A veritable smorgasbord of economic data crosses the tape ahead of the last trading day of this week. All of it will be grist for the mill when the Fed reconvenes next week to decide on interest rate policy (hint: it’s going up). What today’s data will more likely inform are the forward projections the Fed makes in the statements the body makes, such as how likely will it be the Fed goes back for another quarter-point rate hike in December, and perhaps even March of next year?
First up is Retail Sales, which in August came in a bit deflated from expectations: +0.1% on the advanced headline is a full 30 basis points below what analysts were expecting. Subtract auto sales and the number jumps to +0.3%, still down from the 0.5% expected. Minus autos and gas, that number dips to +0.2%. Control was also +0.1%.
Yet consider July’s revisions — up to 0.7% on the headline, with the Control number moving strongly from +0.5% to +0.8% for the month. This represents a pretty clear illustration that consumers bought lots more in July but tapered off their spending last month. Thus, we might consider Retail Sales over the last two months a wash — still heading upward steadily when we smooth out the numbers. Likely not much of an effect on Fed members’ decision-making next week.
Import Prices for August were also much weaker than expected: -0.6% from the -0.2% expected. Ex-petrol we see -0.2%, meaning oil & gas imports made up the biggest chunk of this deficit. Year over year, these numbers are also way down: the +3.7% versus +4.9% in the previous read. Export Prices dropped -0.1% for the month, sinking the year-over-year number from +4.3% last read to +3.6% this morning.
Big-ticket items, like motor vehicles, furniture, etc. look to have been hit the hardest for the month. But perhaps due to greater-than-expected spending in July, the pent-up demand in August was far lower than estimated. In any case, today’s Import/Export numbers do not indicate an economy on fire — which may help sway Fed participants to cool their jets on making too many interest rate hikes too soon.
We also see new August Industrial Production figures ahead of today’s opening bell, and these numbers were better than expected: +0.4% on the headline beat estimates by 10 basis points, following a revision to July from +0.1% to _+0.3%. This indicates strong Goods numbers, which is a sector that has definitely picked up slack over the course of the “Trump economy.”
Capacity Utilization for August — sort of a barometer for goods productivity — improved from the consensus estimate to 78.4% from 78.2% expected. The July headline bumped down a bit, from 78.1% last read to 77.9% this time around. Still not much to sound the alarm bells at the Federal Reserve going into next week.