Year-End Watch - Calm Waters Mask Underlying Friction

The week in the United States was marked by a series of economic data that showed mixed signals about the pulse of the economy. The University of Michigan Consumer Sentiment Index was revised downward in December to 52.9 points, reflecting a deterioration in both perceptions of current conditions and expectations. At the same time, one-year inflation expectations were adjusted slightly upward to 4.2%, although they remain close to the lowest levels of the last year, while the five-year horizon stabilized at 3.2%, reinforcing the idea of gradual, albeit still incomplete, disinflation. In the real estate sector, existing home sales surprised on the upside, reaching an annualized rate of 4.13 million units in November, the highest level in nine months and the third consecutive monthly increase. The improvement was associated with a moderation in mortgage rates in the fall, although supply growth began to show signs of stagnation.

Prices, while still rising, grew only 1.2% year-on-year, one of the weakest advances since mid-2023. At the same time, labor and activity data delayed by the government shutdown were released, showing a drop in employment in October, largely explained by the voluntary departure of federal employees, followed by a partial recovery in November. The unemployment rate rose to 4.6%, its highest level in four years, although excluding the effect of the public sector, the labor market remains relatively stable. October retail sales were flat overall, but the key component for GDP grew strongly, while November inflation figures, which showed a marked slowdown, were received with caution due to possible methodological distortions.

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