It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines…
Wholesale Prices Rise More Than Expected
On Wednesday, the Labor Department announced that its Producer Price Index (PPI) rose 0.3% in June. This was higher than economists’ consensus estimate of a 0.2% increase. The core PPI, which excludes food, energy and trade, also rose 0.3% in June. The cost of services rose 0.4% in June, driving overall PPI higher.
In the past 12 months, the PPI has risen 3.4%. This is the highest annual pace in over six years. Meanwhile, the core PPI has risen 2.7%. Interestingly, the 10-year Treasury bond yield meandered lower when the PPI report was released. Like the Fed, bond investors also apparently believe that the recent wave of wholesale inflation may be temporary.
Consumer Inflation Comes Below Estimates
On Thursday, the Labor Department announced that its Consumer Price Index (CPI) rose 0.1% in June. This was below economists’ consensus estimate of a 0.2% increase. Food prices rose 0.2% in June, while energy prices slipped 0.3% due to lower natural gas and electricity prices. The core CPI, which excludes food and energy and trade, rose 0.2% in June.
In the past 12 months, the CPI has risen 2.9%. This also represents the highest rate in six years. The core CPI has risen 2.3% in the past year. Like the PPI report, the 10-year Treasury bond yield barely budged when the CPI was announced. So, if the bond market is not worried about inflation, we shouldn’t worry either.
Consumer Borrowing Surged in May
Finally, the Fed reported this week that consumer borrowing surged to $24.6 billion to a seasonally adjusted annual pace of $3.9 trillion in May. This was a massive surprise, since economists were expecting only a $12.4 billion increase in consumer borrowing. In the past 12 months, consumer credit has risen 7.6%, which is the fastest annual pace since November. This means that retail sales should remain strong in the near term, which is great for continued strong GDP growth.
That’s all I have for you this week. I’ll be in touch again next week with the latest ratings out of Portfolio Grader.
Until next week,