Market will get inflation, consumer data ahead of Fed meeting

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The Federal Reserve’s pre-meeting blackout period started, and although we won’t hear from Fed officials this week, several economic indicators are slated, including inflation data on Wednesday and Thursday and reads of the consumer sector on Friday.

The producer price index will be released Wednesday, consumer prices Thursday, with retail sales and consumer sentiment readings due Friday.

While expectations of recession are climbing among market participants, Treasury Secretary Steven Mnuchin said Monday, “I don’t see in any way a U.S. recession.” Speaking on Fox Business News, he said the U.S. economy is performing better than most other industrialized nations and “I don’t think in any way the yield curve reflects a recession.”

The rest of the year should have “healthy, robust growth,” Mnuchin said.

Confirming the softening in the labor market seen in Friday’s employment report, the Conference Board reported its Employment Trends Index slipped to 110.62 in August from 110.72 in July and is off 0.5% over the past 12 months.

“In August, for only the second time since the financial crisis, the year-over-year growth in the Employment Trends Index turned negative. And indeed, job growth has clearly slowed in 2019,” according to Gad Levanon, head of the firm’s Labor Market Institute. “However, there is no reason to worry for now, since the stable behavior of the ETI is consistent with a slowdown in employment growth and is still far from indicating a decline in the number of jobs. Beyond economic growth, it is difficult to maintain strong employment growth in such a tight labor market. For the remainder of 2019, employment will continue growing at a more moderate but still healthy pace.”

Inflation expectations declined, according to the Federal Reserve Bank of New York’s August Survey of Consumer Expectations, released Monday.

One-year inflation expectations slid to 2.4% from 2.6% a month earlier, while three-year inflation forecasts dropped to 2.5% from 2.6%.

“Expectations for one year ahead inflation, home prices changes, and changes in the price of medical care and rent all reached new series lows,” the Fed said. “Expectations about employment, growth in earnings, spending, income, and household financial situation were generally less optimistic.”

Median home price change expectations slipped to 2.9% in August, posting its first drop since December 2018. It had registered 3.0% in the eight reading since.

Income growth expectations fell to 2.7% in August from 2.9% in July, while spending also dipped 0.1-point to 3.2%, just under the 12-month average of 3.3%, the Fed reported.

The August Money Anxiety Index, which measures consumer financial concern, was flat at 43.6, suggesting “consumer financial behavior is stable, contrary to consumer confidence surveys showing a decline in financial confidence.”

The index, which is based on consumers’ actual consumer actions rather than what they say, indicates consumers are not concerned.

“The main cause of the conflicting confidence phenomenon in August is the hype in recession speculation exposure all month long,” said behavioral economist Dan Geller. “This constant barrage of recession hysteria adversely affected the responders to the University of Michigan Consumer Sentiment survey. Yet, when it comes to actual financial behavior, consumers did not make any change.”

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Economic indicators