Month-In-Review: August 2024

It’s official: According to Chairman Jerome Powell, the time for rate cuts is upon us. Speaking at the annual Jackson Hole symposium, in the aftermath of cooler employment data, including a slowdown in both job openings and topline hiring along with an uptick in the unemployment rate from 4.1% to 4.3% in July, Powell noted, “The time has come for policy to adjust.” While inflation remains stubbornly sticky and still above the Committee’s target, the further gradual improvement in both the CPI and PPI, coupled with no further upward momentum in the PCE, has seemingly offered policy makers the needed confidence that price stability is within reach as the risks to achieving its employment and inflation goals “continue to move into better balance.” 

 Absent a commitment to the specific size and pace of subsequent rate cuts, investors anticipate a rapid reduction back towards neutral (and perhaps below) sooner than later with at least 100bps in cuts by year-end. However, with conditions characterized as cooling as opposed to indicating outright weakness, many policy makers have called for a controlled and tempered pace of reductions, potentially falling short of market forecasts.  

Market Activity and Commodities

·       Equities – Stocks ended higher in August after finishing mixed in July. Beginning at 5,522.30, the S&P 500 rose 2.2% in August, closing at 5,645.59, notching its fourth straight monthly gain. The Dow, meanwhile, climbed nearly 1.8%, increasing from 40,842.79 to 41,563.08, closing out the month at an all-time high. The Nasdaq advanced 0.7% in August, closing at 17,713.63. Since the start of the year, the S&P 500 is up 18%, the Nasdaq gained 18% and the Dow rose 10%.

·       Treasuries – Treasury yields declined in August after falling in July. The 2-year Treasury yield closed out August at 3.92%, down 34bps since July’s close. The 10-year Treasury yield, meanwhile, dropped 12bps from 4.03% to 3.91% in August.

·       Commodities      

o   (Aug 26) – Oil prices climbed following heightened tensions in the Middle East after Israel launched a series of airstrikes in Lebanon, as well as a halt in Libyan oil production following a dispute regarding the leadership of Libya’s central bank. WTI rose more than 3% to settle at $77.42 a barrel, while Brent rose almost 3% to close at $81.43 a barrel. 

National Growth and Outlook

• NFIB Small Business Optimism (Aug 13) – The NFIB Small Business Optimism Index unexpectedly rose from 91.5 to a reading of 93.7 in July, the highest reading since February 2022. According to the median forecast, the index was expected to remain unchanged at a reading of 91.5 for a second consecutive month. In the details of the report, the proportion of small business owners that planned to hire in the next three months remained at 15%, as it has since May.
• Leading Index (Aug 19) – The Leading Index dropped 0.6% in June, greater than the 0.4% decline expected and following a 0.2% decrease the month prior. June’s -0.6% decline marks the fifth consecutive month of a decrease.
• Chicago Fed National Activity Index (Aug 22) – The Chicago Fed National Activity Index fell from -0.09 (revised down from +0.05) to -0.34 in July, a six-month low. According to the median forecast, the index was expected to drop to +0.03. The Chicago Fed Index draws on 85 economic indicators; a reading below zero indicates below-trend growth in the national economy and a sign of easing pressures on future inflation. In July, 28 of the 85 monthly individual indicators made positive contributions, while 57 made negative contributions.
• GDP (Aug 29) – GDP was unexpectedly revised higher from a 2.8% gain to a 3.0% rise on an annualized basis in the second-round Q2 report, the largest gain in two quarters. According to the median forecast, growth was expected to be unrevised at a 2.8% gain. The four-quarter average, meanwhile, rose from 2.9% to 3.2%. In the details of the report, personal consumption was revised higher from a 2.3% rise to a 2.9% gain in the second-round Q2 report, the largest increase in two quarters. Goods consumption was revised up from a 2.5% gain to a larger 3.0% increase, due to upward revisions in durables consumption from a 4.7% gain to a 4.9% rise, and nondurables consumption from a 1.4% gain to a 2.0% rise. Services consumption, meanwhile, was revised up from a 2.2% increase to a 2.9% rise, albeit still down from a 3.3% gain in the first quarter. On the other hand, gross private investment – a gauge of business spending – was revised down from an 8.4% rise to a 7.5% gain, still the largest quarterly increase since Q3 2023. Fixed investment was revised down from a 3.6% rise to a smaller 3.0% gain in the second-round Q2 report, the weakest quarterly pace since Q4 2022. Nonresidential investment – including office buildings and factories – was revised down from a 5.2% increase to a 4.6% gain, due to downward revisions in equipment investment from an 11.6% rise to a 10.8% gain, and intellectual property investment from a 4.5% gain to a 2.6% increase. Structures investment, however, was revised up from a 3.3% drop to a lesser 1.6% decline in the second-round Q2 report, still the largest quarterly decline since Q4 2021. Residential investment, meanwhile, was revised down from a 1.4% decline to a 2.0% drop, marking the largest quarterly decline in a year. On the trade side, exports were revised down from a 2.0% gain to a 1.6% increase, while imports were revised up slightly from a 6.9% gain to a 7.0% rise in the second-round Q2 report, the largest gain since Q1 2022. Finally, government consumption was revised down from a 3.1% gain to a 2.7% increase. Federal spending was revised down from +3.9% to +3.3%, with national defense spending revised lower from +5.2% to +4.9%, and nondefense spending revised down by a full percentage point to +1.2%. State and local spending, meanwhile, was revised down from a 2.6% gain to a smaller 2.3% increase, the weakest pace in two years.

