Weekly Market Commentary July 10th to July 14th 2023

The number of significant economic releases this week was a bit light but contained important inflation figures that will be considered in the FOMC’s rate decision later in the month.

The Consumer Price Index (CPI), a measure of the change in price of goods and services paid by consumers, increased 0.2% in the month of June. This was higher than the 0.1% reported for May but lower than the forecast of 0.3%. The CPI YoY was 2.9%, lower than the prior month and forecast of 3.0%. If we look at YoY CPI excluding Food and Energy, which tend to be more volatile components, the figure was 4.8% with the previous month’s figure at 5.3%. The takeaway here is that core inflation is decreasing but is still higher than the Fed’s target and a reversal of the lower food and energy costs would negatively impact headline CPI.

The Producer Price Index (PPI), a measure of the change in price of goods and services sold to consumers which reflects the higher input costs of businesses, came in at 0.1% for June. This was lower than the expected figure of 0.2% but higher than the previous month which was revised from -0.3% to -0.4%. PPI YoY also came in at 0.1%, lower than the 0.4% expectation and the previous month which was revised from 1.1% to 0.9%. The PPI excluding Food and Energy YoY also came in lower than the expected figure of 2.6% at 2.4%. The previous month’s number was also revised lower from 2.8% to 2.6%. The story here is nearly identical to CPI. The higher food and energy prices from a year ago have rolled off the data being reporting, resulting in lower figures. The difference with PPI is that some businesses with cost sensitive clientele have elected to decrease their profits and absorb some costs rather than pass the full cost increase onto the consumer.

The stock markets were up for the week. The S&P 500 was up 2.4% finishing the week at 4,505, while the Nasdaq increased 3.3% to 14,114 and the Dow Jones Industrials rose 2.3% to 34,509. The 10-year Treasury yield decreased to 3.82% this week from 4.06% at the end of last week.

Next week’s releases to keep an eye on include Retail Sales and the various housing metrics.