J P M O R G A N North America Economic Research

05 January 2024

US Weekly Prospects

Economic and Policy Research

Michael Feroli
(1-212) 834-5523
[email protected]
JPMorgan Chase Bank NA
Daniel Silver
(1-212) 622-6039
[email protected]
JPMorgan Chase Bank NA
Murat Tasci
(1-212) 622-0288
[email protected]
J.P. Morgan Securities LLC

Contents
Data Watch 2
Focus: Cooler inflation isn’t quite like pre-COVID
times 4
Global Data Watch: It’s not soup yet 5
US Indicator forecasts 8
J.P. Morgan US forecast 14
US Economic Calendar 15
See page 16 for analyst certification and important disclosures.
www.jpmorganmarkets.com
Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
US Weekly Prospects
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

Job growth still solid

Data Watch Nonfarm employment beat expectations in December,
increasing 216,000, although after downward revisions of
• Job growth was solid in December (216,000) with 71,000 to prior months the level of employment came in close
unemployment rate holding at 3.7% to what was anticipated. There were also mixed messages
from the other details of the report. In the establishment sur-
• FOMC minutes suggested rate cuts could come later
vey, average hourly earnings increased a solid 0.4%, but the
this year
average workweek ticked down to 34.3 hours. In the house-
• We continue to think first Fed cut occurs in June hold survey, the unemployment rate held unchanged at a low
• December CPI forecast: headline: 0.2%, core 0.3% 3.7%, but the labor force participation rate slumped three-
tenths to 62.5% and the volatile household measure of
We continue to think that the FOMC will start lowering rates employment plunged 683,000.
in June, with the news from the past week supporting the idea
that a rate cut could come fairly soon, but probably not as ear- Figure 1: Nonfarm employment and average hourly earnings
ly as the first quarter. Most importantly, the December 000s, sa, 3m avg. change %3m/3m, saar
employment report showed solid job growth continuing 800 6.5
through the fourth quarter, with a still-tight labor market gen- Average
700 hourly 6.0
erating upward pressure on wages. The broad trend in 600 earnings 5.5
employment growth (and aggregate hours growth and average 500 5.0
hourly earnings growth) still appears to be moderating over 400 4.5
time, but so far this looks like a shift to a more balanced labor 300 4.0
Employment
market following the severe effects of the pandemic, and not 200 3.5
a labor market that has particularly weak demand for workers. 100 3.0
Several other labor market reports echoed this message lately 2021 2022 2023
Source: BLS, J.P. Morgan
(e.g., job openings continued to trend lower into November
but remain higher than pre-pandemic norms), although there Stepping back, labor demand has been gradually cooling. Job
was a curiously downbeat reading on employment in the ISM growth averaged 165,000 in the fourth quarter, the weakest
services survey. quarter of the expansion though still above what’s required to
meet the growth in the population (Figure 1). Similarly, wag-
Signs of a more balanced labor market and reduced inflation es grew at a 3.7% annual rate last quarter, the weakest pace
pressures are leading to speculation about when the FOMC since late 2020 though still probably a little too hot from a
will start to lower rates. The minutes to the December FOMC labor cost and inflation perspective.
meeting didn’t surprise in a meaningful way and didn’t sug-
gest that rate cuts were imminent. They confirmed that the Figure 2: Job openings and layoffs
Committee sees rates “at or near” the peak for the cycle. Mn, sa, both scales
While “almost all participants” thought the improved inflation 14 4
outlook means rate cuts this year, they are still far from guess- 12
ing when those cuts might start. The minutes did suggest that Openings Layoffs
10 3
we should start to see more discussion of plans for the bal-
8
ance sheet soon, and we think this could start to occur at the
late-January meeting. 6 2
4
Inflation remains a key issue for policymakers and next 2 1
week’s December CPI report will be important to watch. We 00 05 10 15 20
Source: BLS, J.P. Morgan
forecast that the headline CPI will be up 0.2%, with a 0.26%
gain for the core index. While this wouldn’t be a particularly The more lagging JOLTS data also suggest that labor demand
soft print for the core measure, we believe the related year- is cooling but remaining solid. Job openings continued their
ago rate will continue to moderate (moving from 4.0%oya in recent downward trend into November. But while the number
November to 3.8% in December) and we expect additional of job openings has fallen by more than 3mn since the all-
cooling over time. This upcoming CPI report likely will be time high reported for March 2022, the November level of
the last main economic release ahead of the late-January openings was still up by more than 1mn from the strongest
FOMC meeting, but there will be plenty of other news before month of 2019 (Figure 2). While hiring has slowed lately,
that meeting as well.

2
Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

firms don’t appear to be opting for many layoffs. And low related to inventories. Inventories added 1.3%-pts to GDP
levels of jobless claims filings reported through much of growth in 3Q but we think they could subtract about a per-
December echo this message from the November JOLTS centage point (or more) from GDP growth in 4Q. That said,
report. there are limited related hard data in hand at this point. For
domestic final sales growth, we expect growth to moderate
Fed minutes don’t signal timing of a cut between these quarters, but we do not look for a particularly
drastic step down.
We believe the apparent resilience of the labor market should
dial down expectations of a Fed rate cut in 1Q, and we still
On the whole, the November construction report came out
look for easing to begin at the June meeting. The minutes to
above expectations, with a somewhat disappointing change
the December 12-13 FOMC meeting didn’t surprise in a big
reported for November (0.4%) but upward revisions to earlier
way and didn’t suggest that a rate cut is imminent. The min-
figures (mainly in October). Private residential spending led
utes rather confirmed that the Committee now sees rates “at
the way in November, with a 1.1% monthly increase that
or near” the peak for the cycle, and this was reflected in the
month, and generally has been climbing at a solid pace in
revised forward guidance. However, that guidance still left
recent months (Figure 3).
intact “the possibility of further increases” if inflation were to
surprise on the upside. “Almost all participants” noted that
Figure 3: Main categories of construction spending
the improved inflation outlook meant rate cuts in ’24, though %ch over 3 months, saar
they are still very far from getting into the game of guessing Private Private
60 nonresidential
when those cuts may start. It was also noted the outlook for residential
45
these cuts was “associated with an unusually elevated degree
of uncertainty” (the minutes rarely note an unusually low 30

