Economic Signals You Shouldn't Ignore (Maybe Inflation isn't Dead Yet?)

Recent US economic data shows mixed signals, with stable core PCE inflation but rising service prices and strong personal income growth, potentially unsustainable due to higher borrowing costs. While consumer spending remains solid, the possibility of inflation resurgence, slower income, or increased borrowing costs poses risks, potentially leading to a less favorable economic start to 2025.

US Inflation Signals

• 00:00:22 The core PCE price index, a key inflation metric, rose 0.3% in October, with the year-over-year rate reaching 2.8%, the highest in six months. Service prices continue to climb, while goods prices have decreased, raising concerns about inflation potentially rebounding if demand increases. The speaker expresses worry that this could set the stage for stronger inflation than desired.

US Personal Income & Spending

• 00:01:39 Personal income unexpectedly increased 0.6% in October, primarily driven by wage and salary growth and dividend income, exceeding market expectations. Disposable personal income also rose, suggesting increased money in consumers' pockets. However, the sustainability of this growth is questioned given the higher borrowing costs and the potential impact on wages and investments if these trends continue.

Consumer Spending Trends

• 00:02:49 Personal spending increased by 0.4% in October, primarily driven by service spending (travel, dining, entertainment) while spending on goods remained flat or decreased. This shift suggests consumers are prioritizing spending on experiences over delaying purchases of goods, which could be a warning sign if spending falters further. Consumer spending is a vital driver of the US economy.

Canadian Debt & Delinquency

• 00:06:07 Canada's total consumer debt reached $2.54 trillion in Q3 2024, with auto loans being a significant driver. Delinquency rates, particularly among mortgage holders, are improving due to the Bank of Canada's interest rate cuts. However, overall delinquency rates remain high, and specific groups like newcomers and those with credit histories of 12-36 months are experiencing challenges, indicating uneven financial pressure across the population.

Canada Post Strike

• 00:09:04 Mediation efforts to end the Canada Post strike have failed, and the two sides remain far apart on critical issues. The Canadian Union of Postal Workers seeks a fair wage and better working conditions, while Canada Post argues that these demands would incur significant costs and operational inflexibility. The labor minister hopes mediation can resume when the parties are prepared for meaningful negotiations.