Live Markets: Pre-Fed appetizers: Retail sales, import prices, homebuilder sentiment, et al
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PRE-FED APPETIZERS: RETAIL SALES, IMPORT PRICES, HOMEBUILDER SENTIMENT, ET AL
Investors were given a truckload of economic data to sort through on Wednesday, as distraction for this afternoon's main event; the U.S. Federal Reserve's policy decision.
None of the data did much to move the needle regarding the largely expected rate hike.
Receipts at U.S. retailers USRSL=ECI increased by 1.2% in August, marking an abrupt reversal from July's 0.5% dip.
The number breezed past the 0.8% growth analysts expected.
Drilling down, the 3.1% surge at the gasoline pump helped boost the headline, as did a 2.6% jump in the non-store retail segment—which includes online shopping. Department stores were once again a weak spot, dropping 0.8%.
The 1.2% increase in food and drink services suggest consumers continue to spend, despite stubborn inflation.
The "control" figure, which excludes autos, gasoline, building supplies and food services—and is most closely correlated with the personal expenditures element of GDP—jumped by 1.4%, blasting past the 0.4% consensus.
"Given the rebound in retail sales, we are on track for another quarter of solid corporate earnings," writes Jeffrey Roach, chief economist at LPL Financial. "We also expect the Fed will raise rates to address the inflationary pressures coming from the demand side of the economy."
Shifting gears, the cost of goods imported to the United States USIMP=ECI (excluding tariffs) increased by 0.7% last month, per Labor Department data, much hotter than the 0.4% increase economists predicted and rebounding from July's 0.3% drop.
Digging deeper, a 1.2% increase in in industrial supplies and a 0.9% rise in capital goods provided much of the upside muscle, with petroleum cost growth posting a nominal 0.1% gain. Year-on-year, the cost of imported petroleum and industrial supplies have risen 27.3% and 17.5%, respectively.
"Rising fuel prices weren’t to blame this time ... with higher non-fuel costs – led by higher costs to fund the AI buildout – exerting upward pressure," says Oren Klachkin, financial market economist at Nationwide. "After today, we’re looking for another 25bps hike (from the Fed) before year-end."
Meanwhile, the cost of U.S. exports rose 0.6%, driven by a 1.3% increase in industrial supplies.
Year-over-year, import prices have risen 7.0%, and export prices have gained 8.6%.
Knocking on the housing sector, the mood among homebuilders has grown increasingly sullen this month.
The National Association of Home Builders' USNAHB=ECI housing market index (HMI) shed 3 points to 32, two points shy of expectations.
The NAHB dividing line between optimism and pessimism in the sector is 50. The HMI has been wallowing below that level for 29 months now.
"Buyer traffic has weakened across much of the country, largely because of rising mortgage rates,” says NAHB Chairman Bill Owens. “Builders also continue to face higher material costs, rising gas and diesel prices and persistent labor shortages.
In addition to elevated borrowing costs, would-be buyers' uncertainties amid geopolitical turmoil and resurgent inflation are making it a tough time to be in the homebuilding game.
Homebuilding stocks .SPCOMHOME have dropped by nearly 6% so far this year, compared with the S&P 500's more than 11% advance over the same timeframe.
Speaking of borrowing costs, financing home loans grew a lot costlier last week and would be borrowers were having none of it.
The average 30-year fixed contract rate —which tends to rise and fall in tandem with benchmark Treasury yields—surged 12 basis point higher, to 6.97%, according to the Mortgage Bankers Association (MBA).
That's the highest it's been since December 2023.
Demand for loans to purchase homes —among the housing market's most forward-looking indicators—dipped by a mere 0.8%. Those looking to refinance existing mortages, representing a shrinking 39.4% of the mortgage pie, were less impressed. Refi applications tumbled by 8.8%.
Taken together, mortgage demand weakened by 4.1%.
"Ongoing market concerns over spiking energy prices, persistently high inflation, and future monetary policy pushed bond yields and mortgage rates higher last week," said Joel Kan, MBA's deputy chief economist.
The 30-year fixed rate is currently 58 basis points hotter than it was during the same week a year ago.
Over that same period, purchase applications have dipped 10.2%, while refi demand has plummeted 60.7%.
And finally, a dusty bit of data from way back in July shows business inventories USBINV=ECI increased by 0.8%.
That's much stronger than the 0.3% consensus, it follows in the wake of June's paltry 0.1% gain.
Private inventories detracted 0.7 pps from second-quarter GDP, according to the Commerce Department.
(Stephen Culp)
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EARLIER ON LIVE MARKETS:
S&P 500, NASDAQ RISE WITH OIL FALLING AHEAD OF FED CLICK HERE
THE DOW TESTS A KEY LINE IN THE SAND AHEAD OF FED DECISION CLICK HERE
HIGHER RATES WON'T DERAIL EARNINGS CLICK HERE
WILL A FED HIKE END THE BULL MARKET? CLICK HERE
BEER JUG: A VERY GERMAN INFLATION INDICATOR CLICK HERE
FOCUSED ON THE POSITIVES CLICK HERE
BEFORE THE BELL: CAUTIOUSLY TICKING HIGHER CLICK HERE
WARSH ON COLLISION COURSE WITH TRUMP ADMINISTRATION CLICK HERE
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