Inflation report could help determine if the Fed hikes rates again this year
This week’s economic news features the latest reading on inflation, which has become a big conundrum for analysts and Federal Reserve officials. A growing number of Fed policymakers have said they’re inclined to put off an anticipated third interest rate hike this year unless sluggish inflation picks up. Reports on job openings and hires, retail sales and industrial production will also be released.
The Labor Department on
Tuesday puts out its Job Openings and Labor Turnover Survey (JOLTS), which scrapes beneath the monthly job growth totals to reveal employer demand and worker movements in the labor market. In June, employers posted a record 6.2 million job openings, suggesting demand for workers remains robust. But the low 4.4% unemployment rate is making it increasingly tougher for firms to find qualified workers, tempering payroll growth. The JOLTS report for July will reveal whether openings continued to hover near record levels, intensifying the labor supply crunch.
Inflation has been tepid this year despite healthy job gains that should be pushing up wages faster and, in turn, forcing companies to raise prices to maintain profits. While low prices are good for consumers, Fed officials worry they’re a sign of an economy without much vigor. Hurricane Harvey drove up gasoline prices last month and that should have helped nudge annual price increases to 1.8% from 1.7%, economists estimate. But the Fed pays more attention to core prices, which strip out volatile food and energy items and have been held down in a variety of categories. While hotel rates probably picked up last month and airline fares stabilized, rents and prices for wireless phone service, clothing and cars likely remain subdued, says Nomura economist Lewis Alexander. All told, economists figure the Labor Department will announce Thursday that core prices rose 1.6% annually in August, down from 1.7% in July, a development that could further lower the odds of another hike.
Economists expect the Commerce Department to report Fri
day that retail sales rose 0.1% last month but a reading of core sales that excludes volatile autos, gas and other categories jumped 0.3%.