Employment

• Initial Jobless Claims (Aug 1) – Initial jobless claims rose 14k from 235k to 249k in the week ending July 27, the highest in a year. The four-week average increased from 236k to 238k. Containing claims, or a measure of the total number of people receiving unemployment benefits, rose from 1.84M to 1.88M in the week ending July 20, the highest since November 2021. (Aug 8) – Initial jobless claims fell by 17k from 250k to 233k in the week ending August 3, a one-month low and the largest decline in nearly a year. According to the median forecast, jobless claims were expected to decline to 240k. The four-week average, on the other hand, increased from 238k to 241k. Continuing claims, or a measure of the total number of people receiving unemployment benefits, rose from 1.74M to 1.88M in the week ending July 27. (Aug 15) – Initial jobless claims fell 7k from 224k (revised up from 223k) to 227k in the week ending August 10, a five-week low. The four-week average, meanwhile, fell from 241k to 237k. Continuing claims, or the total number of Americans claiming ongoing unemployment, decreased from 1.87M to 1.86M in the week ending August 3. (Aug 22) – Initial jobless claims rose 4k from 228k (revised  up from 227k) to 232k in the week ending August 17, a two-week high. The four-week average, however, ticked down from 237k to 236k. Continuing claims, or the total number of Americans claiming ongoing unemployment, remain steady at 1.86M in the week ending August 10. (Aug 29) – Initial jobless claims fell slightly from 233k to 231k in the week ending August 24, a two-week low. The four-week average, meanwhile, declined from 236k to 232k. Continuing claims, or the number of people claiming ongoing unemployment benefits, ticked up slightly from 1.86M to 1.87M in the week ending August 17.
• Nonfarm Payrolls (Aug 2) – Nonfarm payrolls rose by 114k in July, falling short of the 175k gain expected and the weakest increase in three months. The three-month average, however, ticked up slightly from 168k to 170k. June payrolls were revised down from a 206k gain to a 179k increase. With additional revisions to previous months, the overall change in nonfarm payrolls (July data + net revisions) was just 85k. In the details, private payrolls rose by 97k in July following a 136k gain in June. Goods-producing payrolls increased by 25k, due to a 25k gain in construction payrolls and a 1k rise in manufacturing payrolls. Private service producing payrolls rose by 72k in July following a 125k gain in June. Education and health payrolls led the gain in July, rising 57k, down from the 79k gain the month prior. Leisure and hospitality payrolls increased 23k in July, and trade and transport payrolls climbed 22k, with a 4k gain in retail trade payrolls. On the weaker side, professional and business services payrolls fell 1k, due to a 9k drop in temporary help payrolls, financial payrolls fell 4k, and information payrolls plunged 20k, the largest monthly decline since October. Finally, government payrolls rose by 17k in July following a 43k gain in June.
• Participation Rate (Aug 2) – The labor force participation rate unexpectedly ticked up from 62.6% to 62.7% in July, a three-month high. According to the median forecast, the participation rate was expected to remain at 62.6% for a second consecutive month.
• Unemployment Rate (Aug 2) – Household employment rose by 67k in July following 116k gain in June. The labor force, meanwhile, increased by 420k following a 277k rise in June. Thus, the unemployment rate unexpectedly ticked up from 4.1% to 4.3% in July, the highest since October 2021. According to the median forecast, the unemployment rate was expected to remain at 4.1% for a second consecutive month.
• Average Hourly Earnings (Aug 2) – Average hourly earnings rose 0.2% in July, a tenth of a percentage point less than expected and following a 0.3% increase in June. Year-over-year, wages rose 3.6%, down from a 3.8% gain in June and the smallest annual increase since May 2021.
• Average Weekly Hours (Aug 2) – The average workweek fell from 34.3 to 34.2 hours in July, a six-month low.

