U.S. Consumers Happy to Keep Spending; Inflation Remains Too High for Fed's Kashkari By James Christie

Good day. U.S. retail sales data reported yesterday provided further evidence of a resilient U.S. economy, even as some economies around the globe, like China's, are showing strains. Some analysts took the data as a sign that the Federal Reserve isn't done raising interest rates in its campaign to cool the economy and bring down inflation. Minneapolis Fed President Neel Kashkari said yesterday that it might be too soon to say the central bank's fight against inflation should end, noting he thinks inflation is still too high. "Are we done raising rates? I'm not ready to say that we're done," he said.

Now on to today's news and analysis.

Top News Fed's Kashkari Says inflation Still Too High

Federal Reserve Bank of Minneapolis President Neel Kashkari said Tuesday he wonders whether the central bank has done enough to bring inflation down. "Inflation is coming down. We have made progress and good progress. I feel good about that. It's still too high, " the voting member of the Fed's interest-rate committee said during a discussion during the APi Group's Global Controllers Conference. "The question on my mind is, have we done enough to actually get inflation all the way back down to our 2% target. Or do we have to do more," he added. (MarketWatch)

Strong U.K. Wage Growth Adds to Inflation Concerns

The U.K. labor market is adding to the Bank of England's headaches from high inflation, with wages up 7.8% in the three months to June, their strongest pace on record , adding to concerns about pressures driving consumer prices higher.

Canada Inflation Accelerates to 3.3% in July

Inflation in Canada accelerated at a faster clip than expected last month, putting the Bank of Canada in a tough position as it seeks to rein in prices without risking overtightening monetary policy. Canada's consumer price index rose 3.3% from a year earlier in July, Statistics Canada said. That was hotter than the 3% advance expected and comes after the index slowed to 2.8% in June, the first time in more than two years inflation was inside the Bank of Canada's 1%-3% target range. (Dow Jones Newswires)

U.S. Economy Shoppers Boost Retail Sales for Fourth Straight Month

Retail sales-a measure of spending at stores, online and in restaurants-rose a seasonally adjusted 0.7% in July from June, as consumers continue to open their wallets and bolster the resilient U.S. economy.

Is It Time to Worry About Consumer Debt? Here's Seven Charts Wall Street Ready to Scoop Up Commercial Real Estate on the Cheap

Wall Street firms are raising new funds to acquire office buildings, apartments and other troubled commercial real estate, looking to scoop up properties at a fraction of the price investors paid a few years ago.

America Lost a Whole Lot of Millionaires Last Year

For the first time since 2008, global wealth declined, falling by 2.4% in dollar terms, largely because of whipsawing currencies, UBS and Credit Suisse economists said Tuesday, noting Americans were hit hardest .

Key Developments Around the World China Turns to Well-Honed Playbook: Cut Rates, Hide Data

China's authorities responded to another burst of dire news on the country's economy with a well-honed playbook: They cut interest rates and withheld some potentially embarrassing economic data.

U.K. Inflation Slows, but Still a Worry

The U.K.'s rate of inflation fell in July , though key components of prices remained stubbornly hot, adding pressure on the Bank of England to keep raising rates to cool the highest inflation rate among leading industrialized countries.

Brutal Summer Tests Ability of Energy Exporters to Keep Citizens Cool

Energy-rich countries across the Middle East and North Africa are struggling to keep power flowing to their own citizens during intense summer heat, with Egypt the latest to impose rolling blackouts .

New Zealand Keeps Official Cash Rate on Hold

The Reserve Bank of New Zealand left interest rates unchanged Wednesday, while indicating that they will need to stay high for some time yet. The official cash rate was held steady at 5.50%, as expected by economists.

Forward Guidance Wednesday (all times ET)

8:15 a.m.: Canada housing starts for July

8:30 a.m.: U.S. housing starts and building permits for July; New York Fed's business leaders survey

9:15 a.m.: U.S. industrial production and capacity utilization for July

2 p.m.: FOMC minutes of July 25-26 meeting

Thursday

8:30 a.m.: U.S. weekly initial jobless claims; Philadelphia Fed manufacturing survey

10 a.m.: The Conference Board Leading Economic Index for U.S. for July

Research U.S. Consumer Strength Keeps Rate Increase on Table

Stronger-than-expected July retail sales raise the odds the Federal Reserve might not be done raising interest rates, Oanda senior market analyst Edward Moya writes in a report. "A healthy consumer was supposed to drive soft landing calls, but too much consumer resilience will drive the Fed to keep rates higher for longer," he writes. With the Fed's Jackson Hole meeting coming up, Moya thinks Fed Chairman Jerome Powell will want to keep his options open, "so an end of tightening will not be signaled." Moya also expects July personal-consumption expenditures data, due on Aug. 31, to remain "sticky" and keep the risk of one more rate increase on the table.

