Little attention was focused upon August’s PPI data which was nominally higher than expected. Since the Fed shifted its three-year focus from inflation to jobs, there is little fanfare around the release of any inflation data.
Today import/export price data is released and barring any significant aberration, this data point may also be met with little interest.
The Federal Reserve has a dual but conflicting mandate; maximum employment and price stability.
Attention, however, was elevated around the weekly jobless data which were lower than expected by an insignificant amount. Weekly claims are notoriously volatile. The four-week continuing claims however met expectations.
The markets have fully discounted a 25-bps reduction in the overnight rate at next week’s FOMC meeting. The odds of a 50-bps decrease are almost zero. The markets, however, are still predicting over 110 bps of cuts by year’s end, an amount that many believe is excessive.
It must be remembered during the past two plus years the market expectations have been overly aggressive and have missed the mark by a gargantuan margin.
Speaking of interest rates and the impact upon borrowing, Dow Jones reported that the government spent $1.049 trillion in interest expense, up 35% from one year ago. The Treasury is projecting interest expense for the entire fiscal year ending September will be $1.158 trillion.
Treasury also reported 2024 deficit will reach $1.9 trillion this fiscal year and is up 24% from one year ago, greatly exceeding projected amounts. Next year’s deficit is expected to reach $2 trillion and bring the national debt to over $37 trillion.
It is not a revenue problem as revenues are surging to a record on both an absolute and percentage basis. Treasury reports revenues are up about 11% from a year ago. It is a spending program.
This data is extremely concerning given that the economy is near full employment and far from recessionary territory.
Why is this not being discussed by the candidates? I guess they are more interested in discussing the diets of immigrants and their respected loved ones.
Last night the foreign markets were mixed. London was up 0.27%, Paris up 0.15% and Frankfurt up 0.49%. China was down 0.48%, Japan down 0.68% and Hang Seng up 0.75%.
Futures are flat. The 10-year is up 4/32to yield 3.70%.
