Inflation data is in—and doing just fine

Better late than never, right? After a five-week delay courtesy of the government shutdown, a solid stack of economic reports has landed in our laps…and the news looks pretty darn good.

The Personal Consumption Expenditures price index for September rose 0.3% from August and 2.8% from a year ago, with both numbers in line with expectations. Core prices—the Fed’s favorite inflation gauge since it excludes volatile food and energy—rose 0.2% month to month (as expected) and 2.8% year over year (slightly below forecasts).

Inflation, in other words, is chilling out.

Meanwhile, consumer spending inched up 0.3% in September following a downwardly revised 0.5% increase in August, according to the Commerce Department's Bureau of Economic Analysis. Although in line with projections, this slowdown suggests that shoppers are balking at higher prices amid a shaky job market.

However, early December data paints a rosier picture. The University of Michigan found that consumer sentiment popped for the first time in five months to 53.3 from 51 in November, buoyed by a 13% rise in optimism over their personal finances. Blame it on Christmas bonuses or recent stock market gains, but Americans peering into their bank accounts like what they see.

Your move, Fed

These latest numbers suggest that all systems are a go for the Fed to cut rates next week…but what happens after that? Is this the start of an early Santa Claus Rally, or are we still hearing more noise than sleigh bells?

December is far from over, and there’s still a lot more coming down the pike. On December 16, the Bureau of Labor Statistics will release its next jobs report shedding new light on the state of employment. Meanwhile, uncertainty swirls around Fed Chair Jerome Powell’s replacement, which is slated to be announced in early January. And on top of all that, the Supreme Court will be mulling President Trump’s use of emergency powers to pass sweeping tariffs—a decision with billions in tariff revenue at stake.

Bottom line: Today’s inflation data may be looking merry and bright, but don’t count on the market bringing you a gift until everything’s unwrapped.—JD