Before I do that, there are some points worth mentioning. After last week’s positive inflation news, this week was a bit more mixed. There was good news on the retail sales front, as we saw the third month in a row of growth, especially in core sales (i.e., the best economic indicator). But manufacturing pulled back a bit for the second month in a row, even as housing moderated. In other words, the news was still good overall, but the areas that were weaker—manufacturing and to some extent housing—are still holding the economy back.
That doesn’t sound great. But the thing to keep in mind is this: moderation is actually good. As long as we keep growing overall, which we are, slower growth will help keep inflation coming down. That is what the Fed wants to see to keep rates stable. What we have so far is consistent with slowing growth and, ultimately, a soft landing where we get inflation under control without a recession. We are not there yet, but what mattered this week is it still looks like that is where we are headed.
And that matters because next week the Fed is having its regular meeting, where it is widely expected to raise rates another 25 bps. The real question is whether the Fed will signal a pause after this one. The betting right now is yes, and this week’s data may make that outcome more likely.
So, it was kind of a slow week, but one that kept us pointing in the right direction. That is a good send-off to a summer weekend.
Have a great one!