October 2021 update on the US economy

By Nicolas Porter

The Astor Economic Index moderated slightly in September after several months of stable readings, perhaps suggesting that the peak in output growth during the post-pandemic boom is behind us. Nonetheless, the AEI remains consistent with a strong economic state: we take a look at some of the numbers below.

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Part of the story behind AEI’s continued strength are the ISM purchasing managers’ indices, which are at very high levels for both manufacturing and non-manufacturing. In recent times, however, they have started to decline from their lofty heights starting in the summer. Respondents note that demand is robust, but labor and supplies are hard to come by and bottlenecks are on the rise.

Meanwhile, the non-farm payroll disappointed lower in September, gaining a meager 194,000 from consensus estimates of 474,000. August figures have been revised up to 366,000. However, some Interesting details behind the payroll number suggest that things are not as gloomy as they seem. Job losses were driven by declines in local government employment (-144,000), suggesting difficulties with the usual seasonal adjustments of education workers, while private wages increased by 317,000 The average hourly wage, meanwhile, rose sharply by 4.6% year-on-year, although the inflation-adjusted figure shows a decline of 0.8%. As a result, the door remains open for the Fed to start cutting back on schedule based on its litmus test of substantial progress towards full employment.

Speaking of falling, inflation has shown little sign of slowing down, with core CPI printing at 4.0% yoy (0.2% m / m), with headline inflation at 5.0%. 4% year-on-year. Here, too, the details reveal nuances behind the headlines that arguably cast doubts on the transient narrative. Notably, much of the gains were in “stickier” categories like housing, which makes up about a third of the CPI. Price pressures in so-called reopening categories, such as used cars and airline tickets, are slowing or dropping outright. Ultimately, the question is how much and how quickly supply chain problems are easing, and whether the American consumer is shifting the composition of their spending from goods to services.

In short, the US economy continues to show strength thanks to strong consumer demand. The interplay between price pressures and the real economy is a continuing concern, and hence the pace of real wage gains, the increase in more rigid inflation components and the continued turmoil in the supply chain. supply will all be closely watched over the next few weeks.

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AIM-10/15/21-OP464

All information contained in this document is for informational purposes only. This is not a solicitation to offer investment advice or services in a state where it would be illegal. Analysis and research is provided for informational purposes only, and not for trading or investing purposes. All opinions expressed are as of the date of publication and subject to change. Astor and its affiliates are not responsible for the accuracy, usefulness or availability of such information or responsible for any trading or investment based on such information. Please refer to Part 2 of the Astor Form ADV for additional information regarding charges, risks and services.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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