This week’s data may hold clues to September Fed decision

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While Monday’s data was low-tier, this week will feature several economic reports that will offer data the Federal Reserve will parse in advance of its September meeting.

Inflation data will come out on Tuesday (consumer price index) and Thursday’s heavy slate features reads on manufacturing (Empire State Manufacturing Survey and Philadelphia Fed Manufacturing Survey plus industrial production) as well as retail sales. Consumers have been fueling the economic expansion, and while the recent rate cut won’t be reflected in these numbers, economists expect a 0.3% increase in July retail sales.

Housing also appears on this week’s slate, with the NAHB Housing Market index scheduled for release on Thursday and housing starts and building permits on Friday.

Last week, the producer price index was about as expected, but supported another rate cut in September, analysts said. Consumer prices are more closely watched since producers have had difficulty passing along price increases.

Monday’s data
Consumers expect slightly less inflation in the future, according to the Federal Reserve Bank of New York’s July Survey of Consumer Expectations, released Monday, as respondents expect inflation to grow at a 2.6% rate over a one-year and three-year horizon, down a tick from the prior survey.
“Most other household expectations were mostly stable in July,” according to the survey. “In particular, house price, income, and spending expectations were unchanged. Expectations about the labor market and household finance remained optimistic.”

Expected earnings slipped to 2.4% from 2.5% a month earlier. “The series has held within a narrow range of 2.4% to 2.6% since December 2018.”

Home prices are expected to climb 3.0%, the same level that it’s been for seven months now.

Consumers see less chance than the prior month of the unemployment rate rising in a year, while the chances of losing one’s job rose slightly in consumers’ opinion, as did the chances of leaving a job of your own volition.

The chance of finding new work if one’s current job was lost declined to 59.8% from a series high of 63.7% in June, the Fed said.

Budget deficit
The U.S. government ran a larger-than-expected $119.7 billion budget deficit in July, after an $8.5 billion shortfall in June, the Treasury Department reported Monday.

Economists polled by IFR Markets expected a $112.5 billion deficit.

Outlays in the month totaled $371 billion, while the government took in $251 billion.

In July 2018 the deficit was $76.95 billion.

For the fiscal year to date, the deficit is $866.8 billion, up about $183 billion from a similar period last year.

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Economic indicators Monetary policy
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