degree of uncertainty). 15
0
The Committee generally views the risks to inflation as still -15 Public
skewed to the upside, though by not as much as in prior meet- -30
ings. Some sources of lingering upside risk include the recent Jan 19 Oct 19 Jul 20 Apr 21 Jan 22 Oct 22 Jul 23
Source: Census Bureau, J.P. Morgan
easing in financial conditions and global factors could end or
reverse the easing in goods prices. On growth there was the
Auto sales also surprised favorably, rising 3.2% to 15.8mn
contending concern that the Committee could find that policy
saar in December. This marked one of the strongest months
is ultimately overly restrictive, which could be compounded
for sales in over two years but sales continue to run below the
by slower foreign growth and tighter bank credit, particularly
norms from pre-pandemic years. We think that improvements
for small businesses. Both the Committee and the staff saw a
on the inventory front could help sales climb over time.
tough year ahead for CRE.
While inventories generally have been trending higher lately,
there was a decline in inventories reported for December.
The minutes record that “several” participants anticipate
slowing the pace of balance sheet runoff before stopping that
runoff. It was also noted that these participants thought the
technical discussion should begin so that the public has
appropriate advance notice of the plan. We suspect this means
that we could see a fuller discussion of potential balance sheet
plans in the minutes to the next meeting, which takes place
later this month.

4Q GDP still looking modest

We have long been anticipating a clear slowing in GDP
growth in the fourth quarter following the very strong third
quarter of last year and we continue to calibrate our estimate
for 4Q as we get more related information over time. There
were some upside surprises this past week, but we continue to
see some downside risk to our 2.0% real GDP growth forecast
for 4Q23. We should also note that much of the slowing in
growth we expect between the third and fourth quarters is

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 North America Economic Research
JPMORGAN
US Weekly Prospects
05 January 2024

larger decline than normal for these earlier periods (Figure 1).
Focus: Cooler inflation isn’t While core goods prices could move down more, we don’t
think the recent rate of decline will be sustained over a pro-
quite like pre-COVID times longed period.

Headline and core PCE inflation have been running close to While core goods inflation has been weaker than pre-pandem-
the FOMC’s 2% target recently after being significantly ic periods as of late, recent housing inflation has been much
above-target for much of the time since the pandemic began. stronger than we saw in these earlier periods (Figure 1). How-
Here, we compare and contrast details of this recent run of ever, we believe the trend for housing inflation will keep soft-
inflation with the related trends from pre-pandemic years. ening over time, largely based on related industry figures.
The recent run of near-target inflation differs from the earlier Core services prices away from housing have been a focus for
period of soft inflation but we expect a shift closer to the pre- Fed officials lately and inflation rates from this grouping are
pandemic trends over time.1 Core goods prices recently have still elevated relative to the norms from pre-pandemic years
fallen more than they did in pre-COVID years but we expect (Figure 1). We continue to think that softening in the labor
some relative firming ahead, and housing/rental inflation has market would go a long way in bringing prices for core ser-
been stronger lately than it was in pre-pandemic years, but we vices ex. housing down. But as pre-pandemic years have
expect it to moderate. Inflation for core services excluding shown, overall inflation could stay modest even if inflation
housing also has been firmer than the pre-pandemic norm, but for this important grouping stays above 2%.
we expect softening ahead, particularly given our
expectations for cooling in the labor market. Food and energy prices have moved lower over the past year,
weighing down headline inflation somewhat and representing
We should keep in mind that policymakers are not explicitly a break from what normally is an upward trajectory over time
targeting inflation rates for different underlying categories (Figure 1). These prices are often influenced by “noneconom-
2
and they could be content with near-target inflation even if it ic” factors and related movements are frequently not viewed
does not look like the soft inflation that preceded the as being indicative of underlying trends or future inflation
pandemic.3 But we think the pre-COVID period provides a changes. That said, they can be important influences for head-
template for inflation that would be viewed as being more line inflation rates and inflation expectations.
sustainably closer to target than what we have seen in the
inflation data from recent months. Looking at a finer level of detail, it is generally true that PCE
categories that had higher (lower) pre-pandemic inflation
Figure 1: PCE price index details rates have had higher (lower) inflation rates more recently
%ch, saar
Last 12 months (Figure 2). But it is also true that inflation for most categories
8 Last 6 months has been stronger as of late than in pre-pandemic years. Of
7
6 1998-2019 208 categories, about 70% have had higher inflation rates
5 Pre-COVID expansion
4 over the year through November than they had in the pre-pan-
3
2 demic expansion (this near-70% share is also true when
1 focused only on core categories). Over just the most recent
0
-1 six months, somewhat more than 50% of PCE components
-2
-3 (and core components) have had stronger inflation rates than
Core goods Housing Core services Food/energy Headline we saw in pre-pandemic years (not shown).
Source: BEA, J.P. Morgan ex. housing

Figure 2: PCE inflation components 45 degree

Core goods inflation was soft in pre-pandemic periods, gener- November 2022 - November 2023 (% change, annualized) line
25.0 2%
ally drifting down over time, but the 2.3% saar drop in core Core services components
goods PCE prices over the latest six months has been a much Core goods components
12.5 Other components

0.0 2%

1. For both PCE and CPI inflation measures. -12.5

2. The FOMC’s longer-run goals specifically target 2% inflation for
the PCE price index (averaging that rate over time), with the core -25.0
PCE price index often used as an important signal about the -25.0 -12.5 0.0 12.5 25.0
underlying inflation trend. July 2009 - February 2020 (% change, annualized)
Source: BEA, J.P. Morgan
3. Inflation was viewed by some as being too low in the years
leading up to the pandemic.

