Overview: There were few significant surprises in the major economic reports released over the past week. In particular, the latest inflation data was in line with expectations. As a result, mortgage rates ended the week with little change.
Federal Reserve officials keep a close eye on inflation, and the Personal Consumption Expenditures (PCE) Price Index is their favored indicator. In July, core PCE, which excludes food and energy to reduce short-term volatility, was up 2.6% from a year ago. This was the same annual rate of increase as last month and the lowest level since March 2021. While far below its recent peak, it persistently remains above the Fed's target of 2%, confirming the concerns of officials that further progress in bringing down inflation will be more difficult.
Another significant economic report released this week from the Institute for Supply Management (ISM) revealed continued weakness in the manufacturing sector. The ISM Manufacturing Index rose slightly to 47.2, which is close to the consensus forecast. Since readings above 50 indicate an expansion in the sector and below 50 indicate a contraction, the report suggests that this important segment of the economy is still slowing.
The biggest surprise of the week came from the Job Openings and Labor Turnover Survey (JOLTS) report, which suggested looser conditions in the labor market. At the end of July, there were 7.7 million job openings, which is far below the consensus forecast of 8.1 million and the lowest level since January 2021. In addition, the results for June were revised substantially lower. A smaller number of openings suggests that companies face less pressure to raise wages to hire enough workers, so this positive news on inflation supports the case for Fed rate cuts later in the year.
Core PCE (annual % change)
Week Ahead
Sept. 5
ISM Services Index
Sept. 6
Employment Report
Sept. 11
Consumer Price Index (CPI)
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