Here's What We're Looking for in the October Flash PMI Data
The upcoming release could have a big impact on the outlook for future Fed rate cuts.
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The Federal Reserve has published its latest Beige Book, which contains anecdotal comments collected by the various Fed member banks between the last edition and October 11. Knowing that collection period, the report doesn’t bring all that much additional information, but it does reaffirm what September said about the speed of the economy, the expanding labor market and the slight uptick in core inflation data.
To us, what is revealed in Thursday morning’s Flash PMI data from S&P Global about the tone of the manufacturing and services sectors, job creation and inflation in October will be far more useful. New order data will also give us a peak at what we could see in November. While Flash PMI data is not factored into GDP models, it’s an indication of what we’re likely to see when S&P releases its final October PMI figures and ISM publishes its, which are included in models like the Atlanta Fed’s GDPNow model.
Once the preliminary GDP figure for 3Q 2024 is published next week (on October 30), models like that will turn to the current quarter. If the data shows a continuation of recent economic strength, as we discussed in today’s Daily Rundown video, it will fuel near-term recalibration thoughts about the pace of Fed rate cuts over the next eight to nine months.
The Beige Book also called out increasing price sensitivity among consumers, only minor disruptions due to the short-lived dockworkers strike and hurricane-damage impacted crops and prompted pauses in business activity and tourism in the Southeast. While we’ve factored those into our thinking about the economy and our Portfolio decisions, they are good reminders as we move deeper into the current earning season.
