Inflation Lets Up (a Bit): August 12 – August 16

Inflation remained in check in July. Here are the five things we learned from U.S. economic data released during the week ending August 16.

Consumer prices increased moderately in July. The Consumer Price Index (CPI) increased a seasonally adjusted 0.2 percent, following June’s 0.1 percent drop. Whereas energy prices held steady (including flat gasoline prices), food prices grew 0.2 percent. Net of both, the Bureau of Labor Statistics has core CPI increasing 0.2 percent for the month. Rising were prices for shelter (+0.4 percent), transportation services (+0.4 percent), and medical care commodities (+0.3 percent). Prices fell for used cars/trucks (-2.3 percent), apparel (-0.4 percent), medical care services (-0.3 percent), and new vehicles (-0.2 percent). CPI has risen 2.9 percent over the past year (ts best in three years), while core CPI was up 3.2 percent over the same 12-month period.

Wholesale prices modestly grew in July. The Producer Price Index (PPI) for final demand eked out a seasonally adjusted 0.1 percent increase, half of June’s 0.2 percent advance. Core PPI, which removes energy, food, and trade services, jumped 0.3 percent (June 2024: +0.1 percent). The Bureau of Labor Statistics reports that headline PPI was up 2.2 percent from a year earlier, while the core measure has increased 3.3 percent. Goods PPI was up 0.6 percent, including rises in wholesale prices for energy (+1.8 percent) and food (+0.6 percent). Services PPI dropped 0.2 percent, with trade services PPI (largely wholesaler and retail margins) plummeting 1.3 percent.

Retail sales surprised to the positive in July. Retail and food services sales rose 1.0 percent to a seasonally adjusted $709.7 billion. The Census Bureau data series was 2.7 percent ahead of its year-ago level. Gas station sales inched up 0.1 percent, while motor vehicle/parts dealers reported a 3.6 percent rise. Net of both finds core retail sales gaining 0.4 percent for the month and 3.4 percent from a year earlier. Sales advanced at retailers focused on electronics/appliances (+1.6 percent), building materials (+0.9 percent), health/personal care (+0.8 percent), and furniture (+0.5 percent). Restaurants/bars reported a 0.3 percent bump in sales. Sales fell at sporting goods/hobby retailers (-0.7 percent), department stores (-0.2 percent), and apparel retailers (-0.1 percent).     

Manufacturing output declined in July. The Federal Reserve estimates that manufacturing production fell 0.3 percent seasonally adjusted after holding steady in June. Durable goods manufacturing plummeted 0.9 percent, while that of nondurable rose 0.3 percent. The report indicates that Hurricane Beryl “held down” manufacturing 0.3 percent in July. Overall industrial production slumped 0.6 percent after rising in May (+0.8 percent) and June (+0.3 percent). Mining output was unchanged, while utilities’ output slowed 3.7 percent. Compared to a year earlier, manufacturing output was up a paltry 0.1 percent, whereas overall industrial production contracted 0.2 percent.

Consumer sentiment inched up in early August. The University of Michigan’s Index of Consumer Sentiment added 1.4 points to a seasonally adjusted 67.8 (19666Q1=100). Despite the increase, the index was off 2.3 percent from a year earlier. The expectations conditions index jumped 3.3 points to 72.1, leaving the measure 4.8 percent ahead of its year-ago reading. The current conditions index, however, shed 1.8 points to 60.9 (-19.3 percent versus August 2023). The press release noted sentiment moved in different directions given one’s political views. Democrats’ sentiment rose six percent, Republicans fell five percent, and independents’ sentiment gained three percent.

• Other U.S. economic data released over the past week:

• Jobless Claims (Week ending August 10, 2024, First-Time Claims, seasonally adjusted): 227,000, -7,000 vs. the previous week, -21,000 vs. the same week a year earlier). 4-week moving average: 236,500 (-3.2% vs. the same week a year earlier).
• Import Prices (July 2024, All Imports, not seasonally adjusted): +0.1% vs. June 2024; +1.6% vs. July 2023. Nonfuel Imports: +0.1% vs. June 2024; +1.2% vs July 2023.
• Export Prices (July 2024, All Exports, not seasonally adjusted): +0.7% vs. June 2024; +1.2% vs. July 2023. Nonagricultural Exports: +1.0% vs. June 2024; +2.3% vs. July 2023.
• Housing Starts (July 2024, Private-Owned Housing Starts, seasonally adjusted): 1.238 million (-6.8% vs. June 2024; -16.0% vs. July 2023).
• State Employment (July 2024, Nonfarm Payrolls, seasonally adjusted): Increased in 2 states, decreased in 1 state, and unchanged in 47 states and the District of Columbia vs. June 2024. Increased in 28 states and unchanged in 22 states and the District of Columbia vs. July 2023.
• Small Business Optimism (July 2024, Index (1986=100), seasonally adjusted): 93.7 (June 2024: 91.5; July 2023: 91.9).
• Housing Market Index (August 2024, Index (>50=More Homebuilders View Housing Market as “Good” than “Poor,” seasonally adjusted): 39 (July 2024: 41; August 2023: 50).
• Monthly Treasury Statement (July 2024, Federal Budget Deficit Over the 1^st 10 months of FY2024): -$1.517 trillion (vs. 1^st 10 Months of 2023: -$1.614 trillion).

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