Inflation Increases by 0.1% Instead of Falling Slightly as Expected… The monthly inflation rate increased, but the annual inflation rate eased from 8.5% to 8.3% while the core annual inflation rate jumped from 5.9% to 6.3%.
What it means— Well, this is going to leave a mark. This time it wasn’t about energy, which has trended downward for weeks, it was about almost everything else. Groceries are up 13.5% over the past year, while rent is up 6.3%, the biggest jump since 1990. While inflation-adjusted wages rose for the second consecutive month, they have still fallen 2.8% over the past year. Instead of making gains, the median household income fell from $71,186 to $70,784 over the past year. Consumers are getting hammered.
Investors were blindsided by the inflation news and subsequently sold off both the fixed-income and equity markets as they tried to parse out what the Fed will do next week. This shouldn’t be a mystery. Central bank mouthpiece Nick Timiraos has already written that we’re getting another 0.75% this month, so that should be it. The question instead should be what the Fed will do after that. With Putin holding back energy, European companies shutting down some production, the EU considering excess profit taxes, and tens of millions of consumers looking at very expensive power bills, things could get ugly fast. If the Europeans get a cold snap ahead of the next Fed meeting in the first week of November, the bankers might blink and become less hawkish.
Initial Jobless Claims Fall from a Revised 218,000 to 213,000… Jobless claims dropped to their lowest level since May 28.
What it means— The jobless claim number shows the strength in the labor market, even with new workers rejoining the workforce. The number of people filing for continued claims increased by a mere 2,000, to 1.4 million, after the report for July was revised lower by 72,000. We still show no signs of increasing layoffs. This doesn’t mean workers can pay all their bills or maintain their standard of living.
Credit card balances are increasing as households use credit to cover monthly expenses. Balances extending more than a year have increased from 50% to 60% of card users.
But, it does mean most people can trade down in goods to make ends meet. It isn’t fun, but it’s better than a sharp uptrend in unemployment.
Retail Sales Increased 0.3% Last Month, July Retail Sales Revised to -0.4%… Retail sales are not adjusted for inflation, so the -0.4% retail spending in July and the 0.1% increase in August would be more than wiped away by the 0.1% inflation over those two months.
What it means— Services are the thing. People are spending a lot more at restaurants and bars but getting the same amount of goods because of inflation. This shows where our priorities lie. We have cash and want to spend it going out. Expect the trend to continue as long as people are employed, but don’t expect retail sales to jump dramatically during the holiday season. We’re spending down the savings we banked during the pandemic, so there’s no reason to think consumers will splurge as we move toward Christmas.
Capacity Utilization Sits at 80.3%… Domestic companies in mining, manufacturing, and oil and gas exploration have been using right around 80% of capacity since April. Since April 2008, capacity utilization has risen above that level only for just a few months, from August to November 2018.
What it means— This could mean that our capacity has shrunk, our use has increased, or a combination of the two. No matter what made it happen, we’re making better use of our equipment and facilities. On the surface, the economy remains strong, which makes a good case for increased use. Yes, inflation is difficult for consumers and producers, but if the Atlanta Fed’s GDPNow model is correct, our inflation-adjusted economic growth during the third quarter will be 1.4%. If inflation remains around 8.5%, the annual GDP growth rate would be 9.9%, which doesn’t scream “economy in freefall.”
Woman Claims She Is “Allergic” to Drunks Attacks Her Drunk, Sleeping Sister with an EpiPen… Naples, FL, woman Joanna Zielinski, 62, stabbed her sister several times with the EpiPen, and then called the police but didn’t say anything. The police traced the call and showed up to the home. Zielinski’s sister told them that she had fallen asleep as Zielinski drank more, did drugs, and then attacked her several times with the EpiPen. Zielinski told the police she’s allergic to drunks and was trying to sober up her sister, so, “What’s the big deal?” Although the EpiPen is Zielinski’s, she apparently did not use it correctly and thus did not inject any medicine into her sister. However, she is still facing a domestic battery charge.
Data supplied by HS Dent Research
“When the facts change, I change my mind.
What do you do?” ~ John Maynard Keynes
Our plan is “the plan will change.”
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