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Latest On Inflation, Consumer & Business-Owner Optimism

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The inflation rate, as measured by the Consumer Price Index, which excludes volatile energy prices, rose by 0.3%, slightly above expectations of 0.2% in August. Over the past three months, core CPI rose 2.4% at an annual rate. That’s down from 5% during the prior three-month period, and the lowest such rate since March 2021, when the Federal Reserve began a campaign of 12 interest rate hikes. 

The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. Headline CPI, which includes energy expenses, was 0.6% in August and 3.7% in the 12 months through August, according to the latest release from the Bureau of Labor Statistics. 

Both inflation indexes were a step up from recent inflation reports, and the main factor behind the jump was the August increase in the price of retail gasoline, which soared 10.6% over the month the vacation season. Over the past year, the gasoline price is down 3.3%. 

University of Michigan’s Consumer Sentiment Index inched down a scant 1.8 percentage points in August, and has been essentially flat for the past two months. Sentiment is currently about 35% above the all-time historic low reached in June of 2022 but remains shy of the historical average reading of 86. U-M’s said year-ahead inflation expectations moderated from 3.5% last month to 3.1% in August. The current reading is the lowest since March 2021 and is just above the 2.3-3.0% range seen in the two years prior to the pandemic. Long-run inflation expectations down to 2.7%, falling below the narrow 2.9-3.1% range for only the second time in the last 26 months. In comparison, long-run inflation expectations ranged between 2.2 and 2.6% in the two years pre-pandemic, according to U-M. 

Small business owners are expecting better business conditions over the next six months, according to the survey of business owners by the National Federation of Independent Business Owners. business owner optimism deteriorated seven points from July to a net negative 37%, but that’s 24 percentage points better than last June’s reading of a net negative 61%. Forty percent of owners reported job openings that were hard to fill, down two points from July but high by historical standards. The net percent of owners who expected real sales to be higher decreased in August by two points from July to a net negative 14%. 

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The Standard & Poor’s 500 stock index closed Friday at 4450.32, down -1.22% from Thursday, and down -0.16% from a week ago. The index is up +98.91% from the March 23, 2020, bear-market low and down -7.22% from its January 3, 2022, all-time high.

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