Consumer Activity and Confidence

• Vehicle Sales (Aug 1) – Vehicle sales rose from 15.29m to a 15.82m unit pace in July, a two-month high. Over the past 12 months, vehicle sales dropped 0.8%, the second consecutive annual decline.
• Consumer Credit (Aug 7) – Consumer credit rose by $8.9b in June, the smallest gain in two months and following a $13.9b gain the month prior. According to the median forecast, consumer credit was expected to rise by $10.0b. In the details of the report, revolving credit – including credit cards – fell by $1.7b, the most since early 2021, while non-revolving credit, which includes vehicles and school tuition, rose by $10.6b in June, the most in a year.
• Retail Sales (Aug 15) – Retail sales rose 1% in July, more than double the expected increase, and a significant improvement from a -0.2% lull in June. Year-over-year, retail sales rose 2.7%. In the details, ten of the report’s 13 categories posted gains, including a sizable rebound in car sales (+3.6%) following last month’s cyberattack on auto dealers, electronics sales (+1.6%), food and beverage sales (+0.9%) and e-commerce (0.2 %). Gasoline sales also gained for the month (+0.1%) following two consecutive months of decline. Excluding autos and gasoline, retail sales rose 0.4% in July, double expectations, and rose 3.4% year-over-year. Meanwhile, control group sales increased 0.3% in July, also surpassing the 0.1% rise anticipated, and 3.7% over the past 12 months. 
• University of Michigan Consumer Sentiment (Aug 16) – The University of Michigan Consumer Sentiment Index rose from 66.4 to 67.8 in the preliminary August report, a two-month high. According to the median forecast, the index was expected to rise to a reading of 66.9. In the details of the report, a gauge of current conditions fell from 62.7 to 60.9, the lowest reading since December 2022, while a gauge of future expectations rose from 68.8 to 72.1 in the preliminary August report, a four-month high. (Aug 30) – The University of Michigan Consumer Sentiment Index was revised up from 67.8 to 67.9 in the final August report, still a two-month high. In the details of the report, a gauge of current conditions was revised higher from 60.9 to 61.3, still the lowest reading since December 2022, while a gauge of future expectations was unrevised at 72.1 in the final August report, a four-month high.
• Consumer Confidence (Aug 27) – Consumer confidence, according to the Conference Board, rose from 101.9 (revised up from 100.3) to a reading of 103.3 in August, a six-month high. According to the median forecast, a reading of 100.7 was expected. In the details of the report, a gauge of current conditions increased from 133.1 to 134.4, a two-month high. A gauge of future expectations, meanwhile, rose from 81.1 to a reading of 82.5 in August, a one-year high.
• Consumer Spending and Income (Aug 30) – Personal income rose 0.3% in July, a tenth of a percentage point more than expected and following a 0.2% increase in June. Consumer spending, meanwhile, increased 0.5% in July, as expected and following a 0.3% rise the month prior. July’s 0.5% gain marks the largest increase in two months. Year-over-year, consumer spending increased 5.3%, a three-month low, while personal income rose 4.5% in July, in line with the annual increase in June. Adjusting for inflation, real consumer spending rose 0.4%, more than the 0.3% gain expected, and real income gained 0.1% in July for the second consecutive month.

