Economic data continue in negative territory as Industrial Production rose only by 0.4% in August which is the fourth consective month of increase after April’s 12.4% decline. Same story occured with Retail Sales registring 0.6% increase in August with Sales increasing mostly in food services and drinking.
The 16th of September marked an important day as the Federal reserve met to decide on interest rates (Rate unchanged at 0-0.25%) and provide forward guidance. FOMC statement emphasized that the path of the economy will depend significantly on the course of the virus and will continue to monitor public health readings, labor market conditions, inflation pressures and inflation expectations. Looking at the Summary of Economic Projections, the Core PCE inflation is expected to reach 2% in 2023 and interest rates to remain at current levels as the committee will be more lenient to having inflation levels averaging below and above 2%. Jerome Powell reiterated that fiscal stimulus is also necessary to aid the economy.
|Variable (Values are Median)||2020||2021||2022||2023||Longer run|
|Change in real GDP||-3.7||4||3||2.5||1.9|
|Core PCE inflation||1.5||1.7||1.8||2|
|Memo: Projected appropriate policy path|
|Federal funds rate||0.1||0.1||0.1||0.1||2.5|
Source : http://www.federalreserve.gov/monetarypolicy/fomcprojtabl20200916.htm
Building Permits, Housing Starts and Jobless Claims data were also released. Housing sector data came below consensus as Permits went down 0.9% to $1.470 Million in August ($1.520 Million was the consensus). Housing Starts reflected a 5.1% decline to 1,416 thousand.
The labour market was mixed as Continuing Jobless Claims decreased to 12.628 Million showing further improvement since the COVID pandemic began. On the other hand, Initial Jobless Claims rose by 860,000 for the week ending 12/09, 10,000 above consensus, however the trend seem to indicate a less-weak labour market.
image credit : Munich Re