Latest / Markets with Megan: A Quick Financial Markets Update / Federal Reserve Policy in a Consumer-Driven Economy | Episode 185 | 10-30-24

Transcript

Federal Reserve Policy in a Consumer-Driven Economy | Episode 185 | 10-30-24 · Markets with Megan: A Quick Financial Markets Update

• 0:01
  Megan Horneman: The economy just keeps trudging on.
• 0:03
  Megan Horneman: That's what we saw today.
• 0:04
  Megan Horneman: It is Wednesday, october the 30th, and we're here to talk about the advanced reading of third quarter GDP that we got this morning.
• 0:12
  Megan Horneman: Remember, we get several readings on GDP.
• 0:14
  Megan Horneman: There's room for plenty of revisions here, but let's just dig into what we saw in the advanced readings.
• 0:20
  Megan Horneman: This is the first reading we get.
• 0:22
  Megan Horneman: The street was looking for 2.9% growth in the third quarter.
• 0:26
  Megan Horneman: We got 2.8.
• 0:27
  Megan Horneman: So that's pretty close to the consensus, modestly lower than the prior quarter, which was 3%.
• 0:34
  Megan Horneman: The majority of this growth, though, was all in the consumer, and we continue to see the consumer defy all expectations, including ours, and the consumer just keeps spending.
• 0:45
  Megan Horneman: If you look at the contribution to the GDP, the consumer basically made up the entire GDP.
• 0:52
  Megan Horneman: That part the consumer spending on services, specifically household consumption, and then federal government spending.
• 1:01
  Megan Horneman: This is basically what drove GDP in the third quarter.
• 1:05
  Megan Horneman: Now what's the Fed going to look at?
• 1:07
  Megan Horneman: We like to look at the inflation component of this, and the core PCE price index rose 2.2%.
• 1:14
  Megan Horneman: The street was looking for an expectation of 2.1%, so a little bit hotter, but by a very, very fine margin, and it is getting closer to the Fed's target of 2% and it's down from a 2.8% reading in the prior quarter.
• 1:32
  Megan Horneman: So what do we make of this report?
• 1:34
  Megan Horneman: The economy still is trudging along, driven primarily by the consumer, and we've often said the consumer is our biggest concern going forward, because they're spending on fumes, they're using credit cards to continue spending.
• 1:48
  Megan Horneman: And then the other side of this that the Fed needs to watch closely is if the consumer continues to spend at this aggressive pace, what will that do to inflation going forward?
• 1:57
  Megan Horneman: Will it stall that progress that they've made in inflation?
• 2:00
  Megan Horneman: So the Fed's going to be looking at this closely Again.
• 2:02
  Megan Horneman: It's a solid number.
• 2:03
  Megan Horneman: It does not warrant another 50 basis point rate cut, in our opinion.
• 2:08
  Megan Horneman: In fact, I think that they'll probably be more gradual with their rate cuts as they go forward.
• 2:13
  Megan Horneman: That's all we have today.
• 2:15
  Megan Horneman: We'll be back tomorrow with some more economic news and if you like this podcast, please hit that subscribe button, hit the alarm bell, share it with friends, family or colleagues, and if you'd like any of our prior podcasts, you can go to marketswithmeganfm.
• 2:28
  Megan Horneman: Thank you.