10 Things You Need To Know: August 16, 2022
Key data releases this week include: NAHB Housing Market Index (Mon), housing starts (Tue), industrial production (Tue), retail sales (Wed), FOMC meeting minutes (Wed), existing home sales (Thu), and leading economics indicators (Thu).
Haver
August 10, 2022
Consumer prices were unchanged in July after an outsized 1.3% m/m jump in June. The y/y rate slowed to 8.5% in July from 9.1% in June. The Action Economics Forecast Survey had expected a 0.2% m/m increase. The core index increased 0.3% m/m in July (5.9% y/y), down markedly from the 0.7% m/m advance in June. A 0.5% monthly gain was expected.
Haver
August 11, 2022
The Producer Price Index for Final Demand fell 0.5% during July following a 1.0% June rise, revised from 1.1%. The May increase of 0.8% was revised from 0.9%. During the last 12 months, the increase slowed to 9.8% from an 11.7% March peak. A 0.3% July increase had been expected in the Action Economics Forecast Survey.
Haver
August 12, 2022
The National Association of Realtors’ Fixed Rate Mortgage Housing Affordability Index fell 3.6% in June (-31.2% y/y) to 98.5 after a 5.5% May shortfall. Affordability has declined for nine straight months, off 34.1% during that span. The affordability level was the lowest since June 1989 and down 45.7% since its recent peak in January 2021.
Barron’s
August 15, 2022
The aggregate S&P 500 earnings estimate for 2023 has dropped almost 3% since June, according to Evercore, to $245 per share. Meanwhile, the S&P 500 is up about 15% since its mid-June intraday low for the year, which came just before earnings season began. Don’t be surprised to see the market take a breather soon.
Barron’s
August 15, 2022
Services, particularly rents, represent a growing portion of inflationary pressures. Those will be tougher to bring down than goods prices and energy and commodity prices. Meanwhile, economists at Citi warn that the details of the July CPI report suggest underlying inflation isn’t slowing, and that services prices in the PPI, such as medical services, were surprisingly high.
Barron’s
August 15, 2022
The new minimum tax rate might sound scary, but it isn’t. A slight majority of companies in the S&P 500 have had a high enough average operating income to pay the 15% tax, but all but about 50 of them are already paying an effective tax rate of 15% or more. Those 50 companies have recently been contributing about 15% of the S&P 500’s aggregate earnings per share. Taxing them at 15% would shave about 0.4% off the index’s aggregate per share profits.
FT
August 10, 2022
US Federal Reserve policymakers said the slowdown of inflation in July is welcome news, but the central bank will need to keep pushing interest rates higher next month. Minneapolis Federal Reserve Bank President Neel Kashkari, San Francisco Fed President Mary Daly, and Chicago Fed President Charles Evans said the only unanswered question for the Fed is the size of the next rate hike.
Capital Economics
August 12, 2022
The drop back in CPI inflation in July wasn’t enough alone to convince Fed officials to change their plans for interest rate hikes. But we expect the better news on inflation to continue over the coming months, which will eventually persuade the Fed to halt its tightening cycle early next year.
The WSJ
August 14, 2022
Economists have cited the labor shortage as an increasing hindrance to economic growth and to the Federal Reserve’s prospects of achieving a soft landing from high inflation. The workforce has 600,000 fewer people than it did in early 2020.