4
 North America Economic Research
JPMORGAN
05 January 2024

Global Data Watch: It’s not soup yet

• Disinflation not likely to be sufficient for rate cuts by March

• PMIs underscore ongoing geographic and sectoral divergences
• Geopolitics spark goods pricing inflation; Food prices falling
• Next week: US Dec CPI (0.26% core); Nov IP (Ger, UK, Czk, Saf, Ind)
Central banks in the DM will not be ready to step back from their restrictive policy until they are convinced that core
inflation rates are on a path to move sustainably below 3%. Inflation performance over the past six months has fueled
optimism that we are on this path, with core inflation running at roughly 2%ar in both the US and the Euro area
(Figure 1). This benign inflation backdrop has changed our thinking somewhat, as we have pulled forward our start of
Fed easing and added another ECB cut this year. This comes alongside our recent upgrade to the likelihood of soft-
landing. However, absent a growth threat, our central view is that it will take more time for central banks to reach this
conclusion and look to midyear as the most likely time for DM central bank easing to begin (Figure 2).

It is natural to extrapolate the sharp and broad-based slide in global core CPI inflation over the past six months. But as
we highlighted this week, the primary driver of this move—goods price deflation—looks to be abating. Combining
this with fading technical distortions, we expect Euro area core inflation to rebound to a 3%ar in 1H24. In the US,
where core CPI inflation is running a percentage point higher than core PCE inflation, fading goods price deflation
should offset an expected moderation in shelter inflation, keeping core CPI inflation stable at 3%ar. The recent
weakness in “supercore” PCE service price inflation is harder to assess. But with non-market prices playing an
important role in its slide and the CPI counterpart much firmer, the Fed is likely to view the slide cautiously.

This week’s FOMC minutes suggest two judgments are important in a Fed forecast for 75bp of easing this year. First,
“participants judged that the current stance of monetary policy was restrictive and appeared to be restraining
economic activity and inflation.” Second, they expected a tight labor market to move closer to balance this year. In
addition to demand restraint, participants see greater balance arising

Figure 1: US and Euro area core inflation Figure 2: 1H24 DM rate change expectations
%6m, saar; Euro area thru Dec., US thru Nov. Bp, change from current and end 2Q24 policy rates
7 US (CPI) 0
6
5 -20
4
US -40
3
(PCE)
2 -60
1 Euro area JPM Market
(HICP)
0 -80
2019 2020 2021 2022 2023 Fed ECB BoE BoC RBA
Source: BEA, BLS, ECB, J.P. Morgan Source: Bloomberg Finance, L.P., J.P. Morgan

5
 North America Economic Research
JPMORGAN
US Weekly Prospects
05 January 2024

as “higher labor force participation and immigration, with Figure 3: Global manufacturing PMI and output
continued solid productivity growth (are) also supporting the Ratio of DI (thru December) %3m, saar (thru October)
PMI: New Orders /
1.20 Mfg output 12
productive capacity of the economy.” Inventories
(actual)
1.15 8
US GDP growth is poised to moderate following last year’s 1.10
4
3% gain, but expectations for quicker and larger policy easing 1.05
0
need to be tempered against a recent easing of financial con- 1.00
ditions. At the same time, the rapid realized pace of supply 0.95 -4

growth (the labor force and productivity strengthened 1.3% 0.90 -8

07 09 11 13 15 17 19 21 23
and 2.2%, respectively, in 2023) is likely to cool. From a lofty Source: National sources, S&P Global, J.P. Morgan. Details on request.
3.5% realized potential gain last year, we are forecasting US
gains to slow to below 2% this year. This week’s employment Geographically, Western Europe continues to struggle, and
report points in this direction and suggests the midyear drift China looks fragile. A surprisingly weak December ISM
upwards in the US unemployment rate has been arrested, employment reading notwithstanding, the latest US business
despite moderating job gains. surveys overall underscore solid US momentum carrying into
the new year. In Europe, an upward revision to the PMI is
By contrast, the Euro area stagnated last year with an even welcome but does more to remove downside risk than to
weaker supply-side performance that pushed its unemploy- change our view of an economy that is stagnating around the
ment rate lower. For the ECB to hold its current restrictive turn of the year. The main disappointment in this week’s data
stance in 1H24, it must be confident that the region will comes from China, where the more domestically-oriented
return to growth. This week brought some encouraging news NBS PMIs flagged ongoing weakness—despite improvement
on that front as the Euro area composite PMI was revised up in the S&P Global PMI (which is in our global measure).
in the final report for December, consolidating November’s
increase. There was also better news on bank lending and Divergences in Asian manufacturing
German labor demand.
We are also mindful of the ongoing divergences between tech
and non-tech Asian manufacturing, as evident in the relative
Resilience doesn’t deliver convergence regional outperformance of tech-heavy Korea, Taiwan, and
The data flow reinforces our call for near-term growth resil- Singapore (Figure 4). Tech continues to lead production and
ience. We forecast just over 2%ar growth in 4Q23 and 1Q24, shipments in Korea (benefiting from a strong DRAM lift),
slightly below potential. This week’s J.P. Morgan Global PMI while broader non-tech production has weakened. Mean-
advanced further to end the year at a level consistent with while, factory output is struggling in the more auto-dominat-
2.5%ar global GDP growth. Encouragingly, this move arrests ed Japan, where production and exports recorded monthly
a sharp five-month slide through October. A move up in the declines through November. Taiwan’s export and industrial
employment PMI bolsters this gain. Yet the growth gaps that activity has shown steady sequential growth since midyear,
opened up last year persist. Sectorally, the firming in the PMI but November export orders disappointed while this week’s
owed entirely to a large gain in services that more than offset December PMIs gave back months of recent gains. By con-
a drop back in the manufacturing PMI—its seventh month trast, the new orders PMIs from Korea, Vietnam, and Main-
running below the 50-mark. Following a full year of stagna- land China posted more constructive gains. On balance, we
tion, a modest recovery in factory output—to a roughly are upbeat on tech sector activity for 2024, owing to expected
1.5%ar—took hold in 2H23. But this lift appears to be nar- gains in demand for AI and high-performance computing and
rowly linked to a rebound in Asia tech and a firming in the fading destocking pressures.
pace of stock building. With the new orders-to-inventory ratio
of the PMIs still firmly in contractionary territory (Figure 3),
this expansion does not have a firm footing. However, we
take some comfort in the latest indicators that show final
goods demand still rising—helped in part by signs of a pickup
in global capex following a midyear stall.

