Comerica Economic Weekly, December 4, 2023

Bill Adams


Waran Bhahirethan

Retail Store

Preview of the Week Ahead

Payroll employment growth likely slowed in November as retailers added fewer seasonal employees than is typical in the lead-up to the holiday shopping season. The unemployment rate likely edged higher, indicating a modest margin of slack in the labor market. With the labor market operating more normally, wage growth likely registered a new two-year low last month. 

The ISM Non-Manufacturing PMI likely edged lower in November, partially due to slower house sales after the national average rate on a 30-year fixed mortgage rate spiked to near 8% in October. The ISM Non-Manufacturing Prices component will likely report slowing price increases as retailers discounted for Black Friday, and as gas prices at the pump pulled back to the lowest since January.


The Week in Review

Economic growth in the third quarter was revised up to a 5.2% annualized increase in the “second” estimate of real GDP. Consumer spending was robust and broad-based, despite a 0.4 percentage point downward revision to 3.6% annualized. Business fixed investment was revised up sharply from a modest 0.1% decline in the “advance” estimate to 1.3% on the back of strong spending on structures and intellectual property products. Government spending was revised up by nearly a percentage point to 5.5% annualized. The drag on third quarter economic growth from net exports was minimal, while inventory accumulation made a sizeable contribution to growth.

The GDP Price Index, the broadest measure of price pressures in the economy, was revised up by a notch to 3.6% annualized in the third quarter, while the Personal Consumption Expenditures Price Index (PCE PI), the Fed’s preferred inflation gauge, was revised down by a tenth to 2.8% annualized. Residential investment prices rose sharply, up 5.2% annualized, reflecting higher prices of new single-family homes.

Real disposable personal income, adjusted for taxes and inflation, rose by 0.3% in October, the first gain since May. Inflation adjusted consumer spending rose by a modest 0.2%, with expenditures on goods up a paltry 0.1% and services up 0.2%.  The Personal Consumption Expenditures Price Index was flat in October. Goods prices fell 0.3%, while services prices rose a modest 0.2%. Last month’s benign inflation readings further increase the likelihood the Fed will hold rates steady at its next interest rate decision meeting on December 13.   

The ISM Manufacturing Purchasing Managers Index (PMI) was unchanged in November, indicating ongoing moderate contraction of the manufacturing industry—disappointing considering that the UAW strike ended before the month began. On a stronger note, construction spending rose 0.6% in October and was up 10.7% from a year earlier, with nearly half of that year-ago increase due to higher spending on manufacturing facilities, up a staggering 71% year-over-year.

Week Ahead Chart

For a PDF version of this publication, click here: Comerica Economic Weekly, December 4, 2023(PDF, 130 KB)

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December 4, 2023
Bill Adams photo

Bill Adams

SVP, Chief Economist
Comerica Bank
Waran Bhahirethan photo

Waran Bhahirethan

VP, Senior Economist
Comerica Bank

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