Both the top-line and core PPI likely rose 0.1% in August.
Residential gasoline prices moved lower between the July and August reference periods and seasonal factors will only slightly offset this, resulting in a softer energy index for the month. Food prices were unchanged last month and agricultural prices, measured by prices received by farmers, declined in August suggesting that food prices in the PPI should be flat or negative. Price pressures in the core should also be limited in line with information in the Fed’s most recent Beige Book, which indicated that many districts saw “modest growth, no change, or slight decreases in overall commodity and input prices.”
We forecast a 0.6% increase in August retail sales on robust auto sales, while retail sales excluding autos likely rose a more moderate 0.3%
Motor vehicle sales came in at a strong 16.0 million unit annual rate in August, up 1.8% from July and up 11.1% from August 2013. Robust auto sales should add significantly to the top line retail sales figures. In retail sales excluding motor vehicles, we look for a more moderate 0.3% gain. Some reports have suggested that back-to-school sales contributed to sales gains at the end of August, but the Fed’s recent Beige Book reported mixed activity in different regions of the country. The Philadelphia Fed district, for instance, noted that “consumers engaged in ‘price-shopping’” and that “consumers [remained] cautious with their purchases and highly price-sensitive.” Overall, information on consumer activity points to a moderate pace of spending growth during August.
We expect that the preliminary September University of Michigan Consumer Sentiment was roughly unchanged at 82.0.
Since the release of the final August figure equity prices have moved slightly higher, and gas prices have moved slightly lower, which should be positive for sentiment. The survey period coincides with the debate over US involvement in the Syrian conflict, which may present a downside risk to our forecast if it negatively impacts consumer sentiment.
Credit: Michael Carey, N. America Chief Economist
Crédit Agricole via eFXnews
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