6
 North America Economic Research
JPMORGAN
05 January 2024

Figure 4: Asia tech production es (the first rise in four months) and upward pressure on rice
Index, 2015=100, sa prices from India’s export restrictions. We see global food
220 CPI inflation (ex. China and Türkiye) continuing to hover
KR around 3%-4%ar after a 3Q23 upswing to 5%. December
180 food inflation looks to have slowed more than expected in the
Euro area and Poland; food pressures also eased in EM Asia
140
TW (namely Indonesia and Korea). The impact of El Niño on
TH
100 consumer food prices in the EM economies that have been
JP most sensitive to severe episodes in the past (e.g., Colombia,
60 Brazil, India, South Africa) remains relatively modest for
15 17 19 21 23 now, although a greater impact could still be felt in 1H24.
Source: METI, SK, DOS, MOEA, J.P. Morgan

Japan’s unhappy new year Türkiye: Higher for longer rates

While it is too early to fully assess, the disruptions to produc- Türkiye’s consumer prices rose 2.9% in December, in line
tion from the devastating New Year’s Day earthquake in with expectations, and CPI inflation increased to 64.8%oya
Japan appear relatively limited. However, negative impacts (from 62%) on higher food and energy prices. Services infla-
on sentiment risk exacerbating an already weak trend in man- tion hit an all-time record of 90.7%oya, and core inflation
ufacturing. Both industrial output and exports declined in increased to 70.6%oya (from 69.9%). Headline inflation is set
November, dragged down by electronics and autos. Manufac- to rise until May 2024 owing to higher-than-expected wage
turers’ projections imply a sequential contraction into the new hikes and unfavorable base effects driven by natural gas. We
year; a pause in production by one large automaker (follow- thus revise up our year-end inflation forecast to 42%oya
ing a safety scandal) will further depress auto output. By con- (from 40%). We continue to expect the CBRT to hike its poli-
trast, domestic demand has held up: retail sales rose in cy rate by 250bp to 45% at this month’s MPC meeting, and
November, and service sector activity and consumer senti- believe its forward guidance will keep the door open for fur-
ment remain supportive. This contrast, alongside continued ther hikes. Recent data reinforce our view that the CBRT
wage hikes by Japanese corporates, has led us to expect only should keep policy tight for longer, and we do not rule out
gradual BoJ policy adjustments over the course of this year. further tightening depending on 1Q24 inflation. We continue
The past week’s events reinforce our existing forecast for the to expect the CBRT to keep its policy rate at 45% (or higher)
BoJ to exit NIRP no earlier than around the middle of this this year to rein in inflation.
year.
LatAm central banks treading carefully
Red Sea disruptions reignite shipping woes The appreciation of most LatAm currencies in tandem with a
Following a series of attacks in the Red Sea, several major recent easing of global financial conditions leaves the region’s
shipping companies have redirected vessels from the Suez central banks with a choice between direct FX intervention to
Canal—which has seen a more than 20% drop in traffic since contain the appreciation or using the opportunity to reduce
mid-December. Re-routing around Africa is adding upwards policy rates further. In light of regional idiosyncrasies, we
of 10 days to journeys between Europe and Asia, as well as expect divergent policy decisions ahead. Colombia, which
significant increases in insurance and fuel costs. Panama needs to maintain high real policy rates given persistent infla-
Canal blockages have compounded the upward pressure on tion and fiscal concerns, has already announced a reserve
shipping costs. While these cost increases are coming off low accumulation program. Chile had discontinued its mid-2023
levels, they will reinforce the fading of recent deflationary FX intervention, but it would likely resume if current condi-
dynamics for goods prices. In addition to the recent rise in the tions persist. Mexico might also consider intervening, but the
NY Fed’s supply chain pressure index, a firming is also evi- underlying financial cost and upcoming geopolitical events
dent in the global PMI survey on output prices and delivery complicate the decision. Brazil has strayed from direct FX
times in December. intervention and near term is likely to keep a more cautious
approach. This reinforces the risk for lower rates by year-end,
should our expectation for improving activity fail to material-
Food prices eased through December ize or services inflation decelerate more than expected.
Favorable supply conditions continue to limit food price pres-
sures. The FAO food price index fell 1.5%m/m in December
and was down 10%oya. Declines in sugar, vegetable oils, and
meat more than offset weather-related increases in wheat pric-

7
Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
US Weekly Prospects
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

US Indicator forecasts

J.P. Morgan Research versus the consensus

Release date/ J.P. Morgan Consensus Consensus
Indicator forecast median range
Tue, Jan 09
International trade (Nov) -$64.5 bn -$64.8 bn -$65.9 bn to -$63.3 bn

Thu, Jan 11
Jobless claims (w/e Jan 06) 205k 213k 205k to 215k

CPI (Dec) 0.2% 0.2% 0.1% to 0.3%

Core 0.26% 0.2% 0.1% to 0.3%

Fri, Jan 12
PPI (Dec) 0.3% 0.1% 0.0% to 0.3%
Core 0.2% 0.2% 0.0% to 0.3%

Source: J.P. Morgan, consensus forecasts reported by Bloomberg Finance L.P.

