By: Elliott D Pollack & Company: The Monday Morning Quarterback
The Federal Reserve has three remaining meetings this year, the next one started yesterday. The meetings are likely to be significant with most market observers anticipating that the Fed will hold rates steady for this month. The announcement of their decision will come on September 20th along with their projections for interest rates.
While the Consumer Price Index ticked up to 3.7% in August, the jobs market is showing some early signs of softness. This creates more of a balance between the Fed’s two main objectives of controlling inflation and maintaining full employment. Much of the CPI increase was related to surging gas prices which are up more than 10% since July due to oil production cuts by Saudi Arabia and Russia. Oil prices hit $90 per barrel on September 14th, up from $79 per barrel on August 24th.
The good news is the Core CPI, which excludes volatile food and energy, declined in August to 4.4% from 4.7% in July. And Core CPI has been rising at a rate of only 2.6% over the past four months giving some hope that it will continue to decline through the end of the year. One of the unknowns is the price of oil which could reverse recent declines in inflation and transportation costs, ultimately pushing up prices on everything from food to construction.
While we may see a pause in an interest rate increase this month, the Fed’s updated projections will probably show one last quarter-percentage-point hike by the end of the year. November seems the most logical time for this to happen. Stay tuned on September 20th for the update from the Fed and their projections on where they see things going.
- Higher energy prices pushed CPI All Items to a faster pace in more than a year in August. The monthly growth rate increased to 0.6% from 0.2%. Year-over-year, all items index was up 3.7%, up from 3.3% last month. Core inflation (less food and energy) saw a slight increase in the monthly rate from 0.2% to 0.3%. The annual increase declined to 4.4%.
- Retail sales growth accelerated in August continuing positive momentum for the spending side of the economy. Retail sales increased from 0.5% to 0.6% as consumers paid more for gasoline. Higher inflation and borrowing costs negatively affect slowed spending on goods but expectations remain positive for consumer spending on this quarter and overall growth of the economy.
- Industrial production grew 0.4% for the month, down from 0.7% in July. The manufacturing sector continues to struggle as demand remains weak and the interest rate remains high.
- Consumer sentiment for the half month of September declined by nearly 2.6%. This is the second consecutive month with a decline. Consumers remain tentative about the economy and the potential federal government shutdown.
- Arizona’s total taxable sales increased 2.1% in July as Maricopa County saw a 3.3% increase during the month. Total taxable sales were up double digits in both Arizona and Maricopa County.
- Arizona Regional Multiple Listing Service data for August showed total listings down over 33% and single family listings were down over 36% from a year earlier in Greater Phoenix.