By Claire Rubin, Private Bank Investment Strategist, Fifth Third Bank
Hello, this is Claire Rubin, Private Bank Investment Strategist at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices finished mostly lower in a week that brought mixed economic data. The benchmark S&P 500 Index and the Nasdaq Composite each fell about half a percent in total return for the week, while the blue-chip Dow Jones Industrial Average was little changed. International equities were also lower, with the MSCI All Country World closing down 1.0% for the week. The U.S. dollar strengthened versus major peers.
Investors remain wary about the path forward for economic growth as the delta variant continues to spread in the U.S. and abroad, while lingering supply chain issues continue to raise concerns. President Biden met with large U.S. employers at the White House last week to discuss an emergency rule from the Labor Department that will require employers with 100 or more workers to ensure their workers are fully vaccinated and regularly tested.
In economic news, the core consumer price index missed estimates for the second month in a row in August, up just nearly 0.1% from July. Headline inflation also came in below expectations, with both figures recording the lowest gains in several months. Airline fares and hotel rates were among the categories dragging the figure down, amid concerns about the delta variant. Used car and truck prices recorded a monthly decline for the first time since February. Equities rallied on the report, encouraged by the sign of moderating inflation. Retail sales unexpectedly gained, up 0.7% in August. E-commerce was a strong category, while restaurant spending slowed. The positive report was slightly offset by downward revisions to July’s retail spending.
The National Federation of Independent Business reported that small business optimism unexpectedly rose in August despite hiring difficulties and supply chain disruptions. Industrial production rose 0.4% in August, slightly less than anticipated following a downward revision to July. The report estimated that Hurricane Ida subtracted 0.3 percentage points due to plant closures.
Negotiations around fiscal stimulus continued in Congress. House Democrats unveiled legislation that would raise as much as $2.9 trillion to finance their proposed $3.5 trillion spending package. The legislation included proposals to raise the corporate tax rate to 26.5% and to raise the top rate for individuals to 39.6%. These remain as proposals and are subject to continued negotiations.
In the week ahead, the Federal Reserve’s Federal Open Market Committee (FOMC) meets to set monetary policy. The FOMC is not expected to make a formal announcement about tapering asset purchases this week but the statement may provide some more concrete hints, along with Fed Chair Powell’s press conference. Market participants are expecting tapering to start late this year. The FOMC will also release new projections for the economy and interest rates for the first time including 2024 estimates.
The U.S. economic calendar includes housing data and leading economic indicators. The Bank of Japan and Bank of England also meet.
As always, we’ll be watching and reporting back to you. Thank you.
