The Treasury curve is 3 bps steeper this morning despite another downside miss on CPI in July. The major Asian and European equity indexes were lower overnight, but S&P 500 futures have rebounded post-CPI and are now up 5 points amid a weaker U.S. dollar. Both headline and core CPI rose 0.1% m/m in July versus expectation of a 0.2% increase (for both). This is the fifth consecutive below-expectations print for core CPI, which is the second longest streak of the last 20 years (6mo streak in 2005). On a year-over-year basis, both measures rose 1.7% (headline up from June and core unchanged). Much of the weakness is attributable to continued weakness in auto pricing (-0.4% in July) and the lodging away from home category, the latter of which posted the largest monthly decline since the 1960s.
This, of course, further fuels the ongoing debate of whether or not the recent inflation weakness is due to transitory factors. Yesterday, Fed Vice Chair Bill Dudley reiterated his expectation (and the official position of the FOMC) that inflation will rise to the 2% target over the medium term. At the same time, he acknowledged that sluggish productivity is limiting wage growth, despite strong job gains and reduced labor market slack. Today’s inflation report shouldn’t have any impact on the balance-sheet reduction plan, but it does dampen market expectations for future rate hikes, particularly for the rest of 2017.
Jason Haley
Managing Director, Investment Management Group
Indicators
| Date | Time | Event | Survey | Actual | Prior | Revised | |
|---|---|---|---|---|---|---|---|
| 08/07/2017 | 15:00 | Consumer Credit | Jun | $15.750b | $12.397b | $18.410b | $18.285b |
| 08/08/2017 | 06:00 | NFIB Small Business Optimism | Jul | 103.5 | 105.2 | 103.6 | — |
| 08/08/2017 | 10:00 | JOLTS Job Openings | Jun | 5750 | 6163 | 5666 | 5702 |
| 08/09/2017 | 07:00 | MBA Mortgage Applications | 04-Aug | — | 3.00% | -2.80% | — |
| 08/09/2017 | 08:30 | Nonfarm Productivity | 2Q P | 0.70% | 0.90% | 0.00% | 0.10% |
| 08/09/2017 | 08:30 | Unit Labor Costs | 2Q P | 1.10% | 0.60% | 2.20% | 5.40% |
| 08/09/2017 | 10:00 | Wholesale Inventories MoM | Jun F | 0.60% | 0.70% | 0.60% | — |
| 08/09/2017 | 10:00 | Wholesale Trade Sales MoM | Jun | 0.00% | 0.70% | -0.50% | -0.10% |
| 08/10/2017 | 08:30 | Initial Jobless Claims | 05-Aug | 240k | 244k | 240k | 241k |
| 08/10/2017 | 08:30 | Continuing Claims | 29-Jul | 1960k | 1951k | 1968k | 1967k |
| 08/10/2017 | 08:30 | PPI Final Demand MoM | Jul | 0.10% | -0.10% | 0.10% | — |
| 08/10/2017 | 08:30 | PPI Ex Food and Energy MoM | Jul | 0.20% | -0.10% | 0.10% | — |
| 08/10/2017 | 08:30 | PPI Ex Food, Energy, Trade MoM | Jul | 0.20% | 0.00% | 0.20% | — |
| 08/10/2017 | 08:30 | PPI Final Demand YoY | Jul | 2.20% | 1.90% | 2.00% | — |
| 08/10/2017 | 08:30 | PPI Ex Food and Energy YoY | Jul | 2.10% | 1.80% | 1.90% | — |
| 08/10/2017 | 08:30 | PPI Ex Food, Energy, Trade YoY | Jul | — | 1.90% | 2.00% | — |
| 08/10/2017 | 09:45 | Bloomberg Consumer Comfort | 06-Aug | — | 51.4 | 49.6 | — |
| 08/10/2017 | 14:00 | Monthly Budget Statement | Jul | -$54.0b | -$42.9b | -$90.2b | — |
| 08/11/2017 | 08:30 | CPI MoM | Jul | 0.20% | 0.10% | 0.00% | — |
| 08/11/2017 | 08:30 | CPI Ex Food and Energy MoM | Jul | 0.20% | 0.10% | 0.10% | — |
| 08/11/2017 | 08:30 | CPI YoY | Jul | 1.80% | 1.70% | 1.60% | — |
| 08/11/2017 | 08:30 | CPI Ex Food and Energy YoY | Jul | 1.70% | 1.70% | 1.70% | — |
| 08/11/2017 | 08:30 | CPI Core Index SA | Jul | 251.995 | 251.914 | 251.627 | — |
| 08/11/2017 | 08:30 | CPI Index NSA | Jul | 244.925 | 244.786 | 244.955 | — |
| 08/11/2017 | 08:30 | Real Avg Weekly Earnings YoY | Jul | — | 1.10% | 1.10% | 1.20% |
| 08/11/2017 | 08:30 | Real Avg Hourly Earning YoY | Jul | — | 0.70% | 0.80% | 0.90% |