PCE Inflation Data Offers Encouraging Signs
The latest inflation report showed that both headline and core PCE rose 0.2 percent for October and November, keeping the annual inflation rate at 2.8 percent. The Federal Reserve remains focused on balancing sustained inflation pressures with signs of labor market cooling. Softer monthly inflation readings late in 2025 may help speed progress toward the Fed’s 2 percent target as earlier elevated readings fall off the yearly average.
Pending Home Sales Slide
Housing activity slowed in December, with pending home sales falling 9.3 percent after four months of gains. Signed contracts were also down 3 percent from a year earlier. Holiday travel, winter weather, and historically low inventory—just 1.18 million homes nationwide—likely played major roles in the December pullback. Limited choices continue to discourage many buyers from signing contracts.
Q3 GDP Surges to Fastest Pace Since 2023
Economic growth remains strong. The final estimate for third quarter 2025 GDP showed a 4.4 percent annualized increase, marking the fastest pace since 2023. Consumer spending, boosted in part by electric vehicle purchases ahead of expiring tax incentives, played a major role. Stronger exports, increased government spending, and a decline in imports also contributed to the solid growth.
Claims Data Reflect Low Layoffs, Low Hiring, and the Gig Economy
Labor market data continues to reflect low levels of layoffs. Initial unemployment claims ticked up slightly to 200,000 but remain historically low, while continuing claims fell to 1.849 million. The rise of contract and gig‑based work continues influencing unemployment trends, as some displaced workers choose flexible work instead of filing for benefits. Elevated continuing claims indicate that some job seekers may be taking longer to secure new positions.
Happening This Week
This week, the Federal Reserve begins its two‑day policy meeting, with a rate decision and press conference scheduled for Wednesday. Upcoming data includes new home price reports from Case‑Shiller and the FHFA, the weekly jobless claims report, and the December Producer Price Index, offering insights into wholesale inflation.
Technical Picture
In financial markets, mortgage bonds ended last week testing support at the 25‑day moving average, with potential room for upward movement if support holds. The 10‑year Treasury yield remains below its 200‑day moving average, suggesting room for further improvement toward the 4.20 percent support level.
I love to continue the dialogue. Please feel free to call me anytime.
Contact Michael Nelson
Efficient Lending, Inc.
Direct: (720) 419‑3016 or @mike_lending
Email: mike@efficientlending.net
Website: https://efficientlending.net/
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