The week in review
- Headline CPI rose 0.4% m/m and 3.7% y/y
- Core CPI rose 0.3% m/m and 4.1% y/y
- PPI final demand index rose 2.2% y/y
- Prelim. consumer sentiment fell to 63 from 68.1
The week ahead
- Retail sales
- Continuing claims
- Industrial production
- Housing starts and permits
- NAHB housing market index
Thought of the Week
Headline inflation rose 0.4% m/m and 3.7% y/y in September, partly due to higher energy prices with the gasoline CPI component rising 2.1% m/m and 3.0% y/y. However, there could be better news coming on this front. This week’s chart shows daily gasoline prices, WTI crude oil prices and the spread between the two, which reflects taxes, distribution costs and, most importantly, refining margins. Last month the price of crude oil rose to its highest level YTD; however, refining margins actually trended downwards, softening the impact of higher crude prices at the gas pump. This reduction reflects a recovery in U.S. and global refinery activity and relatively soft U.S. gasoline demand in September. Moreover, even with the current Middle East turmoil, oil prices have now fallen from their September peaks, suggesting that the downward trend in gasoline prices may continue through October and into November. This should help reduce CPI inflation over the next two months, potentially discouraging the Federal Reserve from imposing any further rate hikes and setting the stage for modest reductions in both inflation and interest rates in 2024.
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Originally Posted October 16, 2023 – Weekly Market Recap
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