In this week’s recap: consumer optimism increases, the retail sales pace slows, inflation pressure weakens, and Wall Street sees wide-ranging gains.
Weekly Economic Update
September 17, 2018
CONSUMER SENTIMENT EXCEEDS EXPECTATIONS
In its initial September edition, the University of Michigan’s monthly consumer sentiment index rose 4.6 points to 100.8, a 6-month high. Economists polled by Bloomberg had forecast a reading of 96.6. Fifty-six percent of households responding to the survey said that they had made recent financial gains; the all-time high for the survey is 57%, recorded in both March 2018 and February 1998. The index’s future expectations gauge reached a 14-year peak of 91.1.1
RETAIL SALES ALMOST FLAT IN AUGUST
The 0.1% August advance was the smallest monthly gain since February. Core retail purchases (which exclude the automotive, food, and home improvement categories) rose by the same amount. The Department of Commerce did revise the July numbers upward: the overall retail sales increase in that month went to 0.7%; the core retail sales gain, to 0.8%.2
ANNUALIZED INFLATION DECREASES
August’s Consumer Price Index shows 12-month inflation at 2.7%, down from 2.9%. Yearly core inflation retreated similarly, lessening from 2.4% to 2.2% last month. The headline CPI rose 0.2% in August; the core CPI, 0.1%. Both the headline and core Producer Price Index declined 0.1% in August, significantly reducing their annualized gains. Twelve-month wholesale inflation shrank 0.5% to 2.8%, while yearly core wholesale inflation retreated to 2.3% from 2.7%.3
A POSITIVE FIVE DAYS FOR EQUITIES
All three major stock indices advanced last week. The Dow Industrials gained 0.92% to reach 26,154.67 at Friday’s close. Settling at 8,010.04 Friday, the Nasdaq Composite was up 1.36% for the week. The S&P 500 improved 1.16% to 2,904.98. The main barometer of Wall Street volatility, the CBOE VIX, fell 18.88% for the week to 12.07.4
FedEx announces earnings Monday. | AutoZone, Cracker Barrel, and General Mills present earnings Tuesday. | On Wednesday, the Census Bureau provides a snapshot of August residential construction activity, and Red Hat reports quarterly results. | Investors consider August existing home sales numbers, a new initial jobless claims report, and earnings from Darden Restaurants, Micron Technology, Steelcase, and Thor Industries on Thursday. | Nothing major is slated for Friday.
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Sources: wsj.com, bigcharts.com, treasury.gov - 9/14/184,5,6,7 Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.
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1 - bloomberg.com/news/articles/2018-09-14/u-s-consumer-sentiment-rises-to-six-month-high-above-estimate [9/14/18]
2 - cnbc.com/2018/09/14/us-retail-sales-august-2018.html [9/14/18]
3 - investing.com/economic-calendar/ [9/14/18]
4 - markets.wsj.com/us [9/14/18]
5-bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F15%2F08&x=0&y=0 [9/14/18]< br>5-bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F15%2F08&x=0&y=0 [9/14/18]< br>5-bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F15%2F08&x=0&y=0 [9/14/18]
6 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [9/14/18]
7 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [9/14/18]
Posted on Mon, September 17, 2018
by Sound Financial