October is a highly anticipated month for crypto investors as the crypto market typically shows positive growth during this time. However, in the first week of October, Bitcoin (BTC) failed to break through its moving average (MA), extending its correction phase. What does October have in store for BTC? Explore the analysis below.
The Pintu trading team has gathered critical information and analyzed the general economic situation and the crypto market’s movements over the past week. However, it should be noted that all information in this Market Analysis is intended for educational purposes, not as financial advice.
Personal Consumption Expenditures (PCE) & Core PCE
This week’s macroeconomic analysis begins with a review of the Personal Consumer Expenditure (PCE) data, which represents personal spending in the United States. PCE serves as a broad measure of changes in domestic personal spending. Meanwhile, core PCE is used to assess changes in personal consumption by excluding food and energy components, making it a more stable metric compared to total PCE. The PCE price index, which is derived from the PCE data, is an important method for assessing changes in consumer spending patterns and inflation.
Inflation slowed in August, according to the Core PCE measure that the Fed typically relies on. Some key Core PCE data include:
Personal Income and Spending
In line with the rise in the PCE data, Americans’ personal income and spending both increased by 0.4% in August, in line with market expectations.
The 0.4% increase in personal income and spending, combined with consumers’ increased inflation expectations, may influence the Fed to maintain higher interest rates for an extended period of time.
Meanwhile, data from the Commerce Department’s Bureau of Economic Analysis showed that personal income rose $87.6 billion from the previous month. The Bureau also reported that disposable personal income, which is personal income less personal current taxes, increased by $46.6 billion, or 0.2%.
In addition, the bureau said in a statement that the increase in current dollar personal income in August was mainly due to gains in compensation, personal investment income, rental income, and proprietors’ income. However, these gains were partially offset by a decline in receipts of personal current transfers.
US Goods Trade Balance
In contrast to the increase in personal income, the U.S. goods trade balance posted a 7.3% deficit of $84.3 billion. This decline was influenced in part by lower consumer imports, including items such as the new iPhone.
Census Bureau data showed that the goods trade deficit decreased from $90.9 billion in July. In addition, an initial estimate of wholesale inventories showed a slight decline of 0.1% in August, while initial estimates of retail inventories showed a 1.1% increase in the same month.
Michigan Consumer Sentiment
Despite the trade deficit, survey results show that the University of Michigan’s Consumer Sentiment Index fell only slightly from 69.5 in August to 68.1 in September. These results show relatively stable consumer confidence in the US.
However, there remain various concerns about the future direction of the economy, such as the potential for a federal government shutdown and labor disputes in the auto industry. Consumers have been reluctant to make definitive judgments about whether economic conditions have changed significantly from recent months.
S&P Global Services PMI & ISM Services PMI
From a service sector perspective, the latest Standard & Poor’s (S&P) Global and Institute for Supply Management (ISM) Purchasing Managers’ Index (PMI) surveys indicate that the service sector, which accounts for approximately 80% of U.S. gross domestic product (GDP), is showing signs of weakness.
In September, S&P Global’s Services PMI, a measure of whether activity in the services sector is contracting or expanding, fell to 50.1. A reading below 50 indicates that business activity is contracting.
The most significant change in recent months has been a decline in demand for consumer services, including travel, tourism, and recreation, accompanied by a decline in financial services activity.
This marks the fourth consecutive month of slowing growth in the services sector, a notable decline from the pandemic-era peak of over 70 in May 2021, when the reopening after the COVID-19 shutdown led to a surge in business activity.
A separate survey by the Institute for Supply Management (ISM) showed that the service sector continued to expand for the ninth consecutive month, albeit at a slower pace than in August. The index fell nearly a percentage point from the previous month.
S&P Global Manufacturing PMI & ISM Manufacturing PMI
The S&P Global Manufacturing PMI rose from 47.9 in August to 49.8 in September, although it remains in contraction territory. This improvement follows a low of 46.3 in June. The ISM manufacturing index also rose to 49 from 47.6 last month, beating market expectations of 47.8.
Job Openings and Labor Turnover Survey (JOLTS)
Tuesday’s report from the Labor Department showed an increase in the number of job openings in August. There were 9.6 million job openings in August, up from a revised 8.9 million in July, and the increase was larger than expected.
While the numbers are promising, investors have reacted cautiously to the updated figures. There are concerns that these numbers could be interpreted by the Federal Reserve as an indication that the economy is operating at too fast of a pace, potentially requiring higher interest rates to rein it in.
ADP Employment Change
Private employers added 89,000 jobs in September. Even with this addition, September showed the slowest growth rate since January 2021. This slowdown was driven by large institutions, which lost about 83,000 jobs, erasing gains made in August.
Initial claims for unemployment benefits totaled 207,000 on September 30th, an increase of 2,000 from the previous period. This was below the Dow Jones consensus estimate of 210,000.
Continuing claims were relatively stable at 1.664 million, below the FactSet estimate of 1.68 million. The four-week moving average of claims fell to 208,750, a decrease of 2,500.
Following the release of the jobless claims report, the stock market fell 100 points and Treasury yields rose 3 basis points to a yield of 4.76%. This report comes at a critical time for the economy as the Federal Reserve considers the future of its monetary policy. Central bank officials are concerned that continued tightness in the labor market could put upward pressure on inflation, potentially necessitating additional interest rate hikes.
Last week, BTC was rejected at the 200-day MA at a price of $28K. As a result, BTC corrected back to the $27.5K level that it had previously breached. However, if BTC can break above this resistance line, there’s a strong possibility of a rally towards $30K or even higher.