August Inflation and Retail Sales

A couple first-tier economic releases will likely garner the most attention from traders this week as the Fed goes into its quiet period before the September 22 FOMC meeting. First, the August CPI numbers will be released tomorrow and the moderation of springtime price spikes that began in July is expected to continue in August, albeit just slightly. Overall CPI is expected to increase 0.4% versus 0.5% in July  bringing the year-over-year number down to 5.3% from 5.4%. The core rate is expected to increase 0.3% matching the gain in July while the year-over-year rate ticks down to 4.2% versus 4.3% the prior month. The Treasury market has generally bought into the Fed’s “transitory” argument and as long as expectations are met that’s likely to continue. The market will be, however, attuned to any disappointment in the emerging price moderation.

The second report likely to get investors attention this week will be the August retail sales numbers due on Thursday. Expectations are for another somewhat disappointing showing with overall sales expected to decrease –0.9% after decreasing –1.1% in July. The somewhat soft expectations are one reason third quarter GDP estimates have been marked down of late with the Bloomberg consensus at 5.1% QoQ annualized versus 6.6% in the second quarter as personal consumption expectations dropped to 2.2% versus an 11.9% spike in the prior quarter.



Treasury Curve Today Week Change
3 Month 0.04% Unchanged
6 Month 0.05% Unchanged
1 Year 0.07% +0.01%
2 Year 0.22% +0.01%
3 Year 0.45% +0.03%
5 Year 0.82% +0.01%
10 Year 1.34% -0.03%
30 Year 1.92% -0.06%

Short-Term Rates

Fed Funds 0.25%
Prime Rate 3.25%
3 Mo LIBOR 0.12%
6 Mo LIBOR 0.15%
12 Mo LIBOR 0.22%
Swap Rates  
3 Year 0.566%
5 Year 0.916%
10 Year 1.359%


Economic Calendar

Date Statistic For Briefing Forecast Market Expects Prior
Sep 14 Small Business Optimism Aug 99.0 99.0 99.7
Sep 14 CPI (Mom) Aug 0.4% 0.4% 0.5%
Sep 14 CPI (YoY) Aug 5.3% 5.3% 5.4%
Sep 14 Core CPI (MoM) Aug 0.3% 0.3% 0.3%
Sep 14 Core CPI (YoY) Aug 4.2% 4.2% 4.3%
Sep 15 Industrial Production Aug 0.4% 0.4% 0.9%
Sep 15 Manufacturing Production Aug 0.4% 0.4% 1.4%
Sep 16 Retail Sales (MoM) Aug -0.9% -0.9% -1.1%
Sep 16 Retail Sales Control Group (MoM) Aug -0.2% -0.2% -1.0%


Top 5 Events for the Week

September 13—17, 2021

1.  August CPI— Tuesday

The moderation in  spring-time price spikes that began in July should continue into August when looking at expectations CPI.  For August, overall CPI is expected to increase  0.4% versus 0.5% the prior month. The core rate (ex-food and energy) is expected to increase 0.3% matching the pace in July.  Overall CPI (YoY) is expected to dip to  5.3% after the prior month’s 5.4% result. Core CPI (YoY) is expected to dip a tenth to 4.2% after peaking at 4.5% in June. The Treasury market has taken the price spikes in stride, buying into the Fed’s transitory story, and while August is expected to show a continued easing of sorts that began in July, the market will be alert for any disappointments in the expected trend and what that might mean for Fed policy in regards to the inflation threat.

2.  August Retail Sales – Thursday

With the impact of spring-time stimulus checks fading from the scene, the latest retail sales numbers are expected to show a second straight month of decreased spending as rising virus cases and flagging confidence look to have tightened the purse strings for many consumers. For the month, retail sales are expected to have decreased –0.8% versus a –1.1% decrease in July. Sales ex-auto and gas are expected to have decreased -0.3% versus a –0.7% dip in July. The retail sales control group—a direct feed into GDP—is expected to post a  -0.2% dip versus a –0.4% dip in July. All-in-all a second consecutive disappointing read on retail sales is expected and that may have already led to reductions in third quarter GDP estimates.  The current Bloomberg consensus for third quarter GDP is 5.0% QoQ annualized versus 6.6% in the second quarter as consumer spending is expected to slow to 2.2% versus a stimulus check-induced pop of 11.9% in the second quarter.

3. August Industrial Production—Wednesday

Manufacturing and industrial production have held up well throughout the recovery despite inventory shortages and other supply chain bottlenecks and that is expected to continue in August. For the month, industrial production is expected to increase 0.4% versus a 0.9% pop in July.  Manufacturing production is expected to increase 0.4% versus a pop 0.4% the prior month. Capacity utilization is expected to edge up to 76.3% versus 76.1% the prior month.

4. Weekly Initial Jobless Claims—Thursday

The weekly initial jobless claims series has been setting pandemic lows for the last few months and now the labor market braces for the impact of expiring emergency unemployment benefits that occurred on Labor Day.  This time expectations are for claims to total 320 thousand versus 310 thousand the prior week. Continuing claims are expected to trend lower dipping to 2.740 million claims versus 2.783 million the prior week.  The 2.783 million in continuing claims was a new pandemic low which is expected to be bested with the latest claims figure.  As mentioned, with the expiration of supplementary benefits early in the month we may start to see some volatility in this data series. It may be a bit too early this week but watch this series as September plays out.

5. September Preliminary University of Michigan Consumer Sentiment -Friday

Two-thirds of the US economy is consumption-based so gauging consumer sentiment is crucial to determining how they feel about spending. Sentiment took a huge hit in August as inflation expectations and rising virus cases sent sentiment to a decade low reading.  The Bloomberg consensus is for sentiment to be slightly better in September at 72.0 versus 70.3 the prior month. Sentiment peaked at 101 in February 2020 so we have plenty of work to get back to pre-pandemic levels. Inflation expectations will be watched closely too as they remain uncomfortably high at 4.6% in August for the 1yr outlook and to 2.9% in the 5-10yr outlook.

Yield Universe

Source: SouthState Bank Trading Desk

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Published: 09/13/21 Author: Thomas R. Fitzgerald