Even though both stocks and bonds registered gains last week, economic data suggested tougher sledding may be in store. The Producer Price Index (PPI) and Consumer Price Index (CPI) came in above expectations while the University of Michigan Consumer Sentiment Index fell nearly five points, giving back most of the gains since the start of the year.1
The recent spike in oil prices poses additional risks on the growth and inflation fronts. The surprising resiliency of consumer spending, especially among low- and moderate-income households, will be tested further by higher prices at the pump. The upward pressure on headline inflation measures created by higher energy prices is likely to prevent Federal Reserve (Fed) policymakers from signaling a change to its inflation-fighting monetary stance. Concerns about a replay of the late 1970s era stagflation are becoming more common.
This week’s economic calendar includes another look at the state of the U.S. consumer with September retail sales out Tuesday. Fresh data on the housing market will be available beginning Wednesday with housing starts, followed by existing home sales on Thursday.2
Sources:
1Trading Economics – United States Michigan Consumer Sentiment; September 2023
2MarketWatch – U.S. Economic Calendar; as of 10/16/23
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