Higher Inflation
- Mortgage Returns
- Sep 3
- 2 min read
Updated: Sep 10
Overview: Over the past week, the major economic data was mixed, and its impact was relatively small. Inflation moved higher, while the labor market data weakened. Mortgage rates ended the week with little change, remaining near the lowest levels of the year.
With investors focused on inflation, the Personal Consumption Expenditures (PCE) Price Index, the favored inflation indicator of Federal Reserve officials, carries a lot of weight each month. In July, core PCE was 2.9% higher than a year ago, close to expectations. This was up from an annual rate of increase of 2.8% in June and the highest level since February. Progress toward the 2% goal of the Fed remains challenging, as this target level has not been seen since February 2021. Investors are closely watching to see how much upward pressure higher tariffs will exert on future inflation levels.
The latest Job Openings and Labor Turnover Survey (JOLTS) report, covering the month of July, was consistent with other indicators of weakening in the labor market. At the end of July, there were 7.2 million job openings, well below the consensus forecast of 7.4 million, and the lowest level since December 2020. A smaller number of openings suggests that companies face less pressure to raise wages to hire enough workers. This adds evidence to several other recent economic reports indicating that businesses remain reluctant to lay off workers, but their pace of hiring has slowed.
Another significant economic report released this week exceeded expectations. The Institute for Supply Management (ISM) Manufacturing Index rose to 48.7, a little above the consensus forecast. Readings below 50 indicate a contraction in the sector, and this was the sixth consecutive month under that level. However, higher tariffs could help boost domestic manufacturing industries in the future.
Core PCE (annual % change)
Week Ahead
Sept. 4
U.S. International Trade in Goods and Services (aka Trade Deficit)
ISM Services Index
Sept. 5
Employment Report
Sept. 11
Consumer Price Index (CPI)
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