Inflation, Housing Boom, and Labor Market Insights

As September unfolds, financial markets are abuzz with developments in inflation, home prices, and jobless claims. All eyes are on the Federal Reserve as they convene this week to discuss their next moves. Here's a detailed review of the week's key events:

What "Fueled" the Rise in Consumer Inflation?

August's Consumer Price Index (CPI) delivered a 0.6% increase, in line with expectations. On an annual basis, CPI ticked up from 3.2% to 3.7%, though it still lingers near its lowest point in over two years. Core CPI, which excludes food and energy prices, rose 0.3%, while the yearly figure dipped from 4.7% to 4.3%.

Key Insights:

• The surge in energy and gasoline prices was the primary driver of the monthly increase.

• Stable food and shelter prices, along with declining used car costs, played a role in curbing inflation.

• Watch out for potential disruptions in the used car market if the United Auto Workers strike prolongs, potentially leading to rising used car prices.

Is the Rise in Wholesale Inflation a Concern?

The Producer Price Index (PPI), a gauge of wholesale-level inflation, surged by 0.7% in August, surpassing expectations. On an annual basis, PPI doubled from 0.8% to 1.6%. Core PPI, excluding food and energy prices, increased by 0.2%, with the yearly reading dropping from 2.4% to 2.2%.

Key Insights:

• Wholesale inflation rose substantially in August, but it started from a low level and remains relatively subdued.

• Much of the increase in wholesale inflation is attributed to rising energy prices, mirroring trends in consumer inflation.

• The Federal Reserve's ongoing efforts to curb inflation have been driving its policy decisions, with several Fed members indicating a possible pause in rate hikes.

New High in Home Price Appreciation

CoreLogic's Home Price Index revealed that home prices in the U.S. increased for the sixth consecutive month, rising by 0.4% from June to July. Prices were also up by 2.5% compared to the same period last year. CoreLogic predicts further price gains of 0.4% in August and 3.5% over the coming year, though historical data suggests their forecasts tend to be conservative. Based on the current monthly trends, the index projects nearly 9% appreciation for 2023.

Zillow reported a 4.5% increase in home values since the beginning of the year. Their data shows consistent all-time highs in home values since May. Zillow's index suggests a 7% appreciation rate for the entire year, based on observed monthly gains.

Key Insights:

• The continuous rise in home prices, as reported by CoreLogic and Zillow, reinforces the robust growth observed in reports from Case-Shiller, Black Knight, and the Federal Housing Finance Agency.

• Homeownership remains a compelling avenue for wealth-building and investment due to this strong growth.

Important Context Regarding Tame Jobless Claims

Initial Jobless Claims increased by 3,000 in the latest week, with 220,000 individuals filing for unemployment benefits for the first time. Continuing Claims also rose by 4,000, with 1.688 million people still receiving benefits after filing their initial claim. While Continuing Claims have been on a downward trajectory since peaking at 1.861 million in early April, this trend reflects a mix of people securing new employment and benefits expiring.

Key Insights:

• The relatively low level of Initial Jobless Claims points to a robust labor market.

• It's crucial to note that the measured week included the Labor Day holiday, potentially affecting the data due to shorter filing times.

• Initial Jobless Claims are typically the last data point to signal a labor market slowdown; earlier indicators include declines in job postings, hiring rates, and working hours.

As the Federal Reserve's meeting unfolds this week, all these economic indicators will be under scrutiny, influencing future monetary policy decisions.

Stay informed by referring to reliable sources and monitoring updates on these economic factors and trends.

External Links, Resources, and References:

1. Mortgage News Daily: For the latest news, analysis, and trends in the mortgage market.

2. Freddie Mac's Primary Mortgage Market Survey: Explore weekly mortgage rate data and historical trends from Freddie Mac.

3. Bankrate: Access a wide range of mortgage rate data, calculators, and educational resources.

4. The Federal Reserve: Visit the official website of the Federal Reserve to stay informed about monetary policy and its potential impact on mortgage rates.

Please note that this analysis is