Durable Goods
The January Durable Goods report showed signs of softness in business investment. Headline Durable Goods Orders were flat for the month, coming in weaker than the 1.2% increase that was expected.
Core Durable Goods Orders, which exclude defense spending and aircraft and provide a clearer picture of underlying business demand, were also flat. This was below expectations for a 0.5% increase.
Perhaps more important for economic growth, Core Capital Goods Shipments — the component that feeds directly into GDP — declined by 0.1%, well below estimates of a 0.4% increase. This weakness could contribute to further downward revisions in GDP growth from the investment side of the economy.
Personal Consumption Expenditures (PCE)
The Fed’s preferred inflation gauge, Personal Consumption Expenditures (PCE), was released for January and came in largely in line with expectations.
Headline PCE rose 0.3% for the month, while Core PCE increased 0.4%. On a year-over-year basis, Headline inflation declined from 2.9% to 2.8%, which was slightly cooler than expectations. Core PCE, which strips out food and energy, rose from 3.0% to 3.1%, as expected.
Healthcare costs were a notable contributor, rising 0.6% in January and accounting for roughly 0.12% of the monthly increase. This type of increase is fairly typical at the start of the year and made up about one-third of the total monthly rise.
Shelter costs also played a role, increasing 0.23% for the month and 3.21% year over year. While the annual reading continues to somewhat overstate current inflation trends, the monthly increase remained well contained.
Looking ahead, the inflation comparison for February becomes easier because the February 2025 reading being replaced was relatively high at 0.45%. However, progress after that point may become more challenging, particularly with oil prices rising in March.
Markets largely looked past this report, likely because it reflects January data. More recent information from the February CPI report showed Core inflation trending closer to 2.5%, and the recent surge in oil prices could have a meaningful impact on future inflation readings.
JOLTS (Job Openings and Labor Turnover Survey)
The latest JOLTS report from the Bureau of Labor Statistics showed job openings totaling 6.95 million, stronger than expectations of 6.7 million and an increase from the previous reading of 6.5 million.
While the headline number was stronger than expected, job openings remain relatively low historically and there are currently more unemployed workers than available job openings — a sign that the labor market continues to cool.
The hiring rate held steady at 3.3%, remaining near the lowest levels seen since 2013 when excluding the pandemic period. This suggests employers remain cautious about adding new workers.
The quits rate, which reflects worker confidence in finding new employment, also held steady at 2%. This remains near some of the lowest levels since 2014 when excluding Covid-era distortions and further indicates a more cautious labor market environment.