August Inflation Data Fills This Week’s Calendar

  • Treasuries are coming into the week a bit weaker as traders brace for new Treasury supply and continued heavy corporate issuance. 3yr, 10yr, and 30yr Treasury auctions will dot the schedule this week with the 3yr results providing a decent gauge of investor sentiment regarding future Fed policy, especially as it pertains to 2024 expectations. Presently, the 10yr Treasury is yielding 4.28%, down 4/32nds in price while the 2yr is yielding 4.99%, unchanged on the day.


  • It’s a busy week of data with August CPI headlining the releases and that report is due on Wednesday. Overall CPI is expected to surge 0.6% vs. 0.2% in July as gas prices rose during most of the month. That is expected to lift the YoY rate to 3.6% vs. 3.2% in July. The core rate is expected to increase 0.2% for the third straight month and the YoY rate dropping to 4.3% vs. 4.7%. The 4.3% pace would be the lowest since September 2021. While the results aren’t likely to alter the Fed’s decision to pause rate hikes at next week’s meeting, the continued moderation in the core rate will be welcomed by the Fed while the uptick in the overall rate, if solely due to higher gas prices, may prompt some Fed discussion but not likely to shift their recent focus on core services.


  • Second to the CPI report will be August retail sales due on Thursday. Expectations are for sales to slow to a 0.1% gain vs. 0.7% in July, while sales ex-auto and gas are expected to fall -0.1% vs. a solid 1.0% gain in July. If the report comes as expected the moderation in consumer spending should add to the case to pause at next week’s FOMC meeting.


  • In addition, to the above reports, PPI and import/export prices on Friday will add to the inflation data for August. While a slight uptick in overall PPI is expected (1.3%YoY vs. 0.8%), it can also be traced to an increase in energy costs while the ex-food and energy YOY pace is expected to slow to 2.2% from 2.4% in July. That would be the lowest rate since January 2021.


  • The New York Fed will release its latest consumer inflation expectations at 11am ET. This survey is a bit unique versus other consumer survey measures as it tracks the same group of approximately 1,000 households with about 1/12th getting replaced every month, so it allows tracking of changes in expectations within a static group versus a new group every month as is the case in most other consumer surveys. The Fed is big on keeping inflation expectations “well anchored” so they will be alert for any uptick in expectations. Given the recent run-up in gas prices, however, that may just be what we see.

New York Fed 1yr Ahead Consumer Inflation Expectations

Agency Indications — FNMA / FHLMC Callable Rates

Maturity (yrs) 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year
0.25 5.81 5.58 5.52 5.51 5.64 6.10
0.50 5.80 5.55 5.46 5.40 5.49 5.99
1.00 5.79 5.52 5.43 5.36 5.40 5.86
2.00 5.51 5.37 5.28 5.29 NA
3.00 5.23 5.22 NA
4.00 5.18 NA
5.00 5.14 NA
10.00 NA

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Published: 09/11/23 Author: Thomas R. Fitzgerald