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A Surprisingly Strong December Jobs Report Puts Focus on Inflation


A surprisingly strong December jobs report was published on Friday, capturing attention with its notable uptick in wage growth. As we enter the new year, this report keeps the spotlight on inflation as a key concern.

The December Consumer Price Index (CPI)

Thursday, 8:30 a.m. Eastern

One important indicator to watch this week is the December Consumer Price Index (CPI), which will provide valuable insights for Wall Street and help evaluate whether inflation is still on a downward trajectory or potentially stabilizing near 3%. This upcoming CPI release is the highlight of next week’s economic calendar.

Before this report, investors were anticipating a potential interest rate cut by the Federal Reserve as early as March. However, the recent jobs report has caused them to hold their position, according to the CME’s FedWatch tool.

Forecasted CPI Numbers

The forecast for December’s CPI suggests a 0.2% increase. This also applies to the closely monitored core rate, which excludes food and energy prices.

While this increase may not be significant, it could impede some of the progress made in addressing inflation concerns. In fact, the annual increase in prices could rise from 3.1% to 3.3%.

On the other hand, the core rate might experience a slight slowdown, potentially decreasing from 4% to 3.8%. This particular figure is likely to attract more attention from Wall Street since it serves as a better predictor of future inflation trends.

In summary, we can expect a status quo report this time.

Federal Budget Deficit

Thursday, 2 p.m. Eastern

Another noteworthy event on Thursday is the release of the federal budget deficit analysis.

The Nation’s Growing Debt

The nation’s debt has reached a staggering milestone, surpassing $34 trillion for the first time. Unfortunately, this debt shows no signs of shrinking.

Increasing Monthly Budget Deficit

In December alone, the monthly budget deficit is expected to reach around $62.5 billion. This further contributes to the mounting debt burden.

Persistent Deficit Projections

Looking forward, the total deficit for fiscal year 2024 is predicted to exceed last year’s $1.7 trillion shortfall. Clearly, the deficit continues to grow and become a pressing issue.

Deficit Negotiations and Government Shutdown Concerns

The widening deficits have sparked contentious negotiations between the Biden White House and Republican negotiators. Both sides are striving to reach an agreement on spending for the remainder of the fiscal year, while the looming threat of a government shutdown adds additional pressure.

Insights into Wholesale Inflation

At 2 p.m. Eastern on Friday, important data on inflation will be released: the Producer Price Index (PPI). This index offers a glimpse into inflation trends at the wholesale level before they impact consumers directly.

Signs of Less Inflation in the Economy

Notably, the PPI experienced a significant slowdown in 2023, with three negative months recorded. This indicates a reduction in inflationary pressures within the economy.

Forecasted Increase in Wholesale Inflation

For December, there is an anticipated 0.2% increase in both the headline and core rate of wholesale inflation, as projected by experts.

Comparing Wholesale Inflation Over Time

Considering the entire year, core wholesale inflation is expected to rise slightly over 2%. This contrasts with the notable 4.7% advancement seen in 2022.

These insights shed light on the current state of the economy and its potential impact on consumers.

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