Financial markets reacted in a zig-zag pattern to this week's economic data ahead of the next FOMC meeting. Price pressure is still not showing the sustained slowdown the Fed needs before it takes its foot off the throttle of tighter policy. At the same time, consumer goods spending and manufacturing activity are slowing, but not yet to a worrying degree consistent with contraction, and not enough to aid in bringing inflation lower. This week's data have thus further confirmed our view that the FOMC will press ahead with another 75 bp rate hike at its meeting next week. For more detail on our expectations for its meeting, please see our Domestic Outlook and Interest Rate Watch sections.
Wednesday's release of the August Consumer Price Index received the most market attention, in part because it came in hotter than the consensus estimate but also because the underlying details were a bit disappointing. Consumer prices rose 0.1% last month, while the consensus Bloomberg estimate had been looking for an equivalent 0.1% decline. This price gain still helped lower the year-over-year rate of price growth to 8.3%, which is a welcome but insufficient step in relieving excruciatingly high inflation for Americans.
The 0.6% gain in core inflation (excluding food and energy), which was more than double the consensus expectation, demonstrates that price pressure remains widespread across the economy. Core goods inflation specifically remained strong (+0.5%) despite indications that supply chains are functioning more smoothly, inventory stockpiles are building and goods spending is gradually slowing. Goods prices thus did not provide the needed offset to higher core services inflation, which saw a 0.6% rise due in part to stronger shelter inflation. Over the past three months, the core CPI has advanced at a 6.5% annualized pace, more than triple the Fed's 2% target (chart). A sustained return to 2% inflation remains even more distant at present, and the price data suggest more has to be done to rein in this stubbornly high level of inflation.
This Week's State Of The Economy - What Is Ahead? - 06 December 2019
Wells Fargo Economics & Financial Report / Dec 07, 2019
The latest hiring data are an encouraging sign that the U.S. economy is withstanding the global slowdown and continued trade-related uncertainty.
This Week's State Of The Economy - What Is Ahead? - 12 August 2022
Wells Fargo Economics & Financial Report / Aug 13, 2022
The FOMC has made it clear that it needs to see inflation slowing on a sustained basis before pivoting from its current stance. The data seems to be going in multiple directions all at once.
This Week's State Of The Economy - What Is Ahead? - 15 January 2021
Wells Fargo Economics & Financial Report / Jan 18, 2021
Retail sales fell 0.7% in December, the third straight monthly decline. Sales are still up 2.9% over the year, however.
This Week's State Of The Economy - What Is Ahead? - 19 May 2023
Wells Fargo Economics & Financial Report / May 23, 2023
Economic data continue to suggest the U.S. economy is only gradually losing momentum. Consumers continue to spend, and industrial and housing activity are seeing some stabilization.
This Week's State Of The Economy - What Is Ahead? - 09 September 2022
Wells Fargo Economics & Financial Report / Sep 10, 2022
The ISM services index came in stronger than expected, and the underlying details pointed to service sector resilience with business activity and new orders notching their highest reading this year.
This Week's State Of The Economy - What Is Ahead? - 22 July 2022
Wells Fargo Economics & Financial Report / Jul 27, 2022
July\'s NAHB Housing Market Index dropped 12 points to 55, the second largest monthly decline on record behind April 2020\'s pandemic-induced collapse.
This Week's State Of The Economy - What Is Ahead? - 27 November 2019
Wells Fargo Economics & Financial Report / Nov 28, 2019
A series of U.K. general election polls released this week continue to show Boris Johnson’s Conservative Party with a significant lead over the opposition Labor Party.
This Week's State Of The Economy - What Is Ahead? - 11 February 2022
Wells Fargo Economics & Financial Report / Feb 14, 2022
Deep thought for the week, if a tree falls in the forest, or an Olympics occurs, and no one is there to hear it or see it, did it really occur?
This Week's State Of The Economy - What Is Ahead? - 17 February 2023
Wells Fargo Economics & Financial Report / Feb 20, 2023
Inflation in the U.K. receded for the third straight month in January, with the headline rate coming in at 10.1% year-over-year. In bad news, this is still five times the Bank of England\'s 2% target.
This Week's State Of The Economy - What Is Ahead? - 21 February 2020
Wells Fargo Economics & Financial Report / Feb 22, 2020
Minutes from the January 28-29 FOMC meeting indicate the coronavirus will not push the Fed to cut interest rates, and for the most part housing and manufacturing survey data this week supported that view.
