What happened in October?
The 10th month of 2023 provided significant uncertainty and volatility.
Many events contributed to the down-up-down-up-and-down-and up month for investors:
September 30th / October 1st
“Total nonfarm payroll employment rose by 336,000 in September, and the unemployment rate was unchanged at 3.8 percent”, according to the U.S. Bureau of Labor Statistics. BLS release
October 11th and 12th
On two consecutive days U.S. producer and consumer inflation data was released. The Producer Price Index (PPI) increased 0.5% in September, down slightly from 0.7% in August. Year-over-year prices advanced 2.2%, which is the largest increase since April. Consumer prices rose 0.4% in September, down from 0.6% in August. Over the last 12 months the Consumer Price Index (CPI) has risen 3.7%, which is the same reading as in August. BLS PPI release BLS CPI release
Canada’s CPI was lower than expected. On a year-over-year basis consumer prices rose 3.8% in September, slightly lower than the 4.0% gain measured in August. The slowing of price increases was led by travel serviced, durable goods, and groceries. Gasoline rose 7.5% on an annualized basis, compared to August’s 0.8% increase. Excluding gasoline, the CPI rose 3.7% in September. CBC and CPI StatsCan CPI release
October 18th to 23rd
The U.S. corporate earnings season began less than impressively. The number of positive earnings surprises and the magnitude of the earnings surprises are slightly below the 10-year averages. This is not the corporate profitability that markets wanted. Factset and Q3 earnings
The Bank of Canada made a monetary policy announcement that kept the policy interest rate unchanged. According to the press release, “Inflation has been easing in most economies, as supply bottlenecks resolve, and weaker demand relieves price pressures. However, with underlying inflation persisting, central banks continue to be vigilant.” This may provide insight into the Federal Reserve’s next announcement. BoC Press Release CBC and BoC
U.S. GDP grew faster than expected during the third quarter. The annualized pace is 4.9%. The expanding economy, and inflation above goal, may rationale for the Federal Reserve to tighten monetary policy by raising interest rates, but traders see that as unlikely. CNBC and GDP BEA release
On Friday the Bureau of Economic Analysis released the Personal Consumption and Expenditures (PCE) price index. In September, the most recent reporting period, the personal income rose 0.3%, and the PCE price index rose 0.4%. Core PCE (excluding volatile food and energy) increased 3.7% on a year-over-year basis. Core PCE peaked at 5.6% in early 2022, and has fallen steadily, but remains well above the Fed’s target of 2%. The PCE is the Federal Reserve’s primary inflation indicator, the Personal Consumption and Expenditures (PCE) index will be reported, which was a few days ahead of the next U.S. interest rate announcement. BEA and PCE CNBC and PCE
October 31stAccording to StatsCan, “Real gross domestic product (GDP) was essentially unchanged for a second consecutive month in August as factors such as higher interest rates, inflation, forest fires and drought conditions continued to weigh on the economy.” StatsCan release
What’s ahead for November and beyond in 2023?
On November 1st, the Federal Reserve announced that it was holding interest rates unchanged. The Federal Funds rate will remain in the range of 5¼ to 5½%. Fed Chair, Jerome Powell, said that rate reductions have not been considered or discussed for the next interest-rate meeting in December. CNBC and Fed release Fed release and press conference