Trend watch
The impact from the recent hurricanes continues to ripple through the activity-based data (slides 5 and 6). However, it’s causing distortions in both directions. As we expected, hotel rates are jostling. Occupancy jumped to 70.3% last week, matching the highest October reading since 2022, which is also the highest level for October going back to 2019. It was led by Atlanta at 77.5%, presumably by people impacted by Milton (and likely due to Milton-related airline cancellations).
Additionally, air passenger counts soared 6.7% week over week and topping 18.1 million for the prior 7 days. That’s the highest 7-day reading after Labor Day ever.
What’s new this week
- Retail sales ding another fresh all-time high despite drop in gasoline sales (slide 7).
- Monthly and annual pace of rents now running below pre-COVID trend (slide 8).
- New housing activity: single-family improving, while multi-family dropping (slide 9).
- Remodeling trends in third quarter cooling near pre-COVID levels (slide 10).
- Industrial production hampered by automotive, aerospace, and weather (slide 11).
- Early in-person voting offered to 91% of U.S. voters, many already started (slide 12).
Our take
Seemingly every client event or meeting this year has involved at least some questions regarding the upcoming elections. Indeed, the elections are important and impact many facets of the economy, including trade, taxes, tariffs, regulations, fiscal spending, and immigration.
Yet, as we highlight on slide 12, the elections are no longer “upcoming” for many voters – it’s happening now. Based on early indications, this will be a record election in terms of the number of votes. However, we must wait another three more weeks for the tabulation of votes to begin and perhaps longer to find out the outcome.
To say the elections are a distraction could be the understatement of the year. It is certainly reflected in the sour consumer sentiment readings that have persisted for much of 2024.
Meanwhile, most of the recent incoming economic data continues to firm. Consumer-related data remains particularly solid as evidenced by September retail sales along with largely solid third quarter earnings being reported to start earnings season.
In fact, the consensus now expects 2.1% annualized growth for third quarter gross domestic product (GDP), which is up from 1.5% in mid August. Meanwhile, the GDPNow Tracker from the Atlanta Fed – which is based strictly on incoming data – projects 3.4% for the third quarter.
That said, we expect that Hurricanes Helene and Milton will distort more of the economic data for October, November, and December. While its counterintuitive, natural disasters are typically additive for economic growth, although the cleanup and rebuilding tends to be spread out over months and several quarters.
The two exceptions to the solid growth narrative continue to be housing and manufacturing. Here, too, weather will likely negatively impact each in the coming months. But both have been impaired for roughly the past two years – during which the U.S. economy has persevered, growing a bit above 2.5% per year.
Accordingly, given that resilience and now coupled with lower interest rates (which are likely heading even lower), we remain rather sanguine about the ability of the U.S. economy to continue to power through the distractions and uncertainty heading into 2025.
Bottom line
The U.S. economy remains resilient, albeit with uneven growth. It’s certainly not weak, especially when compared to pre-pandemic figures. While the Federal Reserve has begun lowering interest rates to support economic growth, the process of normalizing rates has just started and will take time to unfold.
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