This week saw steady inflation results while the manufacturing sector performed better. Overall, the economic data revealed no significant surprises.
Inflation held steady from last month. Meanwhile, the manufacturing sector remained strong. Mortgage rates ended the week nearly unchanged.
Steady Inflation Results as Core PCE Matches Consensus
The Fed favors the core PCE price index as its de facto inflation indicator. In August 2021, core PCE rose 3.6% higher than a year ago. Thus, core PCE matched the consensus forecast, leading to steady inflation results.
This resulted in the same annual rate of increase as last month. However, core PCE increased from just 1.5% in February 2021. February 2021’s core PCE hit the highest annual rate since 1991.
Economists expected readings of this magnitude during economic reopening. Having said that, economists differ on inflation’s scope. Some feel that inflation faces a temporary spike; others believe inflation will persist for years.
Manufacturing Sector Performs Better
Aside from the steady inflation results, the Institute of Supply Management (ISM) released another significant report this week. Its national manufacturing index rose to 61.1. therefore, the national manufacturing index soared above the consensus forecast of 59.5.
Levels above just 50 indicate that the sector is expanding, Readings above 60 are rare. Of note, a large number of companies reported difficulties in hiring enough workers. As demand grew, manufacturing entities require more workers to maintain production. Ultimately, supply chain disruptions held back production.
Looking Ahead After Steady Inflation Results
Looking ahead after the steady inflation results, investors watch global COVID-19 cases. Investors also look for hints from Fed officials about the timing for changes in monetary policy.
Beyond that, the ISM national service sector index will come out on Tuesday. Subsequently, the key Employment report releases on Friday. The Employment report contains figures on the number of jobs, the unemployment rate, and wage inflation. Analysts highly anticipate the latest data.
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