Mixed Economic Signals Weigh on Markets
Inflation Data Sends Mixed Signals
Tuesday’s Consumer Price Index (CPI) showed inflation cooling, rising 2.7% year-over-year, just under expectations of 2.8%. By Thursday, attention shifted to the Producer Price Index (PPI), which surged 0.9% month-over-month — more than four times the 0.2% forecast. Core PPI, which strips out food and energy, climbed 0.6%, doubling expectations. Since wholesale inflation often leads consumer prices, next month’s CPI report will be one to watch.
Labor Market Remains Steady
Also Thursday, initial jobless claims came in at 224,000, slightly better than the 229,000 expected. The data points to ongoing resilience in the labor market despite signs of slowing growth elsewhere.
Consumers Spend, But Confidence Slips
Friday brought more key data. Retail sales for July rose 0.5%, matching forecasts and underscoring the resilience of U.S. consumers. The Import Price Index jumped 0.4% versus the 0.1% estimate — another early sign of inflation pressure, possibly linked to tariffs. The University of Michigan’s Consumer Sentiment Index dropped to 58.6 from July’s 61.7, reflecting concerns about higher goods prices.
Markets Rally, Then Retreat
Despite the mixed signals, stocks posted a strong week overall, with the S&P 500 and Nasdaq hitting record highs earlier in the week. Equities pulled back Friday following the hotter-than-expected import price report, as investors weighed the potential for renewed inflation pressures.