Economy in Brief

Italian consumer confidence edged lower in December as business confidence in manufacturing notch lower as well. Consumer confidence has slipped for three months in a row. But still has a 67-percentile standing on data back to 1997.

The last 12 Months Consumers rate the overall situation over the last 12-months as slightly weaker, falling on balance over three-months and with a 61.2 percentile standing.

Looking ahead- Over the next 12-months- the overall situation has slipped for three months in a row and is net lower over 12-months as well. The expected overall situation has strengthened but lies only in its 23rd percentile, which is quite weak. Expected unemployment conditions are slightly weaker in December and lower on balance over 3-months and 12-months with a 69.3 percentile standing. Household budgets weakened in December but have strengthened on balance over 3-months and 12-months. The standing for the response is in this 77the percentile robust in the face of deteriorating unemployment prospects.

The household situation for the last 12-months improved in December and had improved over the past 3- and 12-months. With a 68-percentile standing. But, looking ahead over the next 12-months, conditions are slightly weaker in November and December than in October and slightly lower on balance over 12-months. The standing on this metric is in its 13th percentile. As firmly as conditions were viewed for households over the last 12-months there is just as much concern about the future spinning that forward.

The prospect for making major purchases is unchanged month-to-month but weaker on balance over 3-months with a midrange standing in December just above its historic median at its 52.5 percentile.

Italy has had stronger ranking confidence reading than many other EMU members, by may not be losing its advantage as its forward-looking metrics are losing purchase.

Industry climate improves slightly in December while for services the climate situation eroded. But both of the series are in a significant long term down trend from 2021 onward. Between Covid and the Russian invasion of Ukraine, the French economy has been under unrelenting pressure that recently appears to have taken on an even weaker dimension.

Manufacturing Production expectations weakened further in December from November after production expectations weakened in November as well. However, orders and demand show that overall order and foreign orders improved in December compared to November. The price outlook weakened for firms assessing their own pricing prospects but accelerated in evaluating the overall prospects for prices in manufacturing.

In terms of rankings… the rankings on all these categories are substantially below 50, a ranking that marks the historic median for each series. The only exceptions to this are two: foreign orders & demand that have a 68-percentile standing and inventories with a 78-percentile standing. Manufacturing in France is weak and while the industry climate reading moved up in December most components assessing the sector weakened in December.

At today’s meeting of the Federal Open Market Committee, the target range for the Fed funds rate was reduced by 25 basis points to 4.25% to 4.50%. It followed a 25 basis point reduction at the last meeting, and was the third consecutive meeting where rates were reduced from the high range of 5.25%-5.50% in place in mid-September. The decline matched expectations in the Action Economics Forecast Survey.

The statement following the meeting began as it did at the last meeting. “Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated.”

It went on to state, as it did at the last meeting, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”

The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities.

Today’s FOMC statement can be found here.

At today’s meeting the Fed updated its economic projections. The real GDP and Unemployment Rate estimates were little changed at roughly 2.0% (Q4/Q4) and 4.3%, respectively, through 2027. The 2025 PCE Inflation estimate was raised, however, to 2.5% (Q4/Q4) from 2.1%, with it then falling to an unchanged 2.0% estimate in 2027. The Core PCE price estimate was raised to 2.8% (Q4/Q4) from 2.6% for this year, to 2.5% from 2.2% for 2025, to 2.2% from 2.0% in 2026, settling at unchanged projections of 2.0% in 2027.

Interest rate projections also were updated. The Projected appropriate Fed funds rate was left unchanged at 4.4% for the end of 2024, then raised to 3.9% at the end of next year from 3.4%, to 3.4% at the end of 2026 from 2.9%, and to 3.1% at the end of 2027 from 2.9%.