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? - 02 July 2020
Wells Fargo Economics & Financial Report / Jul 04, 2020
It was a mildly busy week for foreign economic data and events, while global COVID-19 cases continued to rise.
This Week's State Of The Economy - What Is Ahead? - 27 January 2023
Wells Fargo Economics & Financial Report / Jan 28, 2023
Real GDP expanded at a 2.9% annualized pace in Q4. While beating expectations, the underlying details were not as encouraging. Moreover, the weakening monthly indicator performances to end the year suggest the decelerating trend will continue in Q1.
This Week's State Of The Economy - What Is Ahead? - 15 December 2023
Wells Fargo Economics & Financial Report / Dec 21, 2023
core CPI remained elevated in November at a 4.0% annual rate, a string of slower monthly prints suggests that disinflation has more room to run.
This Week's State Of The Economy - What Is Ahead? - 18 October 2019
Wells Fargo Economics & Financial Report / Oct 19, 2019
Personal consumption is still on track for a solid Q3, but retail sales declined in September for the first time in seven months.
This Week's State Of The Economy - What Is Ahead? - 19 June 2020
Wells Fargo Economics & Financial Report / Jun 22, 2020
Retail sales kicked off the week with a bang, rising 17.7% month-over-month in May. The increase was larger than every single one of the 74 forecast submissions.
This Week's State Of The Economy - What Is Ahead? - 16 April 2021
Wells Fargo Economics & Financial Report / Apr 17, 2021
Data released this week continue to show that the economic recovery has gained momentum in March. The much anticipated consumer boom has arrived.
This Week's State Of The Economy - What Is Ahead? - 13 August 2021
Wells Fargo Economics & Financial Report / Aug 19, 2021
The general outlook remains positive as households have accumulated over $2T in excess savings on their balance sheets and net worth has risen across all income groups.
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? - 04 December 2020
Wells Fargo Economics & Financial Report / Dec 09, 2020
Manufacturing held up relatively well in November, despite a larger-than-expected dip in the ISM manufacturing survey. The nonfarm manufacturing survey rose slightly.
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.