Energy Prices:
Do you have any exciting plans for the weekend? If you’re thinking about hitting the road for some fall fun, like pumpkin picking or leaf peeping, it might be a good idea to take a closer look at your budget first. Prices have been on the rise lately, with transportation-related expenses leading the way. But don’t worry; with a little bit of budgeting and some creative thinking, you can still enjoy all the best parts of the season without breaking the bank.
- Despite recent optimism about declining inflation, the Consumer Price Index (CPI) recorded its most significant monthly increase this year, up 0.6% in August. On an annual basis, prices rose 3.7%, compared to 3.2% in July.
- In August, transportation-related items replaced shelter as the biggest contributor to overall costs. The rising prices of energy and gas played a significant role in this increase. However, the most recent consumer sentiment report indicates that people expect the inflation rate to decrease over the next year. Despite this positive outlook, overall consumer optimism remains low, and the economy may be at risk of contracting with even minor setbacks.
Wage Growth:
During the pandemic, many employees channeled their inner Tom Cruise from Jerry Maguire by demanding their employers to “Show Me The Money” or walk away from their jobs, resulting in significant wage growth. However, the trend is now starting to shift in favor of owners slowly. The labor market continues to soften and has thus far been as smooth as policymakers could have hoped.
- Seasonally adjusted jobless claims remain close to pre-pandemic levels, with employee retention higher than expected. Despite this, economists anticipate the labor market to cool further, with jobless claims expected to rise in the fourth quarter as layoffs continue.
- Wage gains have also been cooling since July 2022. At the current rate, wage growth may be expected to reach pre-pandemic levels later this year or early in 2024.
Overall Market Outlook:
Unfortunately, a single final exam cannot eliminate our student loan debt; shockingly, the government views this as something other than a viable solution. Adding to the problem, millions of Americans are now required to resume their student loan payments. As a result, we may need to reduce our indulgence in a fall delicacy, pumpkin spice lattes; apologies to Starbucks and Dunkin Donuts.
- Surging energy prices in August may dampen optimism regarding an improving inflationary picture.
- Cooling retail sales, a softening labor market, and the resumption of student loan payments may lead consumers to tighten their budgets in the coming months.
- September’s inflation report, which will be released on October 12th, will be critical in the Fed’s decision-making if further rate hikes may be necessary later this year.
- While economic risks remain no matter which direction the Fed decides to take, a path toward a soft landing is still on the table.
Sources:
- Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
- University of Michigan, http://www.sca.isr.umich.edu/
- Bloomberg Economics
- Federal Reserve Bank of Atlanta, https://www.atlantafed.org/chcs/wage-growth-tracker
- Census Bureau, https://www.census.gov/retail/sales.html
All written content is for information purposes only. Opinions expressed herein are solely those of Zenith, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.
