While not as aggressive as it was months ago, inflation remains pervasive. Here are the five things we learned from U.S. economic data released during the week ending August 11.
Inflation remained above the Fed’s target in July. The Consumer Price Index increased 0.2 percent on a seasonally adjusted basis, matching its June gain. The Bureau of Labor Statistics measure had risen 3.2 percent over the past year, 60 percent above the Federal Reserve’s two-percent target. Energy and food prices grew 0.1 percent and 0.2 percent, respectively. Gasoline prices were up 0.2 percent on a seasonal basis (+0.6 percent without the seasonal adjustments). Net of energy and food, core CPI grew 0.2 percent (also matching its June gain). Core CPI has risen 4.7 percent over the past year. Prices increased for medical care commodities (+0.5 percent), shelter (+0.4 percent), and transportation services (+0.3 percent). Falling were new and used motor vehicle prices (-0.1 percent and -1.3 percent, respectively).
Wholesale prices grew for the first time in four months in July. The Producer Price Index (PPI) for final demand increased a seasonally adjusted 0.3 percent after being steady in June and falling 0.3 percent in May. The Bureau of Labor Statistics measure was up a measly 0.8 percent over the past year. The core wholesale price measure (which removes energy, food, and trade services) grew 0.2 percent, its largest increase since February. That measure has increased 2.7 percent over the past year. Energy PPI held steady and food PPI swelled 0.5 percent. Services PPI rose 0.5 percent, boosted by a 0.7 percent surge for trade services (e.g., wholesaler and retailer margins).
Consumers’ moods held steady in early August. The University of Michigan’s Index of Consumer Sentiment slipped 4/10ths of a point to a seasonally adjusted 71.2 (1966Q1=100). While significantly above the year-ago reading of 58.2, the index remains under its historical average of 86. The current conditions index added 8/10ths of a point to 77.4 (August 2022: 58.6), while the expectations index lost a whole point to 67.3 (August 2022: 58.0). One-year inflation expectations declined by 1/10th of a percentage point to +3.3 percent and five-year expectations held steady at +2.9 percent (both above the Fed’s two-percent target).
The trade deficit narrowed in June. The Census Bureau and the Bureau of Economic Analysis report that exports slipped 0.1 percent to a seasonally adjusted $247.5 billion and imports fell 1.0 percent to $313.0 billion. The resulting trade deficit of -$65.5 billion was down 4.1 percent from May. The trade deficit over the first six months of 2023 (-409.2 billion) was 22.3 percent below the comparable 2022 months. The goods deficit contracted by $2.8 billion to -$88.2 billion, while the services surplus remained steady at +$22.7 billion. The former resulted from lower imports of computers and industrial supplies/materials (e.g., finished metal shapes and crude oil). The U.S. had its largest goods deficits with China, the European Union, Mexico, and Vietnam.
Hiring continued to vex small business owners. The National Federation of Independent Business’s Small Business Optimism Index grew by 9/10ths of a point in July to a seasonally adjusted 91.9 (1986=100). The index has failed to top the century mark in 24 of the past 25 months. Five of ten index components improved during the month, including a sharp improvement in expected economic conditions. Only one measure—earnings trends—experienced a setback. Twenty-one percent of survey respondents indicated that “inflation was their single most important problem in operating their business,” while 42 percent said that jobs “were hard to fill.”
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending August 5, 2023, First-Time Claims, seasonally adjusted): 248,000, +21,000 vs. the previous week, +34,000 vs. the same week a year earlier). 4-week moving average: 231,000 (+7.9% vs. the same week a year earlier).
- Wholesale Trade (June 2023, Merchant Wholesaler Inventories, seasonally adjusted): $905.2 billion (-0.5% vs. May 2023; +1.3% vs. June 2022).
- Consumer Credit (June 2023, Outstanding Non-Mortgage Consumer Credit Balances, seasonally adjusted): $4.997 trillion (+$17.8 billion vs. May 2023; +5.7% vs. June 2022).
- Monthly Treasury Statement (July 2023, U.S. Federal Government Budget Deficit Over the First 10 Months of FY2023): -$1.613 trillion (+122.2% vs. First 10 Months of FY2022).
- Mortgage Delinquency Rate (2023Q2, Delinquency Rate for Mortgages on One-to-Four Unit Residential Properties, seasonally adjusted): 3.37% (-19 basis points vs. 2023Q1; -27 basis points vs. 2022Q2).
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What We Learned About the U.S. Economy Last Week 