Inflation

• PPI (Aug 13) – The PPI (Producer Price Index) rose 0.1% in July, a tenth of a percentage point less than expected and following a 0.2% gain the month prior. Year-over-year, producer prices rose 2.2% in July, down from the 2.6% annual gain in June and marking the smallest annual increase since April. Food prices rose 0.6% and energy prices increased 1.9% in July following two consecutive months of decline. Excluding food and energy costs, the core PPI was flat (0.0%), the smallest reading in seven months and following a 0.3% rise in June. Year-over-year, the core PPI increased 2.4% in July, down from the 3.0% annual gain in June and the smallest annual increase in three months. Excluding food, energy and trade, however, producer costs rose 0.3%, the largest monthly gain in three months. Over the past 12 months, the PPI excluding food, energy and trade rose 3.3%, the hottest reading since May. Additionally, services costs fell 0.2%, due to a 1.3% decline in trade costs. Transportation and warehousing costs, however, rose 0.4% at the start of the third quarter.
• CPI (Aug 14) – The CPI (Consumer Price Index) rose 0.2% in July, as expected and following a 0.1% decline in June. Year-over-year, consumer prices rose 2.9%, a tenth of a percentage point below expectations and down from the 3.0% annual increase in June. Food prices rose 0.2%, while energy prices were unchanged following a 2.0% decline in June. Excluding food and energy costs, the core CPI rose 0.2% in July, as expected and following a 0.1% gain in June. Year-over-year, the core CPI increased 3.2%, down from the 3.3% annual gain in June and the slowest pace in since April 2021. In the details of the report, shelter prices rose 0.4% with a similar gain in OER (Owners’ Equivalent Rent), both marking the largest gains in two months. Also, other goods and services costs rose 0.2%, and recreation prices increased 0.1% in July following a similar rise the month prior. Additionally, education and communication prices rose 0.2%, the most in three months. On the other hand, transportation prices fell 0.1%, due to a 0.2% decline in new vehicle prices and a 2.3% drop in used cars and trucks prices. Additionally, airline fares declined 1.6%, marking the fifth consecutive month of a decline. Additionally, medical care prices fell 0.2%, and commodities prices slipped 0.1% in July. Another iteration of inflation, the supercore – defined as core services excluding housing – rose 0.2% in July following a 0.1% decline the month prior. Over the past 12 months, the supercore increased 4.4%, down from the 4.6% annual increase in June and the smallest annual gain in five months.
• PCE (Aug 30) – The Personal Consumption Expenditures (PCE) Index rose 0.2% in July, as expected and following a 0.1% gain in June. Year-over-year, headline inflation increased 2.5%, in line with expectations and matching the 2.5% annual increase in June. Excluding food and energy, the core PCE rose 0.2% in July, as expected and following a 0.2% gain the month prior. Over the past 12 months, core inflation increased 2.6%, less than the 2.7% annual gain expected and also matching the 2.6% annual gain in June. The supercore PCE measure – core services excluding shelter – rose 0.2% in July and increased 3.3% on an annual basis for the second consecutive month.

