Inflation reports take center stage
On Wednesday, the Labor Department is set to release its consumer price index, with forecasts pointing to a 0.2% monthly gain in September and a 3.6% rise from a year earlier. The following day brings the producer price index, which tracks inflation before it hits consumers. Economists anticipate an increase from August's 5.4%, itself up from 4.8% in July. Last week, PepsiCo announced higher prices on Doritos and other products, pointing to costlier fuel, aluminum and commodities.[S1]
Last month, the U.S. reported that inflation picked up in August as gasoline prices surged amid renewed Middle East fighting. September is expected to bring more of the same, with all parties to the Iranian conflict refusing to back down. Oil prices will take center stage as the U.S. war with Iran enters its eighth month. Fresh violence pushed crude back above $100 a barrel, average gasoline prices stay well above $4 a gallon, and diesel sits just under September's record highs. All of that has driven inflation, squeezing household budgets and businesses.[S1]
Housing market shows little improvement
In the U.S. housing market, the absence of bad news counts as good news these days. The National Association of Realtors releases September existing home sales on Tuesday, and economists expect the pace to match August. Yet August was dismal, with sales falling to their weakest annual rate in over a year. Rising mortgage rates are keeping would-be buyers away, and Freddie Mac reported Thursday that rates climbed for a seventh straight week. The average long-term U.S. home loan rate now stands at its highest in nearly three years. Housing has struggled since 2022, and sales of previously occupied homes were basically flat last year, mired at a 30-year low.[S1]
Retail sales and holiday forecast
With the holiday shopping season approaching, economists think Americans trimmed their spending in September, with most projecting a 0.65% increase. Even so, consumers caught nearly everyone off guard in August. Despite complaints about pricier gasoline and groceries, they spent freely, lifting retail sales by 1.2% — almost double what forecasters had anticipated. Also next week, the National Retail Federation will issue its holiday forecast.[S1]
Big banks expected to post profit gains
Banks have posted record earnings this year, helped by trading desks that profit from a choppy stock market while the U.S. war with Iran continues. Sharp market swings typically drive more trading activity, generating bigger commissions and fee income for banks. At the same time, consumers keep spending despite high prices, which lifts fee and lending revenue. Wall Street anticipates similar results in the third-quarter reports. Analysts expect JPMorgan Chase to post a 47% profit increase and Citigroup a 61% jump when both report Tuesday. Bank of America is seen gaining 36% when it announces Wednesday. Other institutions, including Morgan Stanley, also report during the week.[S1]
Households and businesses must also contend with elevated interest rates, which let banks charge more for loans and are unlikely to ