This Week’s Economic Calendar: CPI, PPI, FOMC, And More That Investors Need To Know About

Key Takeaways

  • The determination to raise or lower rates comes from various economic reports, many set to be released this week.
  • The monthly CPI report came in hotter than expected, pushing markets down as a hawkish Fed is very likely to continue raising interest rates.
  • Investors should keep an eye on jobless claims and the consumer sentiment index for more clues about how the Fed will act next week.

Inflation and interest rates are hot topics right now. When you tune into the news, you hear people discuss these terms, along with the Consumer Price Index, the Federal Reserve, treasury yields, the stock market, and more. Most of us have a firm understanding of inflation but not so much of how the Federal Reserve decides to change interest rates.

Do they only use one report? Do they look at the stock market? To understand how the Fed reaches its decisions, we need to look at the various pieces of economic data it uses as sources. By reviewing multiple reports, the Fed can better understand where the economy is now and where it might be going. Based on this, they decide what to do with interest rates.

Luckily, this week has an abundance of data scheduled to be released that will significantly impact what the Federal Reserve decides at its next open committee meeting on September 20-21. Let’s get a better understanding of this data.

Consumer Price Index (CPI)

The Consumer Price Index (CPI) measures the rise in prices over the previous month. Lately, this report has been trending higher, though the overall number decreased in August. If you look at the headlines, you would think that the Fed is in control of inflation. But digging deeper into the numbers, you see that the significant decrease in the price of gas was enough to offset the continued rise in food prices and rent.

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Because many people just looked at the headlines, the stock market began trending higher. But Fed Chairman Jerome Powell reiterated that inflation was still not under control on August 26, 2022. The stock market fell 7% in the days after these comments.

The fall was short-lived as the market headed higher again after the Labor Day weekend. That is until the latest CPI report was released today. Analysts expected the headline number to be negative 0.1% and the core number 0.3%. The actual headline number increased by 0.1%, and the core number rose by 0.6%.

The summary of the report is eerily the same as the previous report. Gas prices fell while food and rent increased. This time, food and rent rose enough to increase the headline number, whereas they did not in the previous report.

Because of these numbers, the market is down 3% as of the time I’m writing this. Anyone looking past the headlines knows inflation is still out of control, and the Federal Reserve will remain aggressive with raising interest rates. Unfortunately, many people chose to ignore the underlying numbers in the August report.

Small Business Optimism Index

The small business optimism index report was also released today by the National Federation of Independent Business. This report is a survey of small businesses, released monthly since 1986. It gives excellent insight into the current state of small businesses and what small business owners see in their economic future.

The report shows the index rose to 91.8 in August, which beat analyst expectations. This increase is in line with the previous CPI report that showed inflation easing, again thanks to lower fuel costs.

While the index rose, it remains historically low due to concerns about inflation and the difficulty of finding workers.

This report is essential to review as small businesses make up most of the US economy.

Producer Price Index (PPI)

The producer price index is an inflation report that looks at prices from the wholesale side. It shows how inflation impacts the cost of goods from those who make products. This report will come out on Wednesday, September 14, 2022.

In the PPI report released in August, which reviews the month of July, prices fell 0.5%, the first time there has been a decrease since April 2020. The majority of the fall is from the decline in gas prices. If you take out food, energy, and trade services, the index rose 0.2% for July.

Jobless Claims

Jobless claims, both initial and continuous, will be released on Thursday, September 15, 2022. This will be a heavily anticipated report due to the signs of a weakening economy. Even though there have been cracks in the health of the overall US economy, visible in pullbacks in housing starts, high inflation, and an inverted yield curve, businesses are still hiring.

In the most recent jobless claims report, claims were a seasonally adjusted 232,000, only 5,000 less than the previous month.

As long as this trend continues, the economy, in theory, can hold off or delay a recession. With more people working and earning an income, they can spend money and keep the economy growing.

Empire State Manufacturing Survey

This monthly report is from the Federal Reserve Bank of New York and gives insight into the condition of the manufacturing industry in New York state. While the survey only covers one state, it sheds light on the national manufacturing picture.

This report is set to release on Thursday, September 15, 2022. The recent trend has been negative, with the August report coming in at a negative 31.3. Anything under zero is considered a negative outlook.

Retail Sales Data

Retail sales data also comes out on Thursday, September 15, 2022. This report reflects sales data from 13 industries, including auto sales, grocery sales, general merchandise, and more. Economists use this report to see how consumers spend money. If consumers stop spending, this could forecast a slowdown in the economy. It could also point to lower consumer sentiment.

The July report came in at 0%, with analysts expecting an increase of 0.1%. The overall trend has been lower in the three most recent reports, so analysts don’t expect a turnaround in the upcoming report.

Consumer Sentiment Index

The Consumer Sentiment Index is a consumer survey that reflects opinions on the economy’s health. The report is conducted monthly by the University of Michigan and is released on Friday, September 16, 2022.

The findings are critical because if consumers feel pessimistic about the economy’s near-term outlook, they will be less likely to spend money, especially on big-ticket items like cars and housing. The reverse is also true. More spending can result in a positive outlook, keeping the economy growing.

Currently, the index is 51.5, which is the second lowest reading since 1980. For reference, readings in the mid to upper 90s occur when the economy is doing well.

Housing Reports

Housing reports are not released this week but on Monday, September 19, 2022. This will also be an important report to pay attention to as housing starts have been weak recently. With housing making up a large portion of the economy, a slowdown in the housing industry could have a ripple effect.

For example, homebuilders might pull back on building new homes and lay off more workers. This will impact the jobless claims report. Also, without a job, people will scale back on spending, pushing us closer to a recession. Finally, consumer sentiment can suffer, too, since without a job, people are more likely to have a negative outlook on the near term.

Federal Reserve Open Market Committee Meeting (FOMC)

The next FOMC meeting is scheduled for September 20-21, and the belief is that the Fed will raise interest rates again. The amount of the increase is in question. Most analysts expect a rise of 75 basis points. Those expecting less might now think otherwise with the hotter-than-expected CPI report just released.

However, there is more data to come, and as I’ve mentioned, the Fed will consider all of it when making its decision.

Bottom Line

The economic reports released will impact the future of interest rates. They can also help the National Bureau of Economic Research determine if the economy is in a recession or not.

As a consumer and an investor, you must also pay attention to these reports. While you don’t need to study them in-depth, you do need to look beyond the headline to get a complete understanding. Often only select numbers from these reports will be pulled to make a headline, and these numbers don’t tell the entire story.

The result of the August release was an overconfident market that didn’t understand inflation was still here and not slowing down. By paying attention, we could have all predicted the recent rally would be short and avoided doing anything rash.

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