The latest PCE inflation data add to the evidence, that the neutral rate in the US is very close to where the fed funds rate is right now. Core PCE inflation (ex-food & energy) accelerated to 2.80% in October and could hit 2.94% in November. Seasonally adjusted initial claims decreased 2k to 213k in the week ending November 23rd. There is a lot of volatility around this series during the Thanksgiving period. But other indicators corroborate the view that the labour market has not softened by much, if at all, recently.
Indeed, the y/y for nominal wages & salaries accelerated to 5.64% in October, according to the latest personal income & outlays report. House price gains have firmed in recent months too. The y/y increase in the Redfin median home sale price accelerated to 7.0% in the four weeks ending November 24th, the largest annual increase since September 2022. The Freddie Mac house price index for October also rose 0.45% m/m, and by a 3-month annualised rate of 5.59%.
Demand appears to have perked up in recent weeks, with mortgage applications for purchase increasing 12.4% from a week earlier in the week ending November 22nd. According to the NAHB, the ‘sales expectations in the next six months’ index increased seven points to 64 this month, the highest since April 2022. House price appreciation has not been driven by leverage: household mortgage liabilities fell to 45.3% of GDP in Q2, according to the latest flow of funds report, a 24-year low. The delinquency rate on residential real estate loans remains pinned near secular lows.
