Watch The Consumer Price Index Friday

Tomorrow monring at 7:30 am (central) we have the only real economic report that has a minor possibility of moving some markets and that is the CPI (Consumer Price Index).

Currently the consensus forecast for the month of July is for an increase in prices of .2% month over month or 2.3% year over year.

Today we had the producer price index come in flat–no increase, month over month–the core rate (stripping out food and energy) was at an increase of .3% for an increase of 2.8% year over year.

Markets have recently pretty much ignored both the PPI and CPI in terms of being market moving events–and likely that will continue–BUT a crazy number like plus .5% would get folks attention.  We don’t expect something crazy to happen, but if it does watch the 10 year treasury to breach 3%.

Of course any number over the expected .2% adds fuel to the fire for a Fed Funds rate hike in September, which we already believe is near cast in stone.

4 thoughts on “Watch The Consumer Price Index Friday”

  1. well the CPI came in at 0.2 as forecast, yr over yr slightly higher at 2.4 w core .2 as well.. shelter costs higher contributed the largest part.. I don’t know who can afford to buy a home and rents are also rising fast for folks.. I guess that is good for Apt REITs

    Today though it is Turkey, emerging markets getting hit w high US$, still prospects of rising US rates affecting markets and folks seem to be rushing into Treasuries again, 10yr at 2.88.. 3mLIBOR down to 2.31..

    it will be interesting to see if the current “uncertainty” carries forward for long.. as Tim has observed, nothing seems to rattle the markets for more than a few days. Int’l currency/credit concerns were enough to pause the FED before, will it be enough now? personally I doubt it.. happy volatility folks! Bea

    1. Yes Bea–it is always something–but investors can’t focus for more than a few hours so it seems.

      I was kind of focused on 3% to the upside instead of 2.9% on the down side–between Turkey and the wage component of the CPI (which I believe fell) down we go again.

      I think the September rate hike will happen, but after that is questionable. Of course I wouldn’t bet either way–but I would enjoy the incremental interest I would receive on money markets etc.

      1. First, thanks for pointing out that the numbers were on the way. Most commentators weren’t even focused on the release. I still think an increase in September is likely. We also have heard remarks from Chicago Fed President Evans, considered a dove, that the increases might continue into 2020. He doesn’t sound like a guy who would vote against an increase in September. The increase in CPI in large part went to housing costs. But I noticed the CEO of Redfin remarked that he thinks there is a sudden softness in housing prices, particularly on the west coast, even in areas where there is limited supply (Portland, Seattle, San Jose). And there are stories of free first month’s rent in Seattle. So maybe housing will cool off a bit. In any case, if we get one more rate hike, and if it is combined with continued chaos abroad that causes the “flight to quality,” that yield curve will keep getting flatter. But some of the chaos abroad can be eliminated overnight with an agreement.

        1. Hi Roger–I have noticed quite a dramatic slowdown in property sales etc in Minnesota (I am a property appraiser)–so far I chalk it up to the dog days of summer–but if September continues poor it may be something deeper.

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