MARKET WATCH: AUGUST 17, 2020

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Last Week’s Economic News

• As more businesses reopen and the economy picks up steam, inflation is beginning to advance. Prices consumers pay for goods and services, as measured by the Consumer Price Index, increased 0.6% in July, the same rate seen in June. For the 12 months ended in July, the CPI is up 1.0%. Gas prices continued to rise in July following June’s sharp increase, climbing 5.6% for the month. However, gas prices are down 20.3% for the 12 months ended in July. Other areas seeing a price increase in July include used cars and trucks (2.3%), apparel (1.1%), and transportation services (3.6%). Food prices fell 0.4% last month, with food prices at home dropping 1.1%. The index less food and energy rose 0.6% in July, its largest increase since January 1991.

• According to the latest report from the Federal Reserve, industrial production advanced 3.0% in July after increasing 5.7% the previous month. Despite the summer increases, industrial production is 8.4% below its pre-pandemic February level. Manufacturing output continued to improve in July, rising 3.4%. Most major industries posted increases, though they were much smaller in magnitude than the advances recorded in June. The largest gain in July, 28.3%, was registered by motor vehicles and parts. Factory production elsewhere advanced 1.6%. Mining production rose 0.8% after decreasing for five consecutive months. The output of utilities increased 3.3%, as unusually warm temperatures increased the demand for air conditioning. The level of total industrial production was 8.2% lower in July than it was a year earlier.

• July saw producer prices jump 0.6% following a 0.2% decline in June. The July increase is the largest rise since a 0.7% advance in October 2018. Prices for both services (0.5%) and goods (0.8%) rose higher last month. For the 12 months ended in July, producer prices are down 0.4%. A 5.3% jump in energy prices led the July increase in goods prices. Gasoline prices, in particular, surged 10.1% for the month. The index for goods less foods and energy moved up 0.3%. Pushing prices for services higher was a 0.8% increase in trade prices.

• Retail sales increased 1.2% in July after advancing 8.4% in June. Retail sales are 2.7% ahead of the July 2019 rate. Businesses enjoying an uptick in sales last month were electronics and appliance stores (22.9%), gasoline stations (6.2%), bars and restaurants (5.0%), and clothing stores (5.7%). Internet sales advanced marginally, up 0.7%.

• The Treasury budget for July came in at $63 billion, lower than expected. The budget deficit for June was a whopping $864 billion. Government expenditures in July were $626 billion, the bulk of which came from Health and Human Services expenditures ($170 billion). Nevertheless, the total deficit through the first 10 months of the fiscal year is $2.81 trillion — an increase of 224% from the same period in fiscal year 2019. Year-over-year, government spending has increased 51%, while receipts have remained relatively unchanged.

• U.S. import prices increased 0.7% in July following a 1.4% increase in June. Higher fuel prices led the monthly advances in import prices for both June and July. Despite the recent increases, import prices have declined 3.3% over the past year. Export prices advanced 0.8% in July after climbing 1.2% the previous month.

• According to the latest Job Openings and Labor Turnover report, June saw the number of job openings increase by 518,000 to 5.9 million. Job openings rose in a number of industries, with the largest increases in accommodation and food services (198,000); other services (69,000); and arts, entertainment, and recreation (34,000). Hires decreased to 6.7 million in June, still the second highest level in the history of the survey, second only to May’s tally. Total separations increased to 4.8 million. Over the 12 months ended in June, hires totaled 70.2 million and separations totaled 79.1 million, yielding a net employment loss of 8.9 million.

• For the week ended August 8, there were 963,000 new claims for unemployment insurance, a decrease of 228,000 from the previous week’s level, which was revised up by 5,000. According to the Department of Labor, the advance rate for insured unemployment claims was 10.6% for the week ended August 1, a decrease of 0.4 percentage point from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended August 1 was 15,486,000, a decrease of 604,000 from the prior week’s level, which was revised down by 17,000.

Eye on the Week Ahead

This week’s economic data focuses on the housing market for July. Existing home sales surged in June, climbing over 20% from May’s totals. July’s figures may not be so robust, but should continue the positive trend in home sales.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI, Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

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