Friday, September 13th, 2024
It’s Friday the 13th, but market participants do not look spooked. Pre-market indexes are +90 points on the Dow, +8 on the Nasdaq and +12 on the S&P 500. This comes after this morning’s economic data release: August Import and Export Price Indexes.
We’re also roughly a week into the un-inverted 2-year/10-year bond yield spread. After 2+ years of short-term yields higher than the 10-year — normally a red flag that an economic recession is on the way — we appear to have made it through the tunnel without getting whacked by that train.
Import Prices Lower: Weak Oil to Blame?
Headline Import Prices last month came in lower than expected, -0.3%, and 40 basis points (bps) below the prior month’s unrevised +0.1%. This downshift had been expected, based on lower oil prices of late on a relative supply glut, but this is the lowest print we’ve seen since December of last year.
So it would make sense to subtract fuel prices for the month, which thankfully this report already does for us: -0.1%. This is clearly lower than the +0.2% expected, and points to something a bit more complex than simply lower oil prices. Perhaps we’re seeing a cooling-off period of the American consumer this late summer?
Year over year shows the biggest separation from expectations: +0.8% for August follows an upwardly revised +1.7% for July. This not only cuts the month-over-month rate in half, it’s the lowest print we’ve seen since March.
Can This Sway the Fed to Cut 50 bps?
These figures appear more in-line with what we’d see ahead of a 50 bps cut in interest rates from the Fed. We know next Wednesday is when the Federal Open Market Committee (FOMC) releases its latest policy statement on interest rate levels, where it is expected by everyone at least a 25 bps cut is in the works.
Based on inflation data from the CPI and PPI earlier this week, it was looking more like 25 bps was a near-certainty. The only sticking point was whether the Fed was going to take a harder tack to address the shrinking labor market before that picks up pace to the downside. It doesn’t seem particularly likely the Fed would move on weaker-than-expected Import Prices for one month, but it does put another notch in that column.
Export Prices Also Lower: Weak Demand Everywhere?
Export Prices also swung to a negative in August — an even bigger swing than on Imports: -0.7% month over month was 120 bps below the downwardly revised +0.5% for July. These are fairly volatile numbers, however, and we did strike a -0.7% back in May of this year, as well.
Exports year over year also came in at -0.7%, and this is a pretty drastic swing month over month from the downwardly revised +1.2% the previous month — 190 bps southward from July to August. This obviously says a lot more about consumer weakness overseas than it does here.
What to Expect After the Opening Bell
Also this Friday the 13th, preliminary Consumer Sentiment numbers for September come out. These are currently anticipated to tick up month over month: the new estimate of 68.4 is above the 67.9 reported in August. Should a move buoy upward, it may quell downward spending concerns among market participants. But keep in mind these consumer-oriented metrics appear to be in flux: we don’t see a clearly up-trend or down-trend in any of them from this vantage point.
Questions or comments about this article and/or author? Click here>>
Friday, September 13th, 2024
It’s Friday the 13th, but market participants do not look spooked. Pre-market indexes are +90 points on the Dow, +8 on the Nasdaq and +12 on the S&P 500. This comes after this morning’s economic data release: August Import and Export Price Indexes.
We’re also roughly a week into the un-inverted 2-year/10-year bond yield spread. After 2+ years of short-term yields higher than the 10-year — normally a red flag that an economic recession is on the way — we appear to have made it through the tunnel without getting whacked by that train.
Import Prices Lower: Weak Oil to Blame?
Headline Import Prices last month came in lower than expected, -0.3%, and 40 basis points (bps) below the prior month’s unrevised +0.1%. This downshift had been expected, based on lower oil prices of late on a relative supply glut, but this is the lowest print we’ve seen since December of last year.
So it would make sense to subtract fuel prices for the month, which thankfully this report already does for us: -0.1%. This is clearly lower than the +0.2% expected, and points to something a bit more complex than simply lower oil prices. Perhaps we’re seeing a cooling-off period of the American consumer this late summer?
Year over year shows the biggest separation from expectations: +0.8% for August follows an upwardly revised +1.7% for July. This not only cuts the month-over-month rate in half, it’s the lowest print we’ve seen since March.
Can This Sway the Fed to Cut 50 bps?
These figures appear more in-line with what we’d see ahead of a 50 bps cut in interest rates from the Fed. We know next Wednesday is when the Federal Open Market Committee (FOMC) releases its latest policy statement on interest rate levels, where it is expected by everyone at least a 25 bps cut is in the works.
Based on inflation data from the CPI and PPI earlier this week, it was looking more like 25 bps was a near-certainty. The only sticking point was whether the Fed was going to take a harder tack to address the shrinking labor market before that picks up pace to the downside. It doesn’t seem particularly likely the Fed would move on weaker-than-expected Import Prices for one month, but it does put another notch in that column.
Export Prices Also Lower: Weak Demand Everywhere?
Export Prices also swung to a negative in August — an even bigger swing than on Imports: -0.7% month over month was 120 bps below the downwardly revised +0.5% for July. These are fairly volatile numbers, however, and we did strike a -0.7% back in May of this year, as well.
Exports year over year also came in at -0.7%, and this is a pretty drastic swing month over month from the downwardly revised +1.2% the previous month — 190 bps southward from July to August. This obviously says a lot more about consumer weakness overseas than it does here.
What to Expect After the Opening Bell
Also this Friday the 13th, preliminary Consumer Sentiment numbers for September come out. These are currently anticipated to tick up month over month: the new estimate of 68.4 is above the 67.9 reported in August. Should a move buoy upward, it may quell downward spending concerns among market participants. But keep in mind these consumer-oriented metrics appear to be in flux: we don’t see a clearly up-trend or down-trend in any of them from this vantage point.
Questions or comments about this article and/or author? Click here>>