Data on the US economy did not make it easier to predict the future rate of the Fed

The data on the state of the American economy published last week still cannot give an unambiguous signal about the dynamics of activity – the consumer spending deflator, on which the US Federal Reserve relies in assessing price growth, showed an acceleration in July from 3% to 3.3%, while On the contrary, the labor market is cooling down – both the slowdown in wage growth and the decrease in the number of posted vacancies testify to the weakening of overheating. Indicators of business activity in the industry still point to its decline, however, their dynamics also varies depending on the specific survey.

According to the Bureau of Economic Analysis, price growth in the US accelerated in July – the consumer spending deflator (PCE), which the Fed is guided by in assessing proximity to the inflation target, showed an acceleration to 3.3% against 3% a month earlier. At the same time, prices for goods in annual terms decreased by 0.5%, while prices for services increased by 5.2% (month-on-month services rose by 0.4%, goods fell by 0.3%, prices for energy – plus 0.1%). Excluding energy and food, inflation rose from 4.1% to 4.2% on a monthly basis, but there was no change – both indicators increased by 0.2% in June and July.

Note, speaking at a conference in Jackson Hole the week before last, Fed Chairman Jerome Powell already operated on July inflation data – then he said that the current slowdown (compared to peak indicators) is not enough, since it is caused by a decrease in energy and food prices , depending on the global situation, they can distort the real dynamics of price growth. From the Fed’s point of view, data on the real estate market may also look dangerous: construction spending has continued to rise since the beginning of the year – in July, the figure increased by 0.7% compared to June and by 5.5% yoy, the Department of Commerce said on Friday (in June there was an increase of 0.5% and 3.5%, respectively). Real estate prices also resumed growth, despite the increase in mortgage rates.

In the labor market, most indicators point to a “softening” of overheating – 187 thousand jobs were created in August, which is more than in June (157 thousand) and higher than the forecast (170 thousand), but in general the indicator remains at the level below average, and the unemployment rate for the month increased from 3.5% to 3.8%. According to the US Department of Labor, the number of open vacancies also decreased – at the end of July, 8.827 million vacancies were posted, which is 338 thousand less than a month earlier – the current level was the lowest since March 2021. At the same time, wage growth – according to the Fed, one of the most important indicators in terms of the degree of contribution to more “sustainable” inflation in services – slowed down from 0.4% mom to 0.2% (in annual terms – from 4.4% up to 4.3%). Recall, speaking at Jackson Hole, Jerome Powell warned that a signal from the labor market about additional imbalance could serve as an incentive for further tightening.

Below 50 points (the bar separating the growth of activity from the recession), the values ​​of the indexes of purchasing managers remain – according to ISM, the indicator rose from 46.4 to 47.6 points, while the PMI for the US manufacturing sector from S&P Global fell to 47.9 points from 49 a month earlier. Note that the global composite index JPM Global PMI, which characterizes the business environment in the global industry, rose from 48.6 points to 49 in August, but has also remained below the 50-point mark for a whole year.

Tatyana Edovina