Latest U.S. economic data shows heat
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Tiffany Herring/Axios
For all the talk of soft landings and fading inflation pressure, the latest round of data on the U.S. economy still shows some heat.
Why it matters: Demand across the U.S. economy remains solid — a key reason the nation has dodged a recession.
- The flip side is the possibility that inflation will be more persistent than policymakers anticipate, owing to factors the Federal Reserve can't control: energy prices.
Driving the news: Retail sales rose 0.6% in August — much more than economists expected. That was largely due to higher prices at gasoline stations, where receipts increased by 5.2%.
- But excluding gas stations and auto shops, spending still powered ahead, increasing 0.2% (instead of the outright decline forecasters expected).
Between the lines: Even as consumers were squeezed by higher prices at the pump, they didn't feel the need to pull back on everything else.
- Spending is still solid across a range of categories, including clothing stores, electronics shops and health stores.
What they're saying: This report "does not look like the last gasp of a consumer that is struggling on the ropes, being pummeled by higher interest rates and weak confidence," Richard de Chazal, a macro analyst at William Blair, wrote in a note.
- "Rather, it shows a consumer that is still hanging in there, with low unemployment and steady income, excess savings, and confidence that seems to be recovering as the economy continues to defy recession predictions."
- Jobless claims, also out Thursday, continued to show low levels of layoffs, pointing to a still-solid labor market.
Meanwhile, the Producer Price Index, which measures wholesale prices that might eventually get passed on to consumers, rose a more-than-expected 0.7% in August — the biggest monthly spike in over a year.
- Much like the big headline gain for the Consumer Price Index released Wednesday, PPI's jump was caused by soaring energy costs that looked to be in the rearview mirror: The energy index rose by more than 10%, while gasoline prices jumped 20%.
- But even stripping out energy, food and trade services, the core PPI rose 0.3%, implying some inflation pressure remains in the pipeline even apart from the oil price surge.
The bottom line: The economy continues to be more resilient, with strong demand that could make the inflation battle even harder. The question is whether it continues.
