There are a few important reports on the U.S. economy worth mentioning this morning. First, household inflation pressures picked up last month, according to the Bureau of Labor Statistics, as the headline consumer price index (CPI) rose by a larger-than-expected 0.3 percent. “Core” CPI, which strips out the volatile food and energy components, also increased by 0.3 percent and the annualized rate of growth has jumped to a near-cycle high. Further, goods inflation continued to accelerate, likely a side-effect of the ongoing trade war (tariffs). Although not the Fed’s preferred measure of household inflation, the July CPI data support chair Powell’s suggestion that earlier weakness in inflation will prove to be transitory. Recent data on wholesale price pressures, though, came in softer than anticipated, which along with elevated geopolitical tensions could make it hard for monetary policymakers to avoid additional rate cuts this year.
Elsewhere, small business owner confidence improved last month, according to a new report from the National Federation of Independent Business. Specifically, the headline optimism index ended July at 104.7, the 2nd-highest reading of 2019 and a clear sign of how fast sentiment can rebound when trade tensions abate. Seven of the ten main components that make up the confidence gauge firmed in July, including marked gains in surveyed owners’ outlooks for sales growth and the overall economy. As for employment conditions, small business job creation cooled last month to the weakest level in almost a year but gauges of job openings and hiring plans rose considerably. This is not too surprising since 56 percent of surveyed owners complained about there being “few or no” qualified job applicants for the vacancies they are trying to fill, a new all-time high. Moreover, “quality of labor” was once again the top-cited problem facing small businesses, and the “cost of labor” appears to be a growing challenge as well.
Sources: Econoday, U.S. DoL, Bloomberg, ZH, Twitter, NFIB, FRBSL
Post author: Charles Couch