late 2025 / early 2026 is shaping up to be the best entry point in years. Rates aren’t going to zero, but they don’t need to — the combination of more supply and low-6% mortgages is already doing the heavy lifting on affordability.

Next updates to watch: November sales (Dec 19), FHFA house-price index (next week), and the Fed’s December meeting. Stay tuned.

Sunday, November 16, 2025

📈 AI, Semiconductors, and Gold: What Nasdaq’s Latest Moves Are Telling Us

Investors love simple narratives, but markets rarely cooperate. The latest performance snapshot of key Nasdaq-related indices tells a more nuanced story: AI and semiconductors remain long-term winners, gold and silver have quietly become superstars, and rate-sensitive sectors like REITs and infrastructure are still under pressure.

Using percent changes from yesterday, last week, last month, and last year, we can see how leadership is shifting beneath the surface.

1. One Year View: The Big Winners and Losers

If you zoom out to the last 12 months, one index absolutely dominates:

PHLX Gold/Silver Sector: +102.27%

That’s not a typo. Precious metals miners have more than doubled over the past year, outpacing even AI and semiconductors. Behind this move are familiar drivers: inflation fears, geopolitical risk, and a persistent search for real assets.

AI and semiconductors are not exactly slacking either:

PHLX Semiconductor (SOX): +33.33%
Nasdaq Global AI & Big Data Index: +24.20%
Nasdaq CTA Artificial Intelligence Index: +22.52%
Nasdaq Composite Total Return: +19.57%
Nasdaq Composite Index: +18.77%
Nasdaq 100 Index: +18.69%

These numbers confirm what headlines have been shouting all year: the AI + semiconductor complex remains a core engine of market performance.

On the weaker side:

Nasdaq US Multi-Asset REIT Total Return Index: –2.02%
Kelly Data Center & Tech Infrastructure Index: –0.66%

REITs and infrastructure are still struggling with higher interest rates, funding costs, and a shaky commercial real estate environment.

2. One Month View: Leaders Losing Steam?

Over the past month, the picture gets more complicated.

Tech-heavy benchmarks still hold up well:

Nasdaq Composite TR: +1.54%
Nasdaq Composite Index: +1.50%
Nasdaq 100: +1.42%

But some of the biggest long-term winners are now flashing short-term fatigue:

PHLX Gold/Silver Sector: –10.59%
Kelly Data Center & Tech Infrastructure Index: –10.63%
Nasdaq CTA Artificial Intelligence Index: –4.76%

In other words:
🔹 The long-term leaders are taking a breather.
🔹 This is classic bull-market behavior — strong uptrends with sharp, sentiment-driven pullbacks.

3. One Week View: Rotation Beneath the Surface

Over the latest 5 trading days, the tone has been mildly risk-off.

Most indices are negative for the week, but one name stands out:

PHLX Gold/Silver Sector: +5.71% (despite the –10% month)

That pattern—down sharply over the month but rebounding hard over the week—suggests traders are buying the dip in precious metals.

On the downside:

Kelly Data Center & Tech Infrastructure Index: –7.95%
Nasdaq CTA AI Index: –3.03%
PHLX Semiconductor: –1.96%

AI-related names and semiconductors are seeing consolidation after a big run, while infrastructure continues to lag.

4. One Day View: Noise or Signal?

Daily moves are often noise, but they’re still useful for checking very short-term sentiment:

The Nasdaq Composite TR and Composite Index were slightly positive on the day (+0.14% and +0.13%).
AI indices and gold/silver slipped:
- Nasdaq CTA AI Index: –0.96%
- PHLX Gold/Silver: –0.89%

This looks like a mild de-risking session: broad indices held up, while the more volatile thematic trades (AI and metals) took a small step back.

5. Heatmap: Seeing the Whole Picture at Once

To really see the story at a glance, the heatmap of all four horizons (daily, weekly, monthly, yearly) is invaluable. Warm colors highlight strength; cool colors highlight weakness.

What it shows clearly:

Gold/Silver: Deep red on the 1-year row (huge outperformance), cold on the 1-month, but warming again on the 1-week.
AI & Semiconductors: Warm on the 1-year, mixed on the 1-month and 1-week as they consolidate.
REITs & Infrastructure: Generally cooler across time frames — confirming ongoing rate sensitivity.
Treasury 10-Year TR Index: Weak on the monthly horizon, consistent with pressure from yields and policy uncertainty.

The heatmap turns a table of numbers into an intuitive “market weather map.”

6. What This Means for Investors

Putting all horizons together:

AI and Semiconductors remain core long-term growth engines.
Their 1-year performance is too strong to ignore, even if the short-term shows some cooling.
Gold and Silver are in a real bull market, not just a trade.
A 100%+ 1-year move combined with continued interest on weekly pullbacks suggests sustained demand for hard assets.
REITs and Infrastructure are still in the penalty box.
Until the rate environment stabilizes, these sectors will likely lag.
Short-term weakness ≠ trend reversal.
The recent pullbacks in AI, semis, and metals look more like consolidations in a larger bull trend than the end of the story.

7. How You Could Use These Charts in a Portfolio Context

Trend-followers might lean into AI, semiconductors, and gold/silver on pullbacks, using the weekly and monthly charts to time entries.
Value or mean-reversion investors might begin watching REITs and infrastructure, but the data suggests it’s still early.
Macro-focused investors can use the divergence between gold, bonds, and rate-sensitive sectors to calibrate their view on inflation, policy, and growth.