-Patrick Sheridan

July Inflation Supports Rate Rise by Bank of Canada

Canada's July inflation reading looks a bit too hot for the Bank of Canada's liking, with the recent slowing in economic growth and employment not yet working fully into price settings, says Katherine Judge, a director and senior economist at CIBC Capital Markets. The surprise rebound in the consumer-price index last month wasn't entirely attributable to higher energy prices and food, as core categories outside of mortgage interest costs also accelerated, and headline inflation in August is likely to pick up further as year-earlier base effects remain unfavorable, she says. So while CIBC would argue for more patience, Judge says the central bank appears on track for a final quarter-point rate increase in September despite the risk of overshooting with inflation possibly falling below its 2% target as early as the second half of 2024.

-Robb Stewart

U.K. Inflation Adds to Wage Data's Hawkish Tone

U.K. inflation news, alongside Tuesday's wage data and last week's GDP figures, are together net hawkish for Bank of England policymakers, according to HSBC senior economist Chris Hare in a note. Given persistent wage pressures, there is still a long way before inflation will fall anywhere close to the central bank's 2% target, he says. While there are signs of softening in the jobs market, it might take a long time for that to bear down significantly on wage growth, Hare notes. "So while our central case is for just one more BOE rate rise in September before a prolonged pause, these labor-cost pressures present a risk that the bank's monetary-policy committee might opt to tighten a little further," he says.

-Ed Frankl

Commentary China's Economic-and Social-Contract Is Fraying

Headline figures from China, as bad as they are, may be hinting at a more fundamental issue : Beijing has failed to convince households that their financial future is secure in the post-Covid era, Nathaniel Taplin writes.

Investors Need to Worry About the Bond Market's Return to Normality

On Tuesday, the bond market's best guess at the real, after-inflation, cost of money-the yield on 10-year Treasury inflation-protected securities, or TIPS-hit 1.89%, the highest since 2009 and back well within the range of what once counted as normal for the economy. America has put the era of low rates behind it. Can it cope , asks James Mackintosh in Streetwise.

Russia's Central Bank Can't Stop Ruble Trouble

Russia's currency crisis might not follow the classic emerging-market template: Rather than a sharp depreciation stemmed by painful interest-rate rises, we are more likely to see a slow but inexorable decline , Jon Sindreu writes.

Basis Points Confidence among U.S. house-builders receded in August, with high mortgage rates beginning to weigh on demand, according to data from the National Association of Home Builders. Its housing-market index, which gauges builder confidence in the market for single-family housing, fell from 56 in July to 50 this month, reversing seven straight months and suggesting mortgage rates of close to 7% are finally denting demand among prospective buyers. Economists polled by The Wall Street Journal expected a 57 reading. (Dow Jones Newswires) Manufacturing activity in New York State fell more than expected in August, though firms have become more optimistic about their six-month outlook, according to data from the Federal Reserve Bank of New York. Its Empire State Manufacturing Survey's general business conditions index fell from 1.1 in July to minus 19.0, the first time since May the index has posted a negative reading. Economists polled by The Wall Street Journal expected the index to tick down to minus 1.4. (DJN) U.S. import prices rose 0.4% in July driven by higher prices for fuel, after a revised decline of 0.1% in June, data from the Labor Department showed Tuesday. Economists polled by The Wall Street Journal had expected prices to rise by 0.2%. (DJN) New home prices in China's major 70 cities fell in July, shrugging off Beijing's attempt to reverse the prolonged real-estate slump, official data showed Wednesday. (DJN) Malaysia's economy likely expanded 3.7% on year in 2Q, compared with the 5.6% growth recorded in 1Q, according to the median estimate of seven economists polled by The Wall Street Journal. (DJN) Singapore's non-oil domestic exports likely fell 14.3% in July from a year earlier, according to the median estimate of 11 economists surveyed by The Wall Street Journal. (DJN) The euro area's economy grew moderately in the second quarter, matching preliminary estimates, exiting two three-month periods when economic activity failed to grow.

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08-16-23 0715ET