8
Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

International trade (Nov) Nominal goods imports and exports

$bn, samr
Released on Tue, Jan 09, at 8:30am
300
We estimate that the nominal trade balance widened from
-$64.3bn in October to -$64.5bn in November, with exports 250 Imports
falling 2.2% and imports declining 1.7%. The advance trade 200
report already showed widening in the nominal goods deficit
150
in November with drops in both exports (-3.6%) and imports
Exports
(-2.1%) during the month. Factoring in price data reported 100
separately, we also expect to see drops in exports and imports 50
in volume terms in November. For the nominal services data, 10 12 14 16 18 20 22 24
Source: Census Bureau, J.P. Morgan
we think that the growth trend for exports will remain firmer
than that of imports in November, with exports rising 0.7%
Nominal services trade
and imports moving up 0.2%.
$bn, sa
100

80 Exports
60

40
Imports
20

0
92 97 02 07 12 17 22
Source: Census Bureau, J.P. Morgan

International trade 253.1 317.6

Balance ($bn) Exports (%m/m) Imports (%m/m)
Sep 23 Oct 23 Nov 23 Sep 23 Oct 23 Nov 23 Sep 23 Oct 23 Nov 23
Total balance -61.2 -64.3 -64.5 2.3 -1.0 -2.2 2.7 0.2 -1.7
Services 25.2 25.5 26.0 0.7 0.7 0.7 2.5 0.4 0.2
Goods (BoP) -86.3 -89.8 -90.5 3.1 -1.8 -3.6 2.7 0.1 -2.1
Foods -2.9 -3.3 11.5 -1.8 -0.5 1.0
Industrial supplies 5.6 7.1 2.5 2.0 2.1 -0.5
Capital goods -20.4 -22.1 0.2 0.2 2.2 2.5
Aircraft 2.3 1.6 40.4 -23.8 -19.4 9.7
Motor vehicles -24.5 -24.5 3.4 -5.8 4.8 -2.4
Consumer goods -41.8 -43.6 2.7 -9.0 3.3 -0.4
Other goods -2.8 -3.2 9.7 -6.7 3.9 -1.8
Real goods (BoP) -86.3 -87.0 -87.1 2.1 -0.2 -3.2 2.5 0.2 -2.0
Source: US Department of Commerce, Bureau of Economic Analysis, J.P. Morgan forecasts
9
Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
US Weekly Prospects
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

Initial claims (w/e Jan 06) Initial jobless claims

Mns, sawr
Released on Thu, Jan 11, at 8:30am
1.0
We forecast that initial jobless claims increased 3,000 to 0.9
205,000 during the week ending January 6. The claims data 0.8
can be noisy from week to week and we think that the drop in 0.7
0.6
filings reported for the week ending December 30 will be par- 0.5
tially reversed in the upcoming report. But we believe filings 0.4
will stay low and remain close to their recent average. 0.3
0.2
0.1
67 72 77 82 87 92 97 02 07 12 17 22
Source: Department of Labor, J.P. Morgan

Jobless claims
Thousands, sa Millions, sa
280 Continuing 1.95
Initial claims
claims 1.90
260
1.85
240 1.80
220 1.75
1.70
200
1.65
180 1.60
Jan 1, 23 Apr 11, 23 Jul 20, 23 Oct 28, 23
Source: Department of Labor, J.P. Morgan

Jobless claims (regular state programs, seasonally adjusted)

Nov 18¹ Nov 25 Dec 2 Dec 9 Dec 16¹ Dec 23 Dec 30 Jan 6
Initial claims (000s) 211 219 221 203 206 220 202 205
Weekly change -22 8 2 -18 3 14 -18 3
4-week moving average 221 220 221 214 212 213 208 208
Weekly change 0 0 1 -8 -1 0 -5 1
Continuing claims (000s) 1925 1856 1866 1861 1886 1855
Weekly change 84 -69 10 -5 25 -31
4-week moving average 1865 1871 1872 1877 1867 1867
Weekly change 28 6 1 5 -10 0
Insured unemployment rate (%) 1.3 1.2 1.3 1.2 1.3 1.2
Source: US Department of Labor, J.P. Morgan forecasts. 1. Employment survey week.
10
Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

CPI (Dec) vehicle CPI for December. And we also think that lodging
prices will continue their recent downward trend, falling 0.3%
Released on Thu, Jan 11, at 8:30am
in December. In other travel-related news, we forecast a 0.5%
We believe the consumer price index (CPI) rose 0.2% in decline for public transportation prices in December. Commu-
December. This would be the firmest monthly change since nication prices generally keep moving down over time, and
September, as we think that the recent drop in energy prices is we expect a 0.1% decline for the related CPI measure in
now behind us and we look for an unchanged energy CPI in December. Apparel prices in the CPI also generally have
December (in seasonally adjusted terms, despite prices mov- moved lower lately through some noisy monthly prices, and
ing down before seasonal adjustment). We also think that we forecast a 0.1% decline for December.
food prices in the CPI rose 0.2% in December, in line with the
recent upward trend. And away from food and energy, we
believe that the core CPI rose 0.26% in December, which
would not be a particularly soft print but it would keep the
year-ago change for this measure moderating over time (mov-
ing from 4.0%oya in November to 3.8% in December).

We look for mixed changes across the main core CPI compo-
nents. We think that the rent measures will keep climbing at a
solid, though decelerating, pace in December—we forecast
that tenants’ rent rose 0.34% in December while owners’
equivalent rent increased 0.33%. We also look for another
solid gain for medical care prices in the CPI (0.5%) as we
think that health insurance prices will keep increasing in
December because of the BLS’s estimation techniques. We
also look for a 0.9% increase in new vehicle prices based on
our analysis of related industry figures.

