Morning Report: Some encouraging news on inflation

Vital Statistics:

S&P futures4,2011.27
Oil (WTI)91.97-0.48
10 year government bond yield 3.05%
30 year fixed rate mortgage 5.73%

Stocks are flat as we await Jerome Powell’s speech at Jackson Hole. Bonds and MBS are up.

Personal Incomes rose 0.2% MOM in July, which was a dramatic slowdown from the 0.7% recorded in June. Personal consumption expenditures fell from 1% to 0.1%.

Finally, the PCE Price Index (which is the Fed’s preferred measure of inflation) fell 0.1% on a MOM basis. Ex-food and energy, it was up 0.1%. This suggests that we have turned the corner on inflation, however the Fed will need to see a string of these before it takes its foot off the brakes. On a YOY basis, the PCE Price Index rose 6.3% on the headline number and 4.6% ex-food and energy.

Blackstone-backed Home Partners of America is stopping purchases of homes in 38 cities and will add more in October. This is the latest sign than institutional investors are getting nervous about the torrid home price appreciation we have seen over the past several years.

Consumers are beginning to improve their mood, according to the University of Michigan Consumer Sentiment Index. The improvement was largely due to better expectations for the economy going forward. Most notably, expectations for year-ahead inflation fell to 4.8%, the lowest in 8 months. The Fed pays close attention to this number.

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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