Friday, December 1, 2023

Decent spending and income growth, stock market jumps, inflation under control. What's not to like?

Thursday had the release of the biggest monthly economic report next to next week's jobs report (and perhaps it's even more important than that). And it was...decent?

So OK growth, and no inflation? Seems like a win-win to me. 5 previous months were also revised in this report, and it included upward revisions for both income and disposable income during the Summer. Which means that instead of several recent months of disposable income that didn't keep up with inflation, we have seen inflation-adjusted disposable income rise in 9 of the 10 months measured in 2023. And we are now finally back to where we were in mid-2021.

With gas prices declining further in November, it looks like inflation will take another tick down in the reports that come out over the next few months, and Wall Streeters have decided that things are going to loosen up soon. And they have jumped back in on the market to get a jump start on it.

For several months, I've been saying that inflation is a ghost the Fed shouldn't be chasing, and the second half of 2023 has borne this out. The economy keeps moving ahead, and central bankers should realize that keeping the economy going forward should be their top priority for 2024. As part of that, they should turn rates back toward sensibility (like 3%-4% instead of 5.5%), to give some relief to leveraged consumers and prospective home-buyers who are paying more than they should.

We'll find out soon how the 2 weeks of Black Friday sales look, and see if the good consumer spending numbers continue for the rest of 2023. But October's figures seem good enough for me, and despite some friction, we seem to be doing just fine right now.

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