Gasoline to Spur U.S. Consumer Spending; Bank of Mexico Eyes ‘Prolonged’ Pause; RBA Set to Hold Rates but Retain Hawkish Hue -September 29, 2023 at 07:17 am EDT
Gasoline to Spur U.S. Consumer Spending; Bank of Mexico Eyes ‘Prolonged’ Pause; RBA Set to Hold Rates but Retain Hawkish Hue By James Christie
Good day. Analysts anticipate the U.S. Commerce Department today will report a rise in consumer spending in August propelled by high gasoline prices. They also expect the Federal Reserve’s preferred inflation gauge, the PCE price index, will post a mild increase, which would be a welcome development for the Fed. Its officials want to see “convincing evidence” they have lifted interest rates enough to sustainably lower inflation to their 2% goal, Fed Chair Jerome Powell has said. Elsewhere, the board of governors of the Bank of Mexico voted unanimously Thursday to leave the overnight interest-rate target at 11.25%, the highest-ever level after a nearly two-year monetary tightening cycle. Mexico’s central bank said the inflation outlook has improved but continues to be “very complicated.” And the Reserve Bank of Australia is widely expected to leave its official cash rate on hold for a fourth month on Tuesday, but is unlikely to telegraph to financial markets that it is becoming relaxed about the medium-term inflation outlook.
Now on to today’s news and analysis.
Top News Consumer Spending Could Flash Mixed Signals
Higher gasoline prices likely boosted August consumer spending and kept inflation elevated, while underlying price pressures cooled, analysts say.
Economists surveyed by The Wall Street Journal estimate consumer spending rose 0.4% last month , down from a 0.8% rise a month earlier. That still-strong August increase was fueled by solid growth in jobs and wages, but also rising pump prices. Keeping up that pace this fall could be a challenge as Americans face the resumption of student-loan repayments, the depletion of pandemic savings and high interest rates.
There’s a New Way to Track ‘Supercore Inflation,’ a Fed Favorite
Federal Reserve watchers have an easier way to track one of the measures the central bank is monitoring to gauge its progress on cooling inflation. The Commerce Department starting this month is publishing what some refer to as a supercore inflation reading : the personal-consumption expenditures price index for services excluding energy and housing. The agency released data for this metric [https://urldefense.com/v3/__https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=survey*eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDNdLCJkYXRhIjpbWyJjYXRlZ29yaWVzIiwiU3VydmV5Il0sWyJOSVBBX1RhYmxlX0xpc3QiLCI2NyJdXX0=__;Iw!!F0Stn7g!AluIBIugn5jlB9958MxdCUIP93j52eE1n0aiG6_GFyfYgx0WVYGAAHwG8mJNbFwGDGUIl15_nQSn2NKMaIJZ9WHQsi7PZKFkwnU5K0Kc$ ] for the first time on Thursday as part of revisions to second-quarter gross domestic product figures.
Chicago Fed’s Austan Goolsbee Warns of Risk of Causing Downturn
“Believing too strongly in the inevitability of a large trade-off between inflation and unemployment comes with the serious risk of a near-term policy error,” Chicago Fed President Austan Goolsbee said Thursday.
U.S. Economy The 2023 Stock-Market Rally Sputters in New World of Yield
A prolonged period of elevated rates could upend the investing strategies that prevailed during years of rock-bottom rates after the global financial crisis, when investors saw few options for returns outside the stock market.
How Painful Could a Shutdown Be? That’s Up to Biden
An 1884 law and other statutes require swaths of the U.S. government come to a halt when Congress fails to approve agency appropriations. But the White House has some wiggle room to interpret the rules, legal experts say.
National Parks Will Close if Government Shuts Down
UAW Joins Wave of Union Strikes Looking for Big Wins
The U.S. lost more than seven million workdays because of labor disputes this year through August, more than any full year since 2000 -and the figures don’t include the United Auto Workers strike that started earlier this month.
Oil Is Near $100. Shale Isn’t Coming to the Rescue.
Though some analysts say oil prices could soon hit $100 a barrel, U.S. shale companies aren’t rushing to drill more, meaning prices might remain elevated until someone else adds production or demand ebbs.
Video: Decadeslong Permit Process Holds Back 10,000 Energy Projects Key Developments Around the World Bank of Mexico Stands Pat on Rates; Eyes ‘Prolonged’ Pause
The Bank of Mexico kept interest rates unchanged for a fourth consecutive meeting, as expected, reiterating it expects to stay on hold for a prolonged period as the inflation outlook has improved but remains “very complicated.”
RBA Is Set to Extend Rate Pause But Retain Hawkish Hue
The Reserve Bank of Australia is set to keep its key policy rate unchanged at 4.10% on Tuesday. But it “is expected to retain its tightening bias,” said Stephen Halmarick, chief economist at the Commonwealth Bank of Australia.
