09/07/2024
Last Week's Economic News in Review
September 4, 2024
Consumers’ outlook improved, layoffs declined, and inflation continued at levels that should foster a rate cut from the Federal Reserve.
Consumer Confidence
Consumer outlook improved somewhat, with the Consumer Confidence Index rising to 103.3 in August from an upwardly revised 101.9 in July (a baseline of 100 was set in 1985), according to last week’s report from The Conference Board. August's improvement maintained the trend of stability in consumer outlook, and was better than economists’ forecast of a 101 ranking.
The Present Situation Index, which measures consumers’ outlook on current income, business, and job market conditions, increased to 134.4 in August from 133.1 in July. The Expectations Index, which gauges consumers’ short-term outlook for the economy and their place in it, also improved in August to 82.5 from a revised 81.1 in July.
While the overall news was positive, some of the feedback collected by The Conference Board indicated mixed feelings on the part of consumers, noted Dana Peterson, the Board’s chief economist.
“Consumers’ assessments of the current business conditions were more positive in August,” Peterson said in comments accompanying the report. “However, their concerns about the labor market increased, reflecting a recent uptick in unemployment.”
Inflation
Inflation rates held relatively steady in July. On a monthly basis, the personal consumption expenditures (PCE) price index increased by 0.2 percent, according to the Bureau of Economic Analysis report released last week. July’s PCE price index excluding food and energy—known as core inflation—also increased by 0.2 percent, matching the growth seen in June.
The key metric that inflation watchers track is the annual rate. When compared to the same period a year ago, July’s PCE price index was 2.5 percent higher than July 2023’s index. This continued the same 2.5 percent annualized inflation gain observed in June.
PCE inflation differs from the Consumer Price Index inflation because, while CPI measures the prices of the expenditures for urban households, PCE covers the expenditures of all households. While the Federal Reserve monitors both indicators when deciding whether or not to raise interest rates, it monitors the PCE index more closely.
With annualized inflation continuing to moderate, many Federal Reserve watchers are expecting the Fed to reduce interest rates in September. Fed Chair Jerome H. Powell said the time has come in an address the week before last.
“The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks,” Powell said.
Initial Jobless Claims
In layoffs news, first-time claims for unemployment benefits filed by recently unemployed Americans during the week ending August 24 fell slightly to 231,000, according to the latest report from the Employment and Training Administration. This was down by 2,000 claims from the previous week’s revised level of 233,000.
This figure was close to economists' forecast of 230,000 claims for the week. Jobless claims remained below the 300,000-claim threshold, which economists say indicates a growing job market.
The four-week moving average, which provides a more stable measure of jobless claims, declined to 231,500 claims, down by 4,750 from the previous week’s revised average of 236,250.
This week, we can expect:
Tuesday - Construction spending for July from the Census Bureau and Department of Housing and Urban Development;
Wednesday - Factory orders for July from the Census Bureau; car and truck sales for August from the auto manufacturers; the balance of trade for July from the Bureau of Economic Analysis.
Thursday - Initial jobless claims for last week from the Employment and Training Administration.
Friday - Payrolls, unemployment, and hourly earnings for August from the Bureau of Labor Statistics.