But we look for declines in prices across several other core

CPI categories. Industry figures tied to used vehicles point to
recent weakening, and we forecast a 1.6% drop in the used

Consumer prices
%m/m, sa %oya, nsa
Aug 23 Sep 23 Oct 23 Nov 23 Dec 23 Aug 23 Sep 23 Oct 23 Nov 23 Dec 23
CPI, All items 0.6 0.4 0.0 0.1 0.2 3.7 3.7 3.2 3.1 3.2
Core (79) 0.28 0.32 0.23 0.28 0.26 4.3 4.1 4.0 4.0 3.8
Food (13) 0.2 0.2 0.3 0.2 0.2 4.3 3.7 3.3 2.9 2.7
Energy (7) 5.6 1.5 -2.5 -2.3 0.0 -3.6 -0.5 -4.5 -5.4 -2.4
Housing (42) 0.3 0.6 0.3 0.4 5.7 5.6 5.2 5.2
Owners' eq. rent (23) 0.38 0.56 0.41 0.50 0.33 7.3 7.1 6.8 6.7 6.2
Lodging away from home (1) -3.0 3.7 -2.5 -0.9 -0.3 3.0 7.3 1.2 0.9 -0.6
Rent (7) 0.48 0.49 0.50 0.48 0.34 7.8 7.4 7.2 6.9 6.4
Apparel (2) 0.2 -0.8 0.1 -1.3 -0.1 3.1 2.3 2.6 1.1 0.9
New vehicles (4) 0.3 0.3 -0.1 -0.1 0.9 2.9 2.5 1.9 1.3 1.7
Used vehicles (4) -1.2 -2.5 -0.8 1.6 -1.6 -6.6 -8.0 -7.1 -3.8 -3.4
Public transportation (1) 3.9 0.5 0.0 1.0 -0.5 -9.4 -9.3 -8.9 -8.1 -10.7
Medical care (8) 0.2 0.2 0.3 0.6 0.5 -1.0 -1.4 -0.8 0.2 0.4
Education (3) 0.1 0.3 0.0 0.0 2.9 2.9 2.7 2.4 2.1
Communication (4) -0.1 0.0 -0.3 -0.6 -0.1 -0.2 -0.1 -0.2 -1.7 -1.8
Core commodities (22) -0.1 -0.4 -0.1 -0.3 0.2 0.0 0.1 0.0 0.1
Core services (58) 0.4 0.6 0.3 0.5 5.9 5.7 5.5 5.5 4.8
CPI, All items (NSA index level) 307.026 307.789 307.671 307.051 306.465
Source: BLS, J.P. Morgan forecasts. Weights in parentheses.
11
Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
US Weekly Prospects
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

Headline CPI
%oya
15

10

-5
70 75 80 85 90 95 00 05 10 15 20
Source: BLS, J.P. Morgan

Core CPI
%oya
14
12
10
8
6
4
2
0
70 75 80 85 90 95 00 05 10 15 20
Source: BLS, J.P. Morgan

Core CPI
%m/m, sa
1.0

0.5

0.0

-0.5
2017 2018 2019 2020 2021 2022 2023 2024
Source: BLS, J.P. Morgan

Core goods and core services CPI

%m/m, sa
2.4
Core goods

1.6

0.8
Core services
0.0

-0.8
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Source: BLS, J.P. Morgan

12
Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

PPI (Dec) Headline and core PPI

%oya
Released on Fri, Jan 12, at 8:30am
12 Headline
We estimate that the producer price index (PPI) rose 0.3% in 10
December. Energy prices fell across October and November 8
but we see some recent firming in related measures (like natu- 6
ral gas prices) and we forecast a 2.1% move up for the energy 4
PPI to be reported for December. Food prices in the PPI have 2
Core
been alternating solid gains with soft monthly changes lately, 0
and we look for a continuation of that trend with a flat print in -2
December to follow the 0.6% November increase. Away from 12 13 14 15 16 17 18 19 20 21 22 23 24
food and energy, we forecast that the core PPI rose 0.2% in Source: BLS, J.P. Morgan

December. This would be a step up from the flat readings

Core PPI
reported for October and November but would still keep the
%m/m, sa
broad trend for the core PPI moderating over time. Core
1.2

0.6

0.0
Core ex.
-0.6 trade services

-1.2
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Source: BLS, J.P. Morgan

Producer prices
%m/m, sa %oya, nsa
Aug 23 Sep 23 Oct 23 Nov 23 Dec 23 Aug 23 Sep 23 Oct 23 Nov 23 Dec 23
PPI, final demand 0.7 0.4 -0.4 0.0 0.3 1.9 2.0 1.2 0.9 1.5
Energy 10.2 3.0 -6.7 -1.2 2.1 -3.0 -1.4 -9.5 -8.4 0.0
Food -0.4 0.6 -0.1 0.6 0.0 -0.7 -1.5 -2.4 -4.9 -4.0
Core 0.2 0.2 0.0 0.0 0.2 2.5 2.6 2.3 2.0 2.0
Core goods 0.1 0.2 0.0 0.2 0.2 1.8 1.9 2.0 1.8 2.0
Services 0.2 0.2 0.0 0.0 0.2 2.7 2.7 2.5 2.1 2.0
Construction 0.1 0.1 -0.4 -0.2 -0.4 3.9 3.7 0.6 0.4 0.0
Personal consumption 0.8 0.4 -0.6 0.0 2.2 2.4 1.3 1.0
Business investment 0.4 0.3 -0.2 0.0 3.0 2.8 2.5 1.7
Government 1.8 0.6 -0.6 0.0 0.9 0.8 -0.3 -0.4
Exports 0.4 0.3 0.0 -0.1 0.1 0.2 0.5 -0.1 1.2
PPI intermediate processed goods 2.1 0.5 -1.0 0.0 -4.4 -3.8 -4.6 -4.1
Core intemediate processed -0.2 0.0 -0.1 -0.2 -3.1 -2.3 -1.6 -1.6
Intermediate services -0.1 0.2 0.1 0.2 4.2 3.9 3.5 2.9
Source: Bureau of Labor Statistics, J.P. Morgan forecast
13
Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
US Weekly Prospects
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

