This week’s economic calendar featured several important releases. In August, U.S. consumer prices exhibited a larger-than-anticipated year-on-year acceleration, mainly triggered by a surge in gasoline prices, which may influence the Federal Reserve’s interest rate trajectory for the remainder of the year.
The Labor Department’s widely monitored consumer price index (CPI), a metric gauging price increments, registered a 3.7% annual increase in August, surpassing July’s 3.2% figure and surpassing the consensus estimate of 3.6%. On a month-to-month basis, the CPI recorded a 0.6% rise, a notable acceleration from the previous month’s 0.2%. The sharply rising gasoline prices were the primary contributor to this rapid monthly ascent, accounting for more than half of the overall increase, as reported by the Labor Department.
Core inflation which excludes volatile components such as food and fuel, exhibited a 0.3% rise on a monthly basis, exceeding expectations of a 0.2% reading. The yearly core CPI tapered from 4.7% to 4.3%, aligning with projections. This marks the smallest annual increase in underlying inflation in nearly two years.
Mitigating high inflation has been a central objective of the Federal Reserve’s comprehensive campaign of interest rate hikes over the past year and a half. While it is widely anticipated that policymakers will leave rates on hold at their September meeting, uncertainties loom over their decisions later in 2023.
Subsequent inflation data released on Thursday indicated that the producer price index for August posted an annualized gain of 1.6%, surpassing projections of 1.2%. Additionally, retail sales for August recorded a 0.6% increase, surpassing forecasts of 0.2%. Concurrently, the weekly volume of Americans seeking unemployment benefits stood at 220,000 last week, lower than expected.
Retail sales exhibited less deceleration than initially projected for August, but consumers are grappling with mounting pressures, including elevated gas prices and the resumption of student loan repayments. The U.S. economy could face additional challenges if the United Auto Workers proceed with a strike following the expiration of their contracts with Ford, General Motors, and Stellantis.
Over the past two months, the U.S. benchmark index has been adversely affected by the surge in the 10-year Treasury yield, as persistent economic strength may tip the Fed to consider another interest rate hike either in November or December. Although hiring and wage growth have moderated, there are no clear indications of a downturn at this juncture.
Nonetheless, the U.S. economy may be approaching a turning point, as the substantial savings accumulated early in the pandemic have been largely depleted, pent-up demand for goods has been satisfied, and discretionary spending faces new constraints due to rising gas prices and student loan repayments.
A potentially significant disruption could arise if the United Auto Workers disrupt auto production, and the looming risk of a government shutdown at the end of the month adds further uncertainty.
The U.S. benchmark index rebounded in late August and gains could extend in the next few months. However, price swings are likely to become choppier and upside from here is likely to be limited as the index approaches its all-time high of 4,774.
Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.
Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.
Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.
Julian joined Leverage Shares in 2018 as part of the company’s primary expansion in Eastern Europe. He is responsible for web content and raising brand awareness.
Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.
For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.
Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.
Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.
Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.
Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.
He joined Leverage Shares from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.
Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.
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