This morning’s Consumer Price Index (CPI) report for the month of August was the big highlight among economic prints for this week. Not that they had an outsized bearing on the flat market results of the following session — they were flat overall: the Dow -0.20%, the S&P 500 +0.13%, the Nasdaq +0.29% and the small-cap Russell 2000 -0.37% — or perhaps they did. Maybe the market is less sure than ever whether the Fed will really stay pat on interest rates a week from now, as has been expected.
We touched on the headline and core CPI numbers when they came out, and even though they were a little warmer than we’d have preferred on a month-over-month basis, on core CPI this was the lowest read in almost two years. That must count for something. These 22-year high interest rate levels are having a pronounced effect over time, and this is preferred to turbulent swings of boom and bust that we might see with a less-measured Fed at the helm of monetary policy. It is for this reason the “hold” at 5.25-5.50% a week from today remains the most likely outcome of the next Fed meeting.
But what happens after that? What if near-term inflation metrics refuse to meaningful continue their downward slope — or in the case of today’s CPI, actually tick up on core month-over-month consumer prices? Certainly the Fed can’t ignore such things, especially considering folks like Fed Chair Powell have been ardent students of how we saw inflation behave in the 1970s and early 80s, when, like a house fire not completely snuffed out, came back raging harder than ever once efforts to tamp it down ended. That’s the current concern.
But in terms of the breakdown of actual August CPI, we saw plenty of places where things are thankfully cooling off: airfares (-13.3%), TV sets (-10.1%), other major appliances (-8.3%) and used cars (-6.6%). Even as we saw unexpected jumps in relatively random things like auto insurance (+19.1%) and frozen vegetables (+14.7%), these don’t appear to be much of a recipe for dangerously high inflation about to rekindle. Of course, no one can foresee dramatic global events — and the U.S. still looks like it’s got a better handle on inflation than almost anywhere else in the world — but nothing in this vast breakdown of inflation seems to point to a particular troubling area.
Tomorrow morning, the sister report to CPI — the Producer Price Index (PPI) — for August comes out. As with the CPI, expectations are for slight upticks but overall flat, especially on core (minus food and energy) year over year. This July print, which came in at the same level as June, is already the lowest we’ve seen since early in 2021, and well off the frighteningly high 9%+ core PPI we were looking at in the early part of last year. Also, Weekly Jobless Claims data will determine if we’re still existing in an uncommonly stout labor market.
Questions or comments about this article and/or author? Click here>>
Image: Bigstock
Markets Flatten Post-CPI Report; PPI, Jobless Claims Thursday
This morning’s Consumer Price Index (CPI) report for the month of August was the big highlight among economic prints for this week. Not that they had an outsized bearing on the flat market results of the following session — they were flat overall: the Dow -0.20%, the S&P 500 +0.13%, the Nasdaq +0.29% and the small-cap Russell 2000 -0.37% — or perhaps they did. Maybe the market is less sure than ever whether the Fed will really stay pat on interest rates a week from now, as has been expected.
We touched on the headline and core CPI numbers when they came out, and even though they were a little warmer than we’d have preferred on a month-over-month basis, on core CPI this was the lowest read in almost two years. That must count for something. These 22-year high interest rate levels are having a pronounced effect over time, and this is preferred to turbulent swings of boom and bust that we might see with a less-measured Fed at the helm of monetary policy. It is for this reason the “hold” at 5.25-5.50% a week from today remains the most likely outcome of the next Fed meeting.
But what happens after that? What if near-term inflation metrics refuse to meaningful continue their downward slope — or in the case of today’s CPI, actually tick up on core month-over-month consumer prices? Certainly the Fed can’t ignore such things, especially considering folks like Fed Chair Powell have been ardent students of how we saw inflation behave in the 1970s and early 80s, when, like a house fire not completely snuffed out, came back raging harder than ever once efforts to tamp it down ended. That’s the current concern.
But in terms of the breakdown of actual August CPI, we saw plenty of places where things are thankfully cooling off: airfares (-13.3%), TV sets (-10.1%), other major appliances (-8.3%) and used cars (-6.6%). Even as we saw unexpected jumps in relatively random things like auto insurance (+19.1%) and frozen vegetables (+14.7%), these don’t appear to be much of a recipe for dangerously high inflation about to rekindle. Of course, no one can foresee dramatic global events — and the U.S. still looks like it’s got a better handle on inflation than almost anywhere else in the world — but nothing in this vast breakdown of inflation seems to point to a particular troubling area.
Tomorrow morning, the sister report to CPI — the Producer Price Index (PPI) — for August comes out. As with the CPI, expectations are for slight upticks but overall flat, especially on core (minus food and energy) year over year. This July print, which came in at the same level as June, is already the lowest we’ve seen since early in 2021, and well off the frighteningly high 9%+ core PPI we were looking at in the early part of last year. Also, Weekly Jobless Claims data will determine if we’re still existing in an uncommonly stout labor market.
Questions or comments about this article and/or author? Click here>>