J.P. Morgan US forecast

%q/q, saar %q4/q4 %y/y
1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 2022 2023 2024 2022 2023 2024
Gross domestic product
Real GDP 2.2 2.1 4.9 2.0 1.3 0.5 0.5 0.8 0.7 2.8 0.7 1.9 2.5 1.6
Final sales 4.6 2.1 3.6 2.9 1.4 0.3 0.3 1.0 1.0 3.3 0.7 1.2 2.8 1.6
Domestic 3.8 2.0 3.5 2.9 1.4 0.6 0.6 1.4 0.8 3.0 1.0 1.6 2.2 1.7
Consumer spending 3.8 0.8 3.1 2.4 1.3 0.5 0.6 0.9 1.2 2.5 0.8 2.5 2.2 1.4
Business investment 5.7 7.4 1.4 5.3 2.0 1.9 1.8 2.9 5.6 5.0 2.1 5.2 4.6 2.9
Equipment -4.1 7.7 -4.4 5.0 1.5 1.0 0.8 1.0 5.3 0.9 1.1 5.2 0.1 1.5
Structures 30.3 16.1 11.2 4.0 1.0 1.0 1.0 1.0 0.8 15.0 1.0 -2.1 12.8 3.6
Intellectual property products 3.8 2.7 1.8 6.2 3.0 3.0 3.0 5.5 8.3 3.6 3.6 9.1 4.6 3.6
Residential investment -5.3 -2.2 6.7 5.1 -1.0 -1.5 -1.5 4.0 -17.4 0.9 0.0 -9.0 -10.5 1.1
Government 4.8 3.3 5.8 2.4 1.8 0.3 0.3 1.3 0.8 4.1 0.9 -0.9 3.9 2.0
Net exports ($bn, chained $2017) -935 -928 -931 -936 -943 -963 -987 -1009 - - - - - -
Exports (goods and services) 6.8 -9.3 5.4 1.3 1.0 -0.8 -0.8 0.3 4.3 0.9 -0.1 7.0 2.4 0.3
Imports (goods and services) 1.3 -7.6 4.2 1.6 1.5 1.8 2.2 2.8 2.1 -0.2 2.1 8.6 -1.7 1.5
Inventories (ch $bn, chained $2017) 27.2 14.9 77.8 28.0 22.1 36.1 49.9 34.8 - - - - - -
Contribution to real GDP growth (% pts):
Domestic final sales 3.8 2.1 3.6 3.0 1.5 0.6 0.7 1.4 0.8 3.0 1.0 1.8 2.2 1.7
Net exports 0.6 0.0 0.0 -0.1 -0.1 -0.4 -0.4 -0.4 0.2 0.2 -0.3 -0.4 0.6 -0.1
Inventories -2.2 0.0 1.3 -0.9 -0.1 0.2 0.2 -0.3 -0.3 -0.5 0.0 0.7 -0.4 0.0
Income and profits (NIPA basis)
Adjusted corp profits -9.9 0.9 14.4 3.0 3.0 2.0 1.0 1.0 8.6 1.7 1.7 9.8 0.7 3.6
Real disposable personal income 10.8 3.3 0.3 2.1 3.3 2.1 0.7 1.2 -1.5 4.0 1.8 -6.0 4.2 2.0
Nominal disposable personal income 15.0 5.8 2.9 3.8 5.1 3.7 3.0 3.2 4.4 6.8 3.7 0.5 7.9 4.0
Saving rate1 4.8 5.1 4.2 4.1 4.6 4.9 5.0 5.0 - - - 3.3 4.6 4.9
Prices and labor cost
Consumer price index 3.8 2.7 3.6 2.7 2.1 1.9 2.7 2.4 7.1 3.2 2.3 8.0 4.1 2.5
Core 5.0 4.7 2.8 3.3 3.1 2.8 2.6 2.6 6.0 4.0 2.8 6.1 4.8 3.1
PCE deflator 4.2 2.5 2.6 1.7 1.8 1.6 2.3 2.0 5.9 2.7 1.9 6.5 3.7 2.0
Core 5.0 3.7 2.0 2.0 2.4 2.4 2.4 2.3 5.1 3.2 2.4 5.2 4.1 2.4
GDP chain-type price index 3.9 1.7 3.3 2.5 1.9 2.0 2.5 2.3 6.4 2.9 2.2 7.1 3.7 2.3
S&P/C-S house price index (%oya) 2.2 -0.2 2.5 5.0 3.8 2.5 1.3 0.0 7.5 5.0 0.0 14.8 2.4 1.8
Employment Cost Index 4.7 4.1 4.3 3.5 3.2 3.0 2.7 2.5 5.1 4.2 2.8 4.9 4.5 3.3
Productivity -0.8 3.6 5.2 1.5 1.0 1.0 1.0 1.0 -2.0 2.2 1.0 -1.9 1.3 1.7
Other indicators
Housing starts (mn units, saar)1 1.385 1.450 1.371 1.365 1.350 1.330 1.360 1.380 - - - 1.551 1.393 1.355
Industrial production, mfg. -0.2 0.4 -0.3 -1.7 2.0 0.5 0.4 0.3 0.6 -0.5 0.8 2.7 -0.6 0.3
Light vehicle sales (mn units, saar)1 15.0 15.8 15.6 15.5 15.5 15.6 15.6 15.6 - - - 13.8 15.5 15.6
Unemployment rate1 3.5 3.6 3.7 3.8 3.9 4.0 4.2 4.3 - - - 3.6 3.6 4.1
Payroll employment (ch, '000s, samr)1 312 201 221 165 100 50 30 75 - - - 399 225 64
Nominal GDP 6.3 3.8 8.3 4.6 3.2 2.5 3.0 3.1 7.1 5.7 2.9 9.1 6.2 3.9
Current account balance ($bn)1 -214.5 -216.8 -200.3 -195.7 -200.4 -205.1 -209.9 -214.8 - - - -971.6 -827.3 -830.2
% of GDP -3.2 -3.2 -2.9 -2.8 -2.8 -2.9 -2.9 -3.0 - - - -3.8 -3.0 -2.9
Federal budget balance ($bn)1 - - - - - - - - - - - -1375.0 -1690.0 -1675.0
% of GDP - - - - - - - - - - - -5.3 -6.2 -5.9
1. Entries are average level for the period. Federal balance figures are for fiscal years.

