US Economics_ Inflation Weekly – Wage pressures returning to normal

Summary of the Conference Call Industry Overview - The report focuses on the US Economics sector, particularly analyzing inflation trends and wage pressures as of November 4, 2024 [3][10][29]. Key Points and Arguments 1. Core PCE Inflation Trends: - Core PCE inflation increased by 0.25% MoM in September, slightly above the expected 0.21% [3][17]. - The annualized increase for Q3 was 2.16% QoQ, indicating a trend towards target inflation levels [3][17]. 2. Wage Pressure Dynamics: - The employment cost index rose by 3.2% annualized in Q3, aligning closely with pre-pandemic wage growth levels [15][17]. - There is a noted easing in wage pressures due to a loosening labor market, which is expected to contribute to inflation stabilizing around 2% [14][19]. 3. Sector-Specific Insights: - Medical services are highlighted as a sector with potential upward price pressures, particularly in October and January, due to historical trends [12][19]. - Financial services prices are anticipated to rise in October, influenced by higher asset prices [12][19]. 4. Inflation Forecasts: - The report projects core PCE inflation to average close to 2% in the coming quarters, despite some month-to-month volatility [12][14]. - Year-end forecasts for core PCE inflation have been slightly revised upwards to 2.8% from 2.7% [17]. 5. Long-term Inflation Risks: - There are concerns about long-term inflation running above 2%, particularly due to persistent wage pressures in the health services sector [19][39]. 6. Market Expectations: - Inflation expectations have moderated, with firms indicating a reduced likelihood of raising prices compared to previous periods [32][39]. Additional Important Content - The report includes detailed inflation forecasts for various metrics, including Headline CPI and Core CPI, projecting a gradual decline in inflation rates over the next few quarters [23][40]. - The analysis emphasizes the importance of core services prices as a key driver of headline inflation, with shelter costs still contributing significantly but showing signs of slowing [26][39]. - The report also discusses the implications of wage growth trends, noting that while average hourly earnings have seen increases, the overall wage pressures are easing, particularly in lower-paid sectors [17][27]. This summary encapsulates the critical insights from the conference call, providing a comprehensive overview of the current economic landscape and inflationary trends as analyzed by Citi Research.