Economic Data Tracker –
More evidence inflation is cooling

Economic Data Tracker

September 9, 2022

Our weekly view on the economy including rationale on GDP, jobs report, and Fed policy decisions. Download the entire weekly edition to view timely charts and data providing a comprehensive picture of how incoming economic data affects our economic outlook.

Trend watch and what’s new this week

The mixed trend of the activity-based data (slides 4 and 5) persists. On the upside, weekly air passenger counts rose WoW, snapping a 6-week slide, while restaurant bookings remained strong, jumping to the highest post-pandemic reading this past week. Back-to-office have ticked up in the latest week. On the downside, hotel occupancy fell the sixth straight week, which is typical as the summer wanes.

Several more recent data points indicate that inflation is cooling. Rail traffic rose week-over-week (WoW) and month-over-month (MoM) in August. Among the cargo sectors that helped boost August traffic, new vehicle shipments jump to 18-month high (slide 6). More vehicles should help with inflation.

On slide 7, the Institute for Supply Management (ISM) Services Index rose for the second straight increase after declining in six of the prior seven months. Within the components, new orders rebounded to an eight-month high. Also, the sharp pullback in the price paid component during past five months (April through August) suggests that inflation has already peaked within service industries. On slide 8, we show the price index of used vehicles, which has fallen in six of the past seven months. Prices fell 4% in August, one of the largest monthly declines in the past decade.  

Our take

As we have highlighted, various price measures show that inflation appears to have peaked. Two of the crucial monthly data points—for consumer and wholesale inflation—will be released next week. We expect both to decline MoM, primarily due to falling gasoline prices.

Yet, it’s not entirely clear whether inflation expectations are moderating enough to satisfy the Federal Reserve (Fed) decision makers. One of the key reasons was the solid August jobs report, which showed job growth of 315,000.

A steady stream of Fed leaders, including Chairman Jay Powell, have voiced support of three-quarter point (0.75%) rate hike at the September Fed meeting. In his Jackson Hole speech two weeks ago, Powell pointedly referenced history regarding the dangers of prematurely loosening policy as validation to keep rates higher for longer. Accordingly, we anticipate that the Fed will raise rates by three-quarter point on September 21.

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