Equities rallied notably last week as investors awaited this week’s Federal Reserve meeting in anticipation of at least a 25.0-basis-point reduction in interest rates. Nine of the 11 market sectors ended last week higher, led by information technology. Only financials and energy lagged. The yield on 10-year Treasuries slipped to its lowest level since May 2023. Crude oil prices posted the first weekly advance in over a month, and the dollar fell amid expectations of the aforementioned interest rate cut.
Last Week’s Economic News
- The Consumer Price Index increased 0.2% in August and 2.5% over the last 12 months. This is the smallest 12-month increase since February 2021. Excluding food and energy prices, the CPI rose 0.3% last month (0.2% in July) and 3.2% since August 2023. The index for shelter rose 0.5% in August and was the main factor in the all items increase. The food index increased 0.1% in August after rising 0.2% in July. The energy index fell 0.8% over the month after being unchanged the preceding month. Over the last 12 months, prices for food rose 2.1%, energy fell 4.0%, and shelter rose 5.2%.
- Prices at the producer level increased 0.2% in August, in line with expectations. Over the last 12 months, producer prices rose 1.7%. The August increase was attributable to a rise in prices for services. Nearly 60.0% of the increase in prices for services was due to a 0.3% advance in prices for services less trade, transportation, and warehousing. Prices for goods were unchanged last month. Goods prices less foods, energy, and trade services advanced 0.3% in August, the same as in July. For the 12 months ended in August, prices less foods, energy, and trade services moved up 3.3%.
- According to the monthly Treasury statement of receipts and outlays, the August deficit was $380 billion, well above the $244 billion deficit for July and higher than the August 2023 surplus of $89.00 billion. With only one more month left in the fiscal year, the total deficit sat at $1,897 trillion, $373 billion above the deficit over the same period last fiscal year.
- U.S. import prices declined 0.3% in August after increasing 0.1% in both June and July. The August monthly decline was the largest drop since December 2023, when prices fell 0.7%. Most of the August decrease in import prices is attributable to import fuel prices, which decreased 3.0% in August after increasing 1.1% the previous month. The August drop in fuel prices was the largest one-month decline since prices fell 8.0% in December 2023. Despite the August decline, import prices rose 0.8% over the past 12 months. Prices for U.S. exports fell 0.7% in August after advancing 0.5% the previous month. Lower prices for nonagricultural and agricultural exports each contributed to the decrease in export prices in August. Over the last 12 months, export prices declined 0.7%, the first year-over-year price drop since April 2024.
- The national average retail price for regular gasoline was $3.236 per gallon on September 9, $0.053 per gallon under the prior week’s price and $0.586 per gallon less than a year ago. Also, as of September 9, the East Coast price fell $0.084 to $3.149 per gallon; the Midwest price decreased $0.073 to $3.098 per gallon; the Gulf Coast price dipped $0.044 to $2.800 per gallon; the Rocky Mountain price declined $0.044 to $3.357 per gallon; and the West Coast price rose $0.003 to $4.104 per gallon.
Eye on the Week Ahead
The focus will be squarely on the Federal Open Market Committee, which meets this week for the first time since July. Many observers predict that the Fed will cut rates by 50.0 basis points as inflation moves closer to the 2.0% Fed target and employment slows.
Have a nice week!
Sincerely,
Robert G. Carpenter