Saturday, September 13, 2025

Bank Balance Sheet Trends: A Shift in Asset Mix

📊 Bank Balance Sheet Trends: A Shift in Asset Mix

Latest data from U.S. commercial banks shows some clear shifts in how balance sheets are evolving:

✅ Strong Growth

Other Loans & Leases: +15.1% YoY → fastest-growing category, reflecting demand outside of real estate and consumer credit.
Other Assets: +9.0% YoY → buildup of miscellaneous financial assets.
Treasury & Agency Securities: +7.3% YoY → banks are increasing their safe asset holdings.

⚖️ Moderate but Stable

Commercial & Industrial Loans: +4.1% YoY → businesses still borrowing, but at a measured pace.
Credit Cards & Revolving Loans: +2.9% YoY → steady consumer demand, though below overall loan growth.
Residential & Commercial Real Estate Loans: both <2% YoY → housing and CRE lending remain subdued under higher rates.

❌ Declining Categories

Cash Assets: -2.3% YoY → banks are drawing down liquidity to redeploy into securities and loans.
Other Securities: -0.8% YoY → contraction despite small recent gains.
Other Consumer Loans: -2.5% YoY (discontinued series) → weakness in non-auto, non-credit card borrowing.

🔎 Takeaway
Banks are reducing cash and reallocating into loans and Treasuries, seeking yield in a higher-rate environment. But real estate lending is stagnating, highlighting the pressure of elevated interest rates on both residential and commercial property markets.

The balance sheet tells the story: short-term and flexible credit is in demand, while long-term real estate exposure is being held back.

Thursday, September 11, 2025

📊 Producer Price Index (PPI) Update: August 2025

The latest PPI data shows a mixed picture for inflation trends:

🔹 Headline vs. Core Inflation (YoY)

Headline PPI cooled to 2.6% YoY in August, down from 3.1% in July.
Core PPI (ex-food, energy, trade) remains stickier at 2.8% YoY, highlighting persistent underlying inflation pressures.

🔹 Goods vs. Services (MoM)

Goods prices remain highly volatile, with energy driving sharp swings earlier in 2025.
Services inflation is steadier, but continues to trend positive, underscoring why disinflation is proving slow.

⚖️ What this means:

Energy shocks are fading, but services and core inflation remain above the Fed’s 2% target.
The Fed is likely cautious about cutting rates too quickly, as the risk of sticky inflation lingers even while headline numbers soften.
A “soft landing” is still possible, but progress toward 2% inflation is uneven.

📈 See charts below for the divergence:
1️⃣ Headline vs Core PPI (YoY)
2️⃣ Goods vs Services PPI (MoM)

👉 How do you see this playing out? Is sticky services inflation enough to keep rates higher for longer?

August CPI Analysis: Inflation Rebounds and the Fed’s Dilemma

📊 August CPI Analysis: Inflation Rebounds and the Fed’s Dilemma

The U.S. Consumer Price Index (CPI) for August has been released. Prices rose 2.9% year-over-year and 0.4% month-over-month, marking a larger increase than last month. After showing a clear downward trend through March, inflation has begun to rebound following the announcement of tariffs.

🏠 Trends by Key Category

1. All Items

MoM: +0.4%
YoY: +2.9%

Inflation had steadily declined through March but has rebounded since April, now hovering close to 3%.

2. Food

MoM: +0.5%
YoY: +3.2%
Notably, dining out (+3.9%) remains higher than grocery prices, adding pressure to household budgets.

3. Energy

MoM: +0.7%
YoY: +0.2%
Gasoline prices are still 6.6% lower YoY, but electricity (+6.2%) and utility gas (+13.8%) show strong increases, pushing energy service costs higher.

4. Core CPI (Excluding Food & Energy)

MoM: +0.3%
YoY: +3.1%
Shelter (+3.6%) and transportation services (+3.5%) remain sticky, driving core inflation higher.

5. Used Cars & Trucks

MoM: +1.0%
YoY: +6.0%
After several months of decline, used car prices have rebounded, adding to consumer price pressures.

🔍 Interpretation and Outlook

Signs of Inflation Rebound
CPI clearly shows a rebound, driven mainly by tariffs and higher energy service costs.
Cooling Labor Market
Recent employment data shows slower job creation, signaling that the labor market is cooling rapidly.
The Fed’s Dilemma
Markets are anticipating a potential rate cut in September. However, such a move would indicate that the Fed prioritizes labor market stability over its traditional goal of price control.
Political Constraints
For inflation to fall back to 2%, unemployment would likely need to rise to around 7%. Politically, this would be unacceptable, as it risks triggering regime change. The current administration is unlikely to allow such an outcome.

📈 Conclusion

The August CPI shows that inflation is entering a rebound phase.

The Fed is caught between two conflicting goals: stabilizing prices and supporting the labor market.

For investors, inflation is likely to remain around 3% in the near term, which will shape both the pace of rate cuts and the movement of equity and bond markets.
For policymakers, the challenge is balancing political realities with economic needs, a task that is becoming increasingly difficult.

👉 Would you like me to now condense this into a LinkedIn version (short, bullet-point insights + infographic), so it’s ready for posting?

ECONREVIEWS

Translate