Japan’s Economy Minister Warns of Risk From China’s Real-Estate
The struggles in China’s real-estate industry and weak Chinese domestic demand pose a risk to the Japanese and global economies, Japan’s new economy minister said. Potentially, “the impact is really big,” he said
Japan Finance Minister Pledges Action Against Excessive Yen Moves
Japan’s Finance Minister Shunichi Suzuki renewed his pledge to take action against sharp falls in the yen as it weakened to its lowest level in almost a year, adding that there isn’t a specific target that would trigger currency intervention.
Another Worrisome Inflation Indicator: Surging Mining Costs
Cost blowouts on new projects in the mining industry have become a theme, and running existing operations has also grown more costly as labor markets remain tight while energy prices resume climbing.
$67 Billion of Rare Minerals Is Buried Under One of the World’s Biggest Carbon Sinks Financial Regulation Roundup Billions in Loans to Board Members Draw Spotlight to Gulf Banks
Two of Abu Dhabi’s biggest banks have reported billions of dollars in loans to boards of directors that include royal-family members , a practice common in the Gulf even as its financial institutions extend their global reach.
UBS Poised to Settle Mozambique’s ‘Tuna Bonds’ Lawsuit
UBS Group is close to settling a claim brought by Mozambique against Credit Suisse, people familiar with the matter said, a move that would resolve one of the many legal headaches it inherited with its rescue of its Swiss rival.
Forward Guidance Friday (all times ET)
8:30 a.m.: Canada gross domestic product for July; U.S. personal income and spending for August; U.S. PCE price index for August; U.S. advance international trade in goods for August
9:45 a.m.: Chicago Business Barometer for September
10 a.m.: University of Michigan consumer survey, final for September
Monday
4 a.m.: Eurozone manufacturing PMI for September
4:30 a.m.: S&P Global / CIPS UK Manufacturing PMI for September
10 a.m.: ISM Report on Business Manufacturing PMI
7:30 p.m.: Cleveland Fed’s Mester speaks at The 50 Club of Cleveland Monthly Meeting
Research More U.S. Home Sellers Are Dropping Asking Prices
Roughly one in 15, or 6.5%, of U.S. homes for sale had a price drop during the four weeks ending Sept. 24, up from 5.8% a month earlier, Redfin says, a sharp monthly increase compared with the same period in years past. The median home-sale price is up 3% year-over-year and the typical homebuyer’s monthly payment is at a record high as mortgage rates stay stubbornly elevated, with daily average rates hitting a two-decade high Wednesday. Total inventory is down 15% year over year. With monthly payments at an all-time high, buyers are picky and don’t want to pay a dollar more than they need to. “The feeling for buyers right now is this: For the interest rate I’m paying, this home better be exactly what I want or the price better be negotiable,” Redfin says.
-Chris Wack
Commentary EVs Will Hit Detroit Harder Than a UAW Raise
While pay increases following the United Auto Workers strike will take the shine off automakers’ margins, their electric vehicles are still making huge losses and pose a bigger bankruptcy risk , Stephen Wilmot writes.
Executive Insights
Here is our weekly roundup of stories from across WSJ Pro that we think you’ll find useful. They are unlocked for WSJ subscribers.
The race to hire warehouse workers and package carriers for the holidays is slowing to a crawl . It’s photons over electrons in an effort to eke out better chip performance. Rite Aid is looking to close roughly 400 to 500 stores in its proposed bankruptcy, while a group of bondholders wants to liquidate more. U.K. pensions, fat and well-funded, increasingly don’t need private-equity investments . Jack Hartung, CFO of Chipotle Mexican Grill, talks about inflation and other financial pressures [https://urldefense.com/v3/__https://open.spotify.com/episode/2rHht1rpItcgwsfHeRwGUG__;!!F0Stn7g!AluIBIugn5jlB9958MxdCUIP93j52eE1n0aiG6_GFyfYgx0WVYGAAHwG8mJNbFwGDGUIl15_nQSn2NKMaIJZ9WHQsi7PZKFkwr2v5i8b$ ] on the fast-casual restaurant’s business strategy. Basis Points The U.S. economy grew at a solid 2.1% annual pace in the second quarter, revised figures show, but consumer spending turned out to be weaker than originally reported, the government reported. The increase in household spending was chopped to 0.8% from a prior estimate of 1.7%. (MarketWatch) Applications for unemployment benefits in the U.S. rose slightly last week to 204,000, as new jobless claims edged up from a revised 202,000 in the prior week, the government said. (MarketWatch) The number of houses going under contract in the U.S. tumbled in August, after two months of rises. The National Association of Realtors’ Pending Home Sales Index fell 7.1% to 71.8. A reading of 100 is equal to the level of contract activity in 2001. (Dow Jones Newswires) Manufacturing activity in the central U.S. fell on month in September, with future expectations also ticking down, reflecting persisting gloom about economic conditions in the industry. The Federal Reserve Bank of Kansas City said Thursday its Tenth District manufacturing survey’s
(MORE TO FOLLOW) Dow Jones Newswires
09-29-23 0716ET