Jan 5 1Q24 2Q24 3Q24 4Q24

Interest rate forecast (end of period)
Fed funds target (top of range) 5.50 5.50 5.25 4.75 4.25
2-yr Treasury 4.39 4.20 3.90 3.50 3.25
5-yr Treasury 4.01 3.80 3.65 3.45 3.35
10-yr Treasury 4.04 3.95 3.80 3.75 3.65
30-yr Treasury 4.20 4.20 4.15 4.15 4.15
Source: J.P. Morgan

14
Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

US Economic Calendar
Monday Tuesday Wednesday Thursday Friday
8 Jan 9 Jan 10 Jan 11 Jan 12 Jan
Consumer credit(3:00pm) NFIB survey(6:00am) Wholesale trade(10:00am) CPI(8:30am) PPI(8:30am)
Nov Dec Nov Dec 0.2% Dec 0.3%
International trade(8:30am) Core 0.26% Core 0.2%
Atlanta Fed President Bostic Nov -$64.5bn Auction 10-year note (r) $37bn Initial claims(8:30am)
speaks(12:00pm) w/e Jan 6 205,000 Minneapolis Fed President
Auction 3-year note $52bn New York Fed President Williams Federal budget(2:00pm) Kashkari speaks(10:00am)
speaks(3:15pm) Dec
Fed Vice Chair for Supervision
Barr speaks(12:00pm) Auction 30-year bond (r) $21bn
Announce 20-year bond (r) $13bn
Announce 10-year TIPS $18bn

15 Jan 16 Jan 17 Jan 18 Jan 19 Jan

Martin Luther King, Jr. Day, Empire State survey(8:30am) Retail sales(8:30am) Housing starts(8:30am) Philadelphia Fed
markets closed Jan Dec Dec manufacturing(8:30am)
Import prices(8:30am) Initial claims(8:30am) Jan
Dec w/e Jan 13 Consumer sentiment(10:00am)
Business leaders Philadelphia Fed Jan prelim
survey(8:30am) survey(8:30am) Existing home sales(10:00am)
Jan Jan Dec
Industrial production(9:15am) TIC data(4:00pm)
Dec Auction 10-year TIPS $18bn Nov
Business inventories(10:00am) Announce 2-year note $60bn
Nov Announce 2-year FRN $28bn
NAHB survey(10:00am) Announce 7-year note $41bn
Jan Announce 5-year note $61bn
Business inventories(10:00am)
Nov
Beige book(2:00pm)

Auction 20-year bond (r) $13bn

22 Jan 23 Jan 24 Jan 25 Jan 26 Jan

Leading indicators(10:00am) Richmond Fed survey(10:00am) Philadelphia Fed Real GDP(8:30am) Personal income(8:30am)
Dec Jan nonmanufacturing(8:30am) 4Q advance Dec
Jan Durable goods(8:30am) Pending home sales(10:00am)
Auction 2-year note $60bn Manufacturing PMI(9:45am) Dec Dec
Jan flash Advance economic
Services PMI(9:45am) indicators(8:30am)
Jan flash Dec
Initial claims(8:30am)
Auction 2-year FRN $28bn w/e Jan 20
Auction 5-year note $61bn New home sales(10:00am)
Dec
KC Fed survey(11:00am)
Jan

Auction 7-year note $41bn

29 Jan 30 Jan 31 Jan 1 Feb 2 Feb

Dallas Fed S&P/Case-Shiller HPI(9:00am) ADP employment(8:15am) Productivity and costs(8:30am) Employment(8:30am)
manufacturing(9:30am) Nov Dec 4Q pre Jan
Jan FHFA HPI(9:00am) Employment cost index(8:30am) Initial claims(8:30am) Factory orders(10:00am)
Nov 4Q w/e Jan 27 Dec
Dallas Fed services(9:30am) Manufacturing PMI(9:45am) Consumer sentiment(10:00am)
Jan Announce 30-year bond $25bn Jan final Jan final
JOLTS(10:00am) Announce 20-year note $42bn ISM manufacturing(10:00am)
Nov Announce 3-year note $54bn Jan
Consumer confidence(10:00am) Construction
Jan FOMC statement (2:00pm) and spending(10:00am)
press conference (2:30pm) Dec
FOMC meeting Light vehicle sales
Jan

Source: Private and public agencies and J.P. Morgan. Further details available upon request.

15
Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
US Weekly Prospects
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

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Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

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17
Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
US Weekly Prospects
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

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18
Michael Feroli (1-212) 834-5523 Murat Tasci (1-212) 622-0288 North America Economic Research
[email protected] [email protected]
JPMORGAN
JPMorgan Chase Bank NA 05 January 2024
Daniel Silver (1-212) 622-6039
[email protected]

"Other Disclosures" last revised January 01, 2024.

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Completed 05 Jan 2024 06:32 PM EST Disseminated 05 Jan 2024 07:01 PM EST

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