The latest data is difficult to change the officials' stance, the game of the Federal Reserve's December decision intensifies.

Before the Federal Reserve's policy meeting on December 9-10, the latest economic data seems unlikely to change the internal disagreements among policymakers. Although the CME FedWatch indicates a clear bias towards dovishness, with an 85% probability of a 25 basis point rate cut at the December meeting, several officials' recent speeches show that there is still intense debate over which is the biggest current risk - inflation or unemployment. Affected by the government shutdown, the data foundation that the Federal Reserve has always relied on has become fragmented in the past few weeks, making judgments based on limited economic information. A batch of delayed data released on Tuesday, while filling in some blanks, did not provide a clear direction. Veronica Clark, economist at Citigroup, said, "Today's data is unlikely to truly influence anyone's views. If anything, they slightly lean towards dovishness." The September final demand Producer Price Index (PPI) rose 0.3% month-on-month, a significant rebound from August's 0.1% decline. However, the core PPI that the Federal Reserve is more concerned about only rose 0.1% that month, lower than the revised 0.3% in August and 0.7% in July. Combining the September PPI and Consumer Price Index (CPI), economists expect the core PCE price index to rise 0.2% month-on-month in September, but there is also a possibility of 0.3%. Regardless, the monthly increase is moderate, but core inflation is still expected to be around 2.8% year-on-year. Stephen Stanley, chief economist at Santander Bank, pointed out, "This data is not worrisome, but it's also not enough to reassure the hawks." Retail sales growth in September was only 0.2% month-on-month, significantly lower than August's 0.6% and below the market's expectation of 0.4%. Mike Reid, economist at the Royal Bank of Canada, noted that sales of the "control group" excluding automobiles, building materials, gasoline, and restaurants declined by 0.1% month-on-month, indicating that lower-income consumers may be starting to struggle. However, due to the strong performance of consumer spending in previous months, even though September was slightly weak, overall consumer spending in the third quarter is still expected to provide robust support for GDP. The Atlanta Fed's GDPNow model estimates that real GDP growth in the third quarter will be 4.2%, while the New York Fed's Nowcast provides a modest growth rate of 2.3%, but still stronger than the trend level. John Ryding, chief economic advisor at Brean Capital, analyzed, "I don't think this data will significantly change the internal debate of the December FOMC. Doves will find reasons in moderate inflation, while hawks will emphasize cost pressures and the overall strong retail performance in the quarter." The most definitive signal from Tuesday's data came from the "labor market differential" indicator in consumer confidence surveys, reflecting the difference between those who believe job opportunities are plentiful and those who find jobs hard to find. The rate of those thinking "jobs are hard to find" decreased slightly from 18.3% in October to 17.9% in November, indicating that the job market has not shown a clear weakening yet. The upcoming release of the Beige Book on Wednesday and ongoing updates of initial jobless claims are most likely to influence the Fed's judgment. Jeff Roach, chief economist at LPL Financial, is particularly concerned about whether companies continue to absorb tariff costs themselves rather than passing them on to consumers. This has helped suppress inflation, and if it continues, it may mean that the current greater economic risk comes from a "weak labor market." Clark also pointed out that if there are more mentions of layoffs in the Beige Book, it will have an impact on some officials. Due to the lack of federal data, some decision-makers will rely more on real-time feedback from businesses in various Fed districts than before. Weekly jobless claims data are also crucial, as this high-frequency data can still be updated during the COVID-19 pandemic. Clark said, "If there is a significant deterioration in the labor market, we will see it here. But for now, there are no red flags." As the December meeting approaches, the internal debates within the Federal Reserve over whether to "cut rates again" or "stand pat" are becoming more intense, and the divergence in expectations between the markets and officials may make this decision the most closely watched one of the year.