Dec. 16 - 20: A Rate Cut, A Rate Explosion, & More
The Fed cut the federal funds rate again this week. That should have been a nice Christmas gift, but the accompanying remarks and projections caused actual rates to surge.
It’s like Jerome Powell (kind of looks like an elf, right?) accidentally lit our Christmas tree on fire while trying to put a present under it, and now our house, or at least our housing market, is burning down.
Anyway. This was a busy week for economic news and data releases. Our Outlook for 2025 will go out on Monday, and that will be our last post of the year. Thanks for reading!
Monday
TSA Checkpoint Travel Numbers
The number of people who flew over the past week is almost the exact same as in the same week of 2023, according to TSA data. The real test will be whether or not there’s more holiday travel this year than last.
Gas Prices & Diesel Prices
Gas prices inched up to $3.14/gallon this week. That’s still pretty close to the lowest price over the past three years. Diesel prices bounced back to $3.49/gallon, which is still $0.40/gallon lower than at this time last year.
Tuesday
Retail Sales
Spending at stores and restaurants increased pretty sharply in November, although a lot of that was due to a huge rise in car purchases and eCommerce spending. Spending was 3.8% higher in November 2024 than in November 2023 (and 4.4% higher if we exclude gas stations). That’s a really solid increase and signals that consumers aren’t slowing down.
Industrial Production
This important measure of how much stuff we produce fell slightly in November after falling sharply in October and is down 0.9% over the past year. This is one of the six indicators that the NBER uses to diagnose a recession, so we’d prefer to see it rising.
That said, you can see that industrial production has been more or less flat over the past three years (and also the past ten years). The goods side of the economy has been weaker than the services side recently, and that remains the case heading into 2025.
NAHB Housing Market Index
This measure of homebuilder confidence was unchanged in December. Homebuilders are feeling better than they were during the summer and fall but worse than in the Spring, and they’re still pretty glum by historical standards. That said, homebuilders broadly expect that sales will increase over the next six months. Notably, they were surveyed before Wednesday’s interest rate news…
Wednesday
Consumer Price Index (INFLATION)..,
