The end-January release of the Employment Cost Index (ECI) for 4Q was quite good news for the sustainability of the inflation moderation we saw over the second half of 2023. The ECI dropped to an annualized rate of 3.5%—the lowest rate since 2Q of 2021, which extends a move down from a high of 5.5% in 1Q of 2022. Similarly, wage growth subindexes in regional Purchasing Managers’ Indexes (PMIs) from across the Federal Reserve (Fed) system have continued to broadly move lower, and forward-looking ones point to further moderation. However, the more timely but also more noisy average hourly earnings (AHE) have shown a pickup into 2024, jumping to over 5% on a 3-month annualized basis.

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This commentary is the opinion of Newfleet Asset Management. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.

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