Hello, this is Claire Ellerhorst, Senior Portfolio Manager at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices were mixed last week. The S&P 500 Index was down 0.1%, the Nasdaq Composite was down 0.4% and the Dow Jones Industrial Average was up 0.1% in total return for the week. Risk sentiment seemed to pick up modestly, though upward pressure on rates has continued with the two-year U.S. Treasury yield back above 5% as of the end of the week.
The U.S. economic calendar was busy last week, including reports on the consumer and producer price indexes. The headline consumer price index (CPI) rose 3.7% year-over-year in August, a faster pace than expected with more than half of the increase attributable to a jump in gas prices. Core CPI, which excludes volatile food and energy prices, rose 4.3% year-over-year, in line with economists’ expectations. The producer price index (PPI) was also hotter than expected on the headline figure, up 1.6% from a year earlier. Core PPI rose 2.2% year-over-year. In other economic news, U.S. retail sales and industrial production came in better than forecast.
In the week ahead, the Federal Reserve’s Federal Open Market Committee (FOMC) meets to set monetary policy. Officials are expected to hold the Fed Funds rate steady, after voting for a 25-basis point increase at their last meeting in July. While the headline inflation readings this past week came in hotter than expected due to the spike in energy prices, core CPI continues to move towards the Federal Reserve’s 2% target. Officials may suggest another rate hike could be appropriate before the end of the year.
The economic calendar brings housing data, including August housing starts and existing home sales. Market participants will also be watching growth impacts of the United Auto Workers union strike and the resumption of student loan payments next month, along with a looming potential government shutdown.
As always, we’ll be watching and reporting back to you. Thank you.