🇺🇸🔺U.S. Macro Sentiment Jumps The Most Since May: Cable FX Macro

• Last week, we received a decent batch of U.S. data, the releases mostly topped economists' expectations sending the macro sentiment gauge to near YTD highs, this was the biggest jump seen since May. The U.S. macroeconomic sentiment is calculated by Citi's Economic Surprise Index.

• The U.S. economic docket recently featured a variety of significant indicators that provide a comprehensive view of the current economic landscape. Among these key data points were durable goods orders, core Personal Consumption Expenditures (PCE), S&P Global Purchasing Managers' Index (PMIs), the Conference Board's consumer sentiment index, and revisions to Gross Domestic Product (GDP) figures.

• Durable goods orders, which measure new orders placed with manufacturers for delivery of hard goods, serve as a vital indicator of economic health. A rise in these orders typically suggests that businesses are investing in equipment and machinery, anticipating future demand. Recent reports indicated fluctuations in durable goods orders, reflecting the ongoing adjustments in supply chains and consumer behavior as the economy continues to recover from the impacts of the pandemic.

• The core Personal Consumption Expenditures price index, which excludes food and energy prices, is a critical measure of inflation that the Federal Reserve closely monitors. Recent data revealed changes in consumer spending patterns, which are crucial for understanding inflationary pressures. An increase in core PCE can signal rising costs for consumers, potentially influencing monetary policy decisions moving forward.

• The S&P Global PMIs provide insights into the health of the manufacturing and services sectors. These indices gauge the economic activity levels and sentiment among purchasing managers, offering a forward-looking perspective on economic trends. Recent PMIs have indicated varying degrees of expansion and contraction within these sectors, reflecting the complexities of the supply chain and labor market dynamics.

• The Conference Board's consumer sentiment index measures how optimistic or pessimistic consumers are regarding their financial situation and the overall economic outlook. Recent readings have shown a notable shift in consumer confidence, influenced by factors such as inflation rates, employment statistics, and geopolitical events. A higher consumer sentiment index typically correlates with increased consumer spending, which is a key driver of economic growth.

• The revisions to GDP figures are particularly noteworthy, as they provide a clearer picture of economic performance. The latest revision showed a growth rate of +3.8%, significantly surpassing initial expectations of 3.2%. This upward revision highlights the robustness of the economy during the second quarter, primarily driven by strong consumer spending and robust exports. The increase in GDP reflects not only the resilience of the American consumer but also the effectiveness of export strategies in a global market that continues to evolve.

• In summary, the recent U.S. economic indicators paint a picture of a recovering economy, characterized by strong consumer spending, resilient exports, and inflationary pressures as measured by core PCE. The combination of durable goods orders, PMIs, consumer sentiment, and GDP revisions provides a multifaceted understanding of the current economic environment and suggests potential trends for the future.

• These releases indicate that Q3 GDP is tracking around 2.2% according to the Atlanta Fed GDPNow update on September 26. This is a slowdown from the strong pace in Q2 but still avoids a contraction. The upcoming labor market data, which has been delayed due to the shutdown, will be crucial. In the meantime, private indicators like ADP payrolls, estimated at +150K for September, might help fill in the gaps.