Manufacturing and Production Activity

• ISM Manufacturing (Aug 1) – The ISM Manufacturing Index unexpectedly fell from 48.5 to 46.8 in July, now marking the fourth consecutive month in contractionary territory (a reading below 50) and the lowest reading in eight months. According to the median forecast, the index was expected to rise to 48.8. In the details of the report, supplier deliveries rose from 49.8 to 52.6, the highest reading since August 2022, and prices paid rose by 0.8 points to 52.9 in July, a two-month high and averaging 55.2 over the past six months. On the other hand, new orders fell 1.9 points to 47.4, a two-month low, employment declined nearly six points to 43.4 in July, the lowest reading in four years. Also, inventories fell from 45.4 to 44.5, production slipped 2.6 points to 45.9, while backlog of orders remained steady at 41.7 in July for the second consecutive month.
• ISM Services (Aug 5) – The ISM Services index moved back into expansionary territory from 48.8 to 51.4 in July, a four-month high. According to the median forecast, the services index was expected to rise to a reading of 51.1. In the details of the report, business activity rose 4.9 points to 54.5, a two-month high, and employment rose 5 points to 51.1, averaging 47.8 over the past six months. Also, new orders increased from 47.3 to 52.4 in July, a two-month high, prices paid ticked up from 56.3 to 57.0, backlog of orders gained from 44.0 to 50.6, and the change in inventories increased from 42.9 to 49.8 in July. On the other hand, supplier deliveries fell from 4.6 points to a reading of 47.6, a four-month low.
• Empire Manufacturing (Aug 15) – The Empire Manufacturing Index rose from -6.6 to -4.7 in August, still marking the ninth consecutive month of decline. According to the median forecast, the index was expected to rise to a reading of -6.0. In the details of the report, the number of employees increased from -7.9 to -6.7, averaging a reading of -7.0 over the past six months, and prices received rose from 6.1 to 8.5 in August. On the other hand, prices paid fell from 26.5 to 23.4, and new orders dropped from -0.6 reading of -7.9, the lowest reading since May. Inventories fell from -6.1, to -10.6, a five-month low, and the six-month general business conditions index declined from 25.8 to 22.9 in August, a three-month low.
• Industrial Production (Aug 15) – Industrial production fell 0.6% in July, more than the 0.3% decline expected and offsetting the 0.6% gain the month prior.
• Capacity Utilization (Aug 15) – Capacity utilization declined from 78.4% to 77.8% in July, a three-month low.
• Business inventories (Aug 15) – Business inventories rose 0.3% in June, as expected and following a 0.5% increase in July.
• Philly Fed Business Outlook Survey (Aug 15) – The Philly Fed Business Outlook Index plunged from +13.9 to -7.0 in August, more than the expected decline to +5.2 and a seven-month low. In the details of the report, prices paid rose from 19.8 to 24.0, the highest reading since December and averaging 18.6 over the past six months, while prices received fell from 24.2 to a reading of 13.7 in August. Also, the number of employees declined from +15.2 to -5.7, a three-month low, and new orders dropped from +20.7 to +14.6 in the second month of Q3.
• Kansas City Fed Manufacturing (Aug 22) – The Kansas City Fed Index rose ten points to -3 in August, the highest reading in three months, albeit now marking one full year in contraction. According to the median forecast, the index was expected to rise to -9. In the details of the report, employment rose from -12 to -7, still the third consecutive month of decline, shipments gained from -18 to a reading of -1, and production rose from -12 to +6, the first positive reading after being negative for five consecutive months. Additionally, the volume of new orders rose from a reading of -21 to -12, prices paid rose one point to +18 in the August report, a three-month high, and the six-month outlook increased by three points to +8 in August, a seven-month high.
• Durable Goods (Aug 26) – Durable goods orders jumped 9.9% in July, the largest monthly increase since July 2020 and following a 6.9% drop in June. According to the median forecast, durable goods orders were expected to rise 5.0%. Year-over-year, headline orders rose 1.3% in July, the largest annual gain since February. In other details, fabricated metals orders climbed 0.2%, the most in three months, while machinery orders were unchanged. On the other hand, primary metals orders fell 0.9%, computers and electronics orders decreased 0.7%, and electrical equipment orders declined 0.4% in July, the largest decline in four months.

·       Transportation Orders (Aug 26) –Transportation orders rose 34.8% following a 20.6% decline the month prior, despite a 657.4% plunge in civilian aircraft orders and a 2.6% decrease in vehicles and parts orders. Excluding transportation, durable goods orders fell 0.2% in July but increased 0.7% over the past 12 months, in line with the annual gain the month prior.

