The decline was due entirely to depressed oil markets, which have pushed the price of gasoline down 23% over the past year. “Core” consumer prices—which exclude food and energy components and are considered a more-reliable measure of underlying inflation—rose 0.1% last month.
Overall prices are up just 0.2% over the past year while core prices are up 1.8%.
Shelter costs—reflecting rent and mortgage payments—climbed 0.2% from July and 3.1% over the year. Food prices were up 0.2% over the month and 1.6% over the year. Medical commodities increased 0.3% over the month and 3.4% over the year.
Also Wednesday, a separate Labor Department report showed Americans’ inflation-adjusted weekly earnings grew 0.7% in August. Earnings rose because of increases in both workers’ hourly pay and hours. Average hourly earnings, adjusted for inflation, rose 0.5%, the biggest jump since January. The average workweek grew 0.3%.
From a year earlier, real average weekly earnings rose 2.3% and hourly earnings rose 2%.
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.1% annualized rate) in August. The 16% trimmed-mean Consumer Price Index rose 0.1% (1.2% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.
The Fed Chart
The Consumer Chart
While market inflation expectations declined from 2.8% to 1.8%, consumers remained doubtful.
Rich Are Winning the Recovery; More Income Than in ’06
U.S. Census Bureau data out Wednesday underscore just how lousy the recovery has been if you aren’t rich. Looking at eight groups of household income selected by Census, only those whose incomes are already high to begin with have seen improvement since 2006, the last full year of expansion before the recession. Households at the 95th and 90th percentiles had larger earnings through 2014, the latest year for which data are available. Income for all others was below 2006 levels, indicating they’re still clawing their way out of the hole caused by the deepest recession in the post-World War II era. Read the full story here.
Who’s traveling in your view?
Travel and tourism spending rose 6.5% in the second quarter at a seasonally adjusted annual rate, the Commerce Department said on Wednesday. That’s up from a 2.2% pace in the first quarter and 5.5% in fourth quarter 2014. (…)
The acceleration appears entirely driven by domestic travelers. Separate Commerce Department data show travel spending by international visitors has leveled off this year. Travel spending for business or personal reasons is down 2.2% from January to July compared with the same period a year earlier.
- The dollar appreciated by about 12% from the middle of 2014 to the middle of 2015 against a basket of currencies tracked by the Federal Reserve, making travel in the U.S. more expensive for foreign visitors.
The same trend also has made travel abroad cheaper for Americans. U.S. travel spending in other countries was up about 8.5% from January through July compared with the same period a year ago, according to Commerce data. (…)
The Commerce Department said the tourism industry supported eight million jobs in the second quarter of the year, up about 1.6% from the first quarter.
The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo improved to 62 (5.1% y/y) from an unrevised August level of 61. It was the highest level since October 2005 and beat expectations for 61 in the Informa Global Markets Survey. The NAHB figures are seasonally adjusted. During the last ten years, there has been an 80% correlation between the y/y change in the home builders index and the y/y change in single-family housing starts.
The index of single-family home sales improved to 67 (6.3% y/y), the highest level in ten years. The index of expected sales during the next six months eased to 68, the lowest level since May.
Realtors reported that their traffic index rose m/m to 47, the highest level in twelve months.
The Mortgage Bankers Association reported that its total Mortgage Market Volume Index fell 7.0% last week (+2.2% y/y) to the lowest level since early last month. Applications to refinance a loan led the decline with a 9.1% fall (+0.5% y/y). Home purchase applications followed with a 4.2% easing (+4.6% y/y) and they have been moving slightly downward since mid-June.
The effective interest rate on a 15-year mortgage was fairly steady at 3.39%, the lowest point since late-May. The effective rate on a 30-year fixed rate loan also held w/w at 4.22% and the rate on a Jumbo 30-year loan was unchanged at 4.11%. (Chart from CalculatedRisk)
Japanese Exports Rise in August Japanese exports rose 3.1% on year in August as a weak yen increased the nominal value of outbound shipments, while they faced headwinds from a slowdown in China.
Japan’s export growth slowed for a second month, signaling waning overseas support for an economy that’s already beset by weakness at home. The value of shipments rose 3.1 percent in August from a year earlier, compared with estimates compiled by Bloomberg for a 4.3 percent increase. Imports dropped 3.1 percent, leaving a deficit of 569.7 billion yen ($4.7 billion), according the figures released by the finance ministry. Exports to China fell 4.6 percent as a market rout and economic slowdown in Japan’s biggest trading partner sapped demand. Disappointing data in recent months has raised concern on the outlook for economic growth after a contracted last quarter and an inflation rate that’s slid back to zero. (Bloomberg)
(…) France’s budget for 2016, to be detailed in a fortnight, will include €2bn in tax breaks for the middle class on top of €3bn already doled out over the past two years. About 8m households, representing two-thirds of French taxpayers, will see their tax bill decrease next year, finance minister Michel Sapin said on Wednesday.
The measures will come on top of €9bn worth of tax breaks and other gifts for companies that were part of a €41bn package that runs from 2014 to 2017, when the next presidential election takes place.
These initiatives — as well as any extra costs that may arise, including France’s pledge to take on 24,000 refugees from the Middle East — will be funded through cuts in other parts of government to meet deficit targets previously agreed with the European Commission, Mr Sapin vowed. (…)
The government is betting on 1.5 per cent growth next year, an estimate Mr Sapin described as “prudent”, and building on the at least 1 per cent it is forecasting this year. Public spending, which stands at 56 per cent of gross domestic product, is expected to decrease to 55 per cent in 2016, a level still well above the 48 per cent eurozone average.
Mr Sapin indicated he was counting on lower interest payments and increased efforts to fight tax evasion to help pay for the measures. He reiterated France would narrow its deficit to 3.8 per cent of GDP this year and 3.3 per cent in 2016. (…)
There’s less than a 50 percent chance that prices will drop to $20 a barrel, most likely when refineries shut in October or March for maintenance, Jeffrey Currie, head of commodities research at the bank, said in an interview in Lake Louise, Alberta. Goldman’s long-term forecast for crude is at $50 a barrel, he said. (…)
“When we think of the longer term oil price, yes we put it at $50 a barrel,” he said. “However the risks are to the downside given what’s happening in the other commodity markets and the macro markets more broadly.” (…)
The world is shifting from an “investment phase” of a 30-year commodity cycle to an “exploitation phase,” with shale fields as an important source of output, he said. (…)
Drink to that?
It is no longer just pub gossip: yesterday SABMiller, the world’s second-largest brewer, confirmed that it is being courted by AB InBev, the biggest. The resulting behemoth would earn about half the industry’s profit. The announcement follows months of deal talks among drinks-makers thirsty for growth. A year ago SABMiller tried and failed to buy third-ranked Heineken. June brought rumours of a union between AB InBev and Diageo, the world’s leading distiller. Most recently, analysts weighed a deal between Diageo and SABMiller. But a tie-up of the two top brewers is in some ways the most logical: SABMiller’s strength in emerging markets complements AB InBev’s in the Americas. But a deal is by no means done. AB InBev has yet to make a formal offer. Under British rules, it must do so by October 14th. (The Economist)