This morning, a fresh parade of economic data marches forth, now less than a week before the next Federal Open Market Committee (FOMC) meeting which will determine an updated policy on interest rates. At first blush, these figures may look worse from a rate-hike standpoint, although pre-market trading does not reflect any trepidation at this point. The Dow had been +125 points ahead of these releases, and is now +165. The S&P 500 climbed slightly from 20 points to 23. The Nasdaq, however, moved from +80 points before the data to +69 now.
The Producer Price Index (PPI) came in hotter on headline for the month of August than analysts had been expecting: +0.7% is 30 basis points (bps) higher than the +0.4% consensus. The last time a monthly PPI headline figure was this high was a year-ago June, when it reached +0.9%. However, strip out volatile food and energy costs, and the core PPI was +0.2% last month, exactly in-line with estimates. Ex-food, energy and trade rose to +0.3% — the highest print since February of 2022.
Final-demand year-over-year August PPI doubled its previous-month post to +1.6% this morning, the hottest print since April, while core PPI came in at +2.2% — 20 bps below the downwardly revised +2.4% for July. Ex-food, energy and trade, we see a +3.0% read, 30 bps ahead of estimates and the previous month, and the highest since the +3.3% we saw in April. Final demand for Goods grew +2% — the highest since June ’22 — and Services were up +0.2%. Again, keep in mind the role high gasoline prices play in this data.
Same goes for Retail Sales in August: +0.6% was higher than the +0.4% expected, and also above the downwardly revised +0.5% for July, but note how much fuel prices added to this headline — subtract autos and gasoline costs, and we’re down to +0.2%. The Control number was +0.1%, though still higher than anticipated. That all of these retail figures are in positive territory while the Fed tries to tame inflation is less than terrific news, although this will likely contribute to pretty solid Q3 GDP numbers when they come out.
Initial Jobless Claims last week reached 220K, basically in-line with estimates, and up from the upwardly revised 217K reported the previous week. Continuing Claims rose to 1.688 million week over week. That said, these weekly jobless claims numbers are completely consistent with an historically robust labor market, which partially checks out in our monthly job gains numbers thus far. Basically, anything under 250-300K new claims per week and 1.8-2.0 million on the longer-term side are positive for domestic employment overall.
In summation: these numbers depict a strong economy, even in the face of higher interest rates for longer. This helps put talk of a pending recession even further away from the stove. However, we expect debate among Fed members next week to pick up regarding whether or not to hike another 25 bps on the Fed funds rate to 5.50-5.75% — a rate we haven’t seen since January 2001. That’s back to when Destiny’s Child was topping the Billboard charts and Ray Lewis was leading the Baltimore Ravens to a Super Bowl victory. Bill Clinton was still president.
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Initial Claims and PPI Numbers Come in Higher
This morning, a fresh parade of economic data marches forth, now less than a week before the next Federal Open Market Committee (FOMC) meeting which will determine an updated policy on interest rates. At first blush, these figures may look worse from a rate-hike standpoint, although pre-market trading does not reflect any trepidation at this point. The Dow had been +125 points ahead of these releases, and is now +165. The S&P 500 climbed slightly from 20 points to 23. The Nasdaq, however, moved from +80 points before the data to +69 now.
The Producer Price Index (PPI) came in hotter on headline for the month of August than analysts had been expecting: +0.7% is 30 basis points (bps) higher than the +0.4% consensus. The last time a monthly PPI headline figure was this high was a year-ago June, when it reached +0.9%. However, strip out volatile food and energy costs, and the core PPI was +0.2% last month, exactly in-line with estimates. Ex-food, energy and trade rose to +0.3% — the highest print since February of 2022.
Final-demand year-over-year August PPI doubled its previous-month post to +1.6% this morning, the hottest print since April, while core PPI came in at +2.2% — 20 bps below the downwardly revised +2.4% for July. Ex-food, energy and trade, we see a +3.0% read, 30 bps ahead of estimates and the previous month, and the highest since the +3.3% we saw in April. Final demand for Goods grew +2% — the highest since June ’22 — and Services were up +0.2%. Again, keep in mind the role high gasoline prices play in this data.
Same goes for Retail Sales in August: +0.6% was higher than the +0.4% expected, and also above the downwardly revised +0.5% for July, but note how much fuel prices added to this headline — subtract autos and gasoline costs, and we’re down to +0.2%. The Control number was +0.1%, though still higher than anticipated. That all of these retail figures are in positive territory while the Fed tries to tame inflation is less than terrific news, although this will likely contribute to pretty solid Q3 GDP numbers when they come out.
Initial Jobless Claims last week reached 220K, basically in-line with estimates, and up from the upwardly revised 217K reported the previous week. Continuing Claims rose to 1.688 million week over week. That said, these weekly jobless claims numbers are completely consistent with an historically robust labor market, which partially checks out in our monthly job gains numbers thus far. Basically, anything under 250-300K new claims per week and 1.8-2.0 million on the longer-term side are positive for domestic employment overall.
In summation: these numbers depict a strong economy, even in the face of higher interest rates for longer. This helps put talk of a pending recession even further away from the stove. However, we expect debate among Fed members next week to pick up regarding whether or not to hike another 25 bps on the Fed funds rate to 5.50-5.75% — a rate we haven’t seen since January 2001. That’s back to when Destiny’s Child was topping the Billboard charts and Ray Lewis was leading the Baltimore Ravens to a Super Bowl victory. Bill Clinton was still president.