Gregory Daco

Let’s go @mancity.com ! Great play despite Sunderland playing with 11 back 🩵

These inflation expectations level don't contain much signal, but the direction of travel indicates a transitory "inflation" shock from tariffs (not "price level"). Should reassure Fed policymakers regarding the inflation outlook.

#Inflation expectations easing in December

📉1-yr ahead: 4.1% (-0.5pt)
⚠️Transitory #tariff shock to inflation
⚠️Still up 1.3pt since Dec '24
⚠️Down from 6.6% in May '25

📉Next 5-yrs: 3.2% (-0.2pt)
⚠️Up 0.2pt since Dec '24
⚠️Back in post-Covid range

Less than 20%, but for some categories like fruits, vegetables, seafood, etc. it's >50% and sometimes 100%

⛔️UMich Consumer #Sentiment bounced up a tad in early December, but morale is historically despressed

⚠️The affordability crisis and "dismal" labor market expectations have kept consumer views "broadly somber"

🔼Sentiment +4.5%
🔻Current Conditions -0.8%
🔼Expectations +7.8%

Market-based core inflation has settled a good 1/2pp above target, now the Fed is faced with the same tough decision it had when inflation was stable below target--how hard do you press to get to 2% vs. letting the labor market breathe? No risk free choices as JPow says
@laurarosner.bsky.social

📊#Tariff-induced #inflation reacceleration partially offset by reduced housing cost inflation

📅September 2025

🔺Headline PCE inflation
⤵️3-month 2.8%
⤴️6-month 2.7%
⤴️12-month 2.8%

🔺Core PCE inflation
⤵️3-month 2.7%
⤴️6-month 2.7%
⤵️12-month 2.8%

🔴A K-shaped consumer spending outlook is not sustainable -- eventually income pulls spending.

📊Real disposable income growth +1.9% y/y

📊Real consumer spending growth +2.1% y/y (🔻0.5pt)

⚠️A weakening labor market is a major risk for the silent majority facing an affordability crisis

Most US consumers struggle in the face of higher prices

🛒Consumer spending +0.3% m/m in Sep
🔴Inflation-adjusted 0%

💵Disposable income +0.3%
🟠Inflation-adjusted +0.1%

🏦Savings rate: 4.7% (flat)

📈PCE #inflation
🔺Headline: 2.8% y/y (+0.1pt)
🔽Core: 2.8% y/y (-0.1pt)

🇺🇸#Tariff-induced #inflation. Hitting where it hurts: groceries, clothing, restaurants & transportation

📆September 2025
🔺Headline PCE prices: 0.27% m/m
🔺Core PCE prices: 0.20% m/m

🎯Moving away from 2% #Fed target
🔺Headline PCE: 2.7% (+0.1pt)
🔽Core PCE: 2.8% (-0.1pt)

Netflix has agreed to buy Warner Bros. in a $72 billion deal after the entertainment company splits its studios and HBO Max streaming business from its cable networks

🔴Total of 1.2 million job cut announcements year-to-date. Up 62% from 2024.

❓Main reasons for layoffs in 2025:

1⃣ DOGE cuts including indirect (315k -- 27% of total)
2⃣ Economic conditions (245k -- 21%)
3⃣ Restructuring (128k -- 11%)
4⃣ AI (55k -- 5%)

🚨 Challenger, Gray & Christmas: 71k #job cut announcements in November

☑️-53% m/m
🔺+24% y/y
🛑Highest November since 2022
🛑Highest YTD (1.2mn) since 2020
⚠️Telecom, Tech & Food led the job cuts

⚠️Continuing claims have been trending higher, slowly

📊Week-ended Nov 22: 1.94mn (-4k)
📈Near high since November 2021

"Curious" US labor market fragility

📈Initial claims for #unemployment eased back in week-ended Nov 29 *but* Thanksgiving volatility & continuing claims near a 4-year high

📉Claims: 191k (-27k)
📉4-wk avg: 215k (-10k)

Bond investors warned US Treasury over picking Kevin Hassett as Fed chair Some market participants worried candidate for top central bank job will be swayed by Trump on interest rates

« Bond investors have told the US Treasury they are concerned about Kevin Hassett’s potential appointment as Federal Reserve chair, worrying he will cut interest rates aggressively to please President Donald Trump. »

giftarticle.ft.com/giftarticle/...

📊The K-shaped economy where small & medium-sized businesses are increasingly struggling.

⚖️More pressured by negative supply shocks (trade and immigration) than lifted by positive supply shocks (AI).

⚠️Looking at the weekly pulse, the momentum is very soft with ongoing job losses

Weak US private sector employment: -32k via @ADP in November

Key insights:
🔻Declines in 4 of last 6 months
🔻3-mo average down -3k
🔻Job losses for small businesses
🔻Prof & business services, info, manufacturing, construction & finance
✅Healthcare & leisure

#Manufacturing purchasing managers

☹️"Trade confusion"
☹️"More permanent changes due to the tariff"
☹️"Tariffs and economic uncertainty weigh on demand"
☹️"Business conditions remain soft"
☹️"Unstable market... [very volatile] pricing"
☹️"Business continues to be a struggle"

👀The ISM #Manufacturing Employment subindex remains in severe contraction territory

US @ISM #Manufacturing: Purchasing managers report uncertainty, confusion, volatile & soft biz conditions in November

⛔️ISM Manufacturing 48.2:🔻0.5pt
⛔️New Orders 47.4: 🔻2pt
✅Production 51.4:🔼3.2pt
⛔️Employment 44.0:🔻2pt
⛔️Backlogs 44: 🔻3.9pt
🔥Inflation 58.5:🔺0.5pt

Trump Says He Has Made His Choice to Lead the Federal Reserve President Donald Trump said Sunday he has decided on his pick for the next Federal Reserve chair after making clear he expects his nominee to deliver interest-rate cuts.

www.bloomberg.com/news/article...

Making sense of it all Hello friends, As November draws to a close, I hope you’re finding a moment to pause, recharge and reconnect with the people who matter most. Thanksgiving is always a welcome reset.

www.linkedin.com/pulse/making...

The fracturing of the world economy

🇮🇳India’s economy grew at the fastest pace in six quarters, underscoring its resilience even as US President Donald Trump’s steep tariffs cloud the outlook.

Gross domestic product rose 8.2%in the three months through September from a year earlier.

www.bloomberg.com/news/article...

📈Core capital goods orders & shipments have swung wildly since the start of the year, but momentum in Q3 was solid, driven by communications equipment, machinery & primary metals

✅Shipments: +0.1%
✅Core capital goods ex aircraft: +0.9%

✅Orders: +0.5%
✅Core cap: +0.9%

🤷‍♂️"Curious" labor market fragility

📈Initial claims for #unemployment fell back in week-ended Nov 22 *but* continuing claims at 4-year high

📉Claims: 216k (-6k)
📉4-wk avg: 224k (-1k)

⚠️Continuing claims 1.96mn (+7k): High since Nov 2021

📉Depressed US consumers! The Conference Board consumer confidence index -6.0pt to 88.7 in Nov: 19% below Dec 2024

🔻Present situation: -4.3pt to 126.9
🔻Expectations: -8.6pt to 63.2

⚠️Confidence depressed by weak job & income conditions & prospects: #inflation, #tariffs & #politics

⚠️The ADP weekly pulse on private sector employment is not yet a mature time series with less than 15 data points

🔻So while weekly prints should be taken with a grain of salt (-54k in 4 weeks to November 8), the direction of travel is concerning

⛔️Labor demand is softening