A shopper checks out at a Walmart store in Secaucus, New Jersey on November 11, 2015. REUTERS/Lucas Jackson/File Photo Acquire License Rights
WASHINGTON, Nov 14 (Reuters Breakingviews) – The U.S. economy is about to land. Inflation is easing even as growth appears strong, but Americans are bracing for new financial woes. It’s a warning sign that the end of the post-pandemic downturn could be rocky.
The year-over-year price increase rate was 3.2% in October, barely above the Federal Reserve’s target, the Bureau of Labor Statistics said Tuesday. Better yet, prices are unchanged from last month. Investors already seem to be assuming this means the end of monetary tightening: According to CME Group, futures markets now estimate the likelihood of a rate hike at the Fed’s Dec. 13 meeting at zero, down from 15% on Monday.
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This slowdown has so far not affected unemployment, which hovered near historic lows in October, nor growth, which reached its highest rate since the end of 2021 in the third quarter. Nevertheless, the Americans are not declaring victory either in terms of price increases or economic strength. Inflation expectations rose to 4.2% in October from 3.2% the previous month, according to data from the University of Michigan. This pessimism can lead households to cut back on spending, impacting business activity.
Companies are taking change seriously. Although McDonald’s (MCD.N) beat profit estimates on October 30, chief Christopher Kempczinski pointed out that lower-income consumers are pulling back. Home Depot (HD.N) warned Tuesday that buyers are foregoing expensive renovations and instead opting for smaller, cheaper projects. The US is closer to launch, but businesses and consumers aren’t ruling out last-minute turmoil. (By Ben Winck)
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Edited by Jonathan Guilford and Oliver Taslic
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