Rising costs  Economic data was about as slow to return after a long weekend as most of us. It was a short week with few updates but the market managed to slide into September with five straight down days ending Friday, so that’s been fun I guess. The biggest report of the week was the August Producer Price Index (PPI), which increased 8.3% compared to august last year, and marks the highest increase of the measure since it began in 2010. Excluding food and energy, core PPI still increased 6.3%, which is the highest annual increase since August 2014.  Moral of the story: PPI tends to be a leading indicator of what…

Shaky confidence  For being historically one of the slowest weeks in the market (week before LDW), there was actually a slew of important economic reports released this past week. We started with the US consumer confidence index, which fell to a six-month low in August driven by concerns about the delta variant and worries about higher food and gas prices. In addition to this low August print, the July number was revised down slightly.  Moral of the story: Even though concerns have caused confidence to pull back a little, consumers are still looking forward to spending money – travel, eating out, back-to-school, PSLs (though too soon for that imho) etc.…

Approaching normal  Jobless claims increased last week by 4k, but still remain at a relatively low level compared to what we’ve been seeing in the last 18 months. Unfortunately, the resurgence of COVID cases across several states has resulted in restaurants, hotels, and other services industries feeling some additional pressures but most employers are actually still trying to hire more workers in anticipation of this wave of cases passing by in the (hopefully) near future. Continuing claims, which are more indicative of a steady “unemployed” number is down to 2.86m, which is a pandemic low.  Moral of the story: The fact that COVID cases began approaching prior peak levels but…

Inflation is moderating, The Consumer Price Index increased 0.5% for the month of July. Excluding the impact of food and energy, core CPI only increased 0.3% in July, slightly below expectations for a 0.4% increase, and well below June’s 0.9% increase. On an annual basis, core inflation is up 4.3% for July (down for 4.5% in June). At the same time, the Producer Price Index increased 1% in July, after a 1% increase in June. On an annual basis, July’s PPI came in at a whopping 7.8%, which is a record high since the index was created over ten years ago.  Moral of the story: The PPI is typically a…

Looking for signs  The ISM Manufacturing Index came in at 59.5 in July, down from 60.6 the month before. Any reading above 50 indicates an expansionary environment, but this is the lowest reading we’ve seen in the index since January. The prices index came in at 85.7, down 6.4 points from June’s reading, which was the highest since July 1979. Additionally, the employment index climbed up 3 points from last month to 52.9. Meanwhile, the ISM Services Index came in at an all-time high reading of 64.1 for July. While this index also indicated improving employment, it did indicate prices continuing to increase.  Moral of the story: Both lower prices…

Making a full recovery The US economy expanded 6.5% for the second quarter, primarily driven by consumer spending, which surged 11.8% in the quarter. Business investment increased by 3% as companies resumed spending on equipment – this part of GDP would have likely been stronger had it not been for the shortages we’ve seen across the services and manufacturing sectors for supplies and labor. Those shortages actually came through in a big way as inventory levels declined $165.9b. Investments in new housing also fell for the first time in a year, another supply side issue versus an indication of lower demand (people still want to buy homes but there just aren’t…

Jobless claims Jobless claims came in higher than expected last week with 419k new claims, well above expectations for 350k. This is higher from last week’s 368k print, which was also unfortunately revised upward. This is the highest report of jobless claims we’ve seen since mid-May. Unsurprisingly, Michigan saw the highest increase in new jobless claims as semiconductor shortages have caused significant delays in auto manufacturing – a big industry for jobs in the state.  Moral of the story: Stocks took quite a tumble on Monday as concerns about the delta variant (i.e. news of LA reinstating a mask mandate indoors…indefinitely) impacted investor sentiment. Though stocks have made a full recovery since…

Inflation is real Consumer prices were 5.4% higher in June compared to the same time last year, which is the largest CPI print we’ve seen since the summer of 2008. Core CPI, which excludes food and energy, increased 4.5%, which is the largest print since September 1991 (that’s literally before I was born, it’s baby’s first high-inflationary period!). Prices are rising for consumers because they’re higher for producers. June’s PPI print came in at a whopping 7.3%, which is the highest annual increase on record for the index.  Moral of the story: Expectations were for inflation to come in hot this month, but reality was quite a bit more aggressive. The longer…

Rock steady Meeting minutes from the latest Fed meeting effectively reiterated the Fed’s view that even though inflation is coming in higher than they had initially expected, they still see it to be transitory in nature. Before they start raising interest rates, the Fed would ease off on their policies that impact the money supply in the market, and there’s only limited talk about doing even that at the moment.  Moral of the story: Despite the economic recovery occurring today, the overall tone from this meeting was that conditions haven’t met the “substantial progress” the FOMC is looking for before starting to take their foot of the gas pedal.  Falling…

All the confidence in consumers  Consumer confidence increased to 127.3 for June, its highest level since February 2020, driven by the improvement in the labor market and optimism about the economy reopening. Consumers are showing strong demand for not only services as travel demand surges but also continued spending on capital goods (cars, appliances, etc.) and homes. Moral of the story: Consumer savings increased an incremental $2T during the pandemic and people are ready to spend. Consumer spending, which accounts for nearly two-thirds of the economic activity in the US, was largely focused on goods during COVID since services were basically all shut down. What this month’s survey shows is…