• Capital Goods (Aug 26) – Capital goods rose 34.3% in July following an 18.6% decline the month prior. Nondefense capital goods orders, meanwhile, increased 41.9% following a 22.9% decline in June. Capital goods orders excluding aircraft and defense – a proxy for business investment – fell 0.1% in July, the weakest pace in two months. Year-over-year, however, business investment gained 0.7%, the strongest annual gain in four months.
• Dallas Fed Index (Aug 26) – The Dallas Fed Manufacturing Activity Index increased from -17.5 to -9.7 in August, surpassing the expected rise to -16.0 and the highest reading since January 2023. At -9.7, however, this marks the 28th consecutive month of a negative print. In the details of the report, new orders rose from a reading of -12.8 to -4.2, averaging a reading of -6.3 over the past six months, production gained from -1.3 to +1.6, and capacity utilization climbed from -10.0 to -2.3 in August, albeit still the fourth consecutive month of a decline. On the other hand, employment fell from a reading of +7.1 to -0.7 in August, a two-month low. Also, the six-month general business outlook index decreased from +21.6 to +11.6, the lowest reading in three months.
• Richmond Fed Manufacturing (Aug 27) – The Richmond Fed Manufacturing Index unexpectedly fell by two points from -17 to -19 in August, the lowest reading since May 2020. According to the median forecast, the index was expected to rise three points to a reading of -14. In the details of the report, shipments rose from -21 to -15 in August. On the other hand, capacity utilization fell four points to -17, the volume of new orders declined three points to a reading of -26, the number of employees decreased by ten points to -15, the lowest reading since May 2020, and wages fell by one point to +14 in August.
• Chicago PMI (Aug 30) – The Chicago PMI unexpectedly rose from 45.3 to a reading of 46.1 in August, a two-month high. According to the median forecast, the index was expected to decline to 44.8 in August. In the details of the report, prices paid and supplier deliveries rose, signaling expansion, while production, inventories, new orders, employment, and order backlogs fell, signaling contraction.

Housing Market Activity

• Construction Spending (Aug 1) – Construction spending declined 0.3% in June following a 0.4% decrease in May. According to the median forecast, construction spending was expected to rise 0.2%. Over the past 12 months, construction spending rose 6.2%, the weakest annual gain in almost a year.
• NAHB Housing Market Index (Aug 15) – The NAHB Housing Market Index declined three points to a reading of 39 in August, the lowest reading since December. According to the median forecast, the index was expected to rise one point to 43.
• Building Permits (Aug 16) – Building permits fell 4% in July from 1.45M to a 1.40M unit pace. Single-family permits fell -0.1%, the sixth consecutive month of decline while multi-family fell 11.1% nearly offsetting last month’s 16.3% increase.
• Housing Starts (Aug 16) – U.S. housing starts fell 6.8% in July, significantly more than expected, dropping from 1.33M to a 1.24M unit pace, reflecting a 14% decline in single-family starts, the largest since early 2020. Year-over-year, housing starts are down 16%.
• Existing Home Sales (Aug 22) – Existing home sales rose 1.3%, as expected, from 3.90m to a 3.95m unit pace in July, a two-month high. Year-over-year, existing home sales fell 2.5% in July, up from the 5.1% annual decline in June, albeit marking the 36th consecutive month of decline. Due to a rose in sales, the months’ supply of existing homes ticked lower from 4.1 months to 4.0 months, averaging 3.9 months over the past three months. Additionally, from a price standpoint, the median cost of a previously owned home climbed 4.2% in July from a year earlier to $423k, down from $427k the month prior.        
• New Home Sales (Aug 23) – New home sales jumped 10.6% in July from 668k (revised up from 617k) to a 739k unit pace, the highest level since May 2023. According to the median forecast, new home sales were expected to rise just 1.0%. Over the past 12 months, new sales rose 5.6%, the most in three months. Due to a rise in new sales, the months’ supply of new homes fell from 8.4 to 7.3 months. From a price standpoint, the median cost of a newly constructed home rose 3.1% from the month prior to $430k, the highest in four months. Year-over-year, new home prices rose 2.0% in July, or by $8.6k.                    
• S&P/CS 20 City & National Index (Aug 27) – The S&P Case-Shiller 20 City Home Price Index increased 0.42% in June, more than the 0.30% gain expected and the largest gain in two  months. On the other hand, the National Home Price Index rose 0.16%, the weakest monthly gain since February 2023. Over the past 12 months, the 20-city index rose 6.41%, a six-month low, while the national index gained 5.37%, the weakest increase in seven months.
• FHFA House Price Index (Aug 27) – The FHFA House Price Index unexpectedly fell 0.1% in June following no change the month prior. According to the median forecast, the index was expected to rise 0.1%.
• Pending Home Sales (Aug 29) – Pending home sales unexpectedly dropped 5.5% in July, the largest monthly decline in three months. According to the median forecast, pending home sales were expected to rise 0.2%. Over the past 12 months, pending home sales fell 4.6%, marking the 32nd consecutive month of decline.

