Market & Macroeconomic Analysis 3Q24
The third quarter of 2024 has presented a stable yet intriguing economic landscape for the United States, mostly after the FEDs recent decisions that always play a crucial role in shaping the economic landscape. For this Market & Macroeconomic Analysis of 3Q24 we analyze key indicators such as the core Consumer Price Index (CPI), GDP growth, and unemployment rates have shown consistent trends, reflecting the underlying health and dynamics of the economy. Here we’ll analyze the behavior of these variables, their past data, tendencies, and the implications for future economic conditions.
Core CPI
Core CPI The core CPI, which excludes volatile food and energy prices, showed a slight increase from 3.2% in August to 3.3% in September 2024. This marks a modest rise in underlying inflationary pressures, following a gradual decline from earlier in the year. The core CPI started the year at 3.9% in January and has generally trended downward, indicating some easing of inflation at the moment. However, the recent uptick suggests that inflationary pressures are not entirely subdued and may be influenced by factors such as wage increases and supply chain issues.
Typically, there is an inverse relationship between inflation and unemployment, known as the Phillips curve. However, the data showed both core CPI and unemployment rates remained relatively stable. This could indicate that the economy is in a phase where inflationary pressures are not significantly driven by labor market conditions, possibly due to other factors like productivity gains or global economic influences.
Source: US Bureau of Economic Analysis
GDP Growth
The GDP growth rate has been steady at 0.3% each month throughout 2024. This consistent growth reflects a stable economic environment, with no significant acceleration or deceleration. The steady GDP growth suggests that the economy is expanding at a moderate pace, which is generally positive for long-term economic health and is a sign of resilience for the US economy. Despite widespread predictions of a recession, the economy has continued to grow, with hiring and consumer spending remaining steady.
Given the recent economic data, including the modest increase in core CPI and stable GDP growth, the Federal Reserve faces a complex decision-making environment. While a gradual rate cut is anticipated, the Fed’s primary objectives of achieving maximum employment and price stability remain paramount.
Source: US Bureau of Economic Analysis
Unemployment Rate
The unemployment rate has shown minor fluctuations, ranging from 4.0% to 4.2% throughout the year. Starting at 3.9% in January, it peaked at 4.2% in June and July before stabilizing at 4.1% in September. This stability suggests a balanced labor market, where job creation is keeping pace with the number of people entering the workforce. The slight increase in the middle of the year could be attributed to seasonal factors or temporary economic adjustments.
Source: US Bureau of Labor Statistics
¿What about the FED?
In the third quarter of 2024, the Federal Reserve made a significant decision to cut interest rates by 0.50%, marking the first rate cut since 2020. This decision was driven by a combination of rising unemployment, and inflation moving back towards the Fed’s 2% target. However, this decision comes with complications. While lower interest rates can boost economic growth and reduce unemployment, they also risk reigniting inflation if not managed carefully. The Fed’s challenge is to balance these competing priorities, ensuring that the economy continues to grow without triggering excessive inflation.
Conclusion
The third quarter of 2024 reflects a stable and balanced economic environment in the United States. While the slight increase in core CPI requires close monitoring, the overall economic indicators suggest a soft landing and continued economic resilience. The Federal Reserve’s decision to cut interest rates highlights the delicate balance policymakers must maintain between supporting growth and controlling inflation. Moving forward, close attention to these economic indicators, along with the US elections, will be crucial in navigating the complexities of the current economic landscape.