Deflation in Core Goods Prices| No sustained relief on the Shelter CPI | Benign Estimates for July PCE | Consumer Spending Resilience

 In this Second Part, we look at the economic data prints:

A Benign CPI reading - mom inflation at 0.15% mom and Core print at 0.17% mom. Core goods disinflation continued with mom at -0.32% with 3m annualized rate at -1.93%. Core Services Inflation rose at 0.31% mom which is at pace higher than the average 0.18% mom in the prior 2 months. Super Core Services also rose at a mild 0.14% mom. The respite in Shelter inflation seen in June appears short lived with prices rising at 0.38% mom in July. There has also been a talk around re-acceleration in inflation as mild prints in the second half of 2023 weigh on the readings going forward. Fed members have also highlighted that the Inflation progress last year benefited from supply-side improvements like eased supply chains, increased labor force participation, and lower energy prices. 

However, these factors may not continue to reduce inflation, as supply chains have normalized, labor force participation has stabilized, and immigration rates may decline. Additionally, geopolitical risks, increase in container shipping costs and potential fiscal stimulus could increase inflationary pressures, and higher immigration could drive up housing costs due to limited affordable housing supply.

Headline PPI for Final Demand rose 0.10% mom | 2.27% yoy but what stood out to me was the PPI excl Food, Energy and the Volatile Trade Services Sector rising 0.30% mom and 3.30% yoy. Also the fact that while CPI showed Core Goods in deflation, the PPI for Goods rose 0.62% mom and PPI for Energy rose 1.90% mom. 

Median PCE Estimates for July are at 0.16% mom for both the Headline and the Core number. The Cleveland Fed Nowcast estimates July Headline PCE at 0.17% and Core PCE at 0.13% and the August numbers are seen at 0.21% and 0.22% on headline and Core numbers respectively.

The Retail Sales print came in at a robust 1% mom sidelining the concerns of an immediate Economic Slowdown. 

The Initial Jobless Claims number came in below the 4W Average of 236,500 and the Continued Jobless Claims were in line with the 4W MA. The spike in initial Jobless Claims in July could be attributed to Hurricane Beryl. 

The Atlanta FED GDPNow estimates peg Q3 GDP growth at 2.40%. 

Industrial production fell 0.6% in July after increasing 0.3% in June. Early July shutdowns concentrated in the petrochemical and related industries due to Hurricane Beryl held down the growth of industrial production by an estimated 0.3%. Manufacturing output stepped down 0.3% as the index for motor vehicles and parts fell nearly 8%; manufacturing excluding motor vehicles and parts rose 0.3%. The index for mining moved sideways while the index for utilities decreased 3.7%. At 102.9 percent of its 2017 average, total industrial production in July was 0.2% below its year-earlier level. Capacity utilization moved down to 77.8% in July, a rate that is 1.9% below its long-run (1972–2023) average.

The week ahead sees the release of Home Sales data, Jobless Claims, S&P PMI, Homes Sales. Speeches include the Fed's Waller, Bostic And Barr and Chair Powell's Speech at the Jackson Hole Symposium. Then you have the FOMC Minutes and Benchmark Revision by the BLS (covered in the earlier post).