Trade and Currency

• U.S. Dollar (Aug 30) – The U.S. dollar posted its largest monthly drop in August as the traders continue to price in multiple rate cuts this year. The dollar declined 2.3% for the month to close at $101.68.
• Trade Balance (Aug 6) – The U.S. trade deficit narrowed for the first time in three months, declining 2.5% from $75.0 billion in May to $73.1 billion in June. The median forecast, according to Bloomberg, was expected to be a $72.5 billion shortfall. In the details of the report, the value of exports increased 1.5%, while imports rose 0.6% in June.
• Import & Export Prices (Aug 15) – Import prices unexpectedly rose 0.1% in July following no change in June. According to the median forecast, import prices were expected to fall 0.1%. Meanwhile, export prices gained 0.7% at the start of Q3, defying expectations of no change and the largest monthly gain since April. Over the past 12 months, import prices rose 1.7%, the largest annual gain since December 2022, and export prices rose 1.4%, the largest annual increase since January 2023.

Monetary Policy, Reports, and Commentary

• Atlanta Fed GDPNow Forecast

o   (Aug 30) – According to the Atlanta Fed’s GDPNow forecast, GDP is expected to rise 2.5% in the third quarter as a result of stronger-than-expected consumer spending in July. At 2.5%, however, this is down from the initial forecast of 2.8%.

• Fed Speak/News (Aug 6) – According to Chicago Fed President Austan Goolsbee, the Federal Reserve stands ready to intervene and "fix" any signs of weakness or instability in the marketplace. Expanding beyond the legal dual mandate of stable prices and full employment, Goolsbee implied part of the Fed's "job" was to instill stable growth in the domestic economy. Goolsbee further indicated that policy may be too restrictive at the moment, but stopped short of suggesting an emergency rate cut ahead of the September meeting was warranted. "The Fed’s job is very straightforward: maximize employment, stabilize prices and maintain financial stability. That’s what we’re going to do," he said during an interview with CNBC. "So if the conditions collectively start coming in like that on the through line, there’s deterioration on any of those parts, we’re going to fix it."

·       July 30-31 FOMC Meeting Minutes (Aug 21)

o   According to the July 30-31 FOMC meeting minutes, the “vast majority” of Committee members “observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.” While the meeting minutes opened the door for a rate cut in September, they also noted that some members would have supported a 25bp cut at the last July meeting given the “recent progress on inflation and increases in the unemployment rate.” As for the outlook for inflation, “almost all participants observed that the factors that had contributed to recent disinflation would likely continue to put downward pressure on inflation in coming months.”

International News and Activity 

·       Euro Area

o   (Aug 20) – Eurozone inflation rose 2.6% in July on an annual basis, surpassing the 2.4% annual gain expected and up slightly from the 2.5% gain in June. Excluding food and energy prices, core inflation remained steady at 2.9% for the second consecutive month, still well above the 2% central bank target.

-Lindsey Piegza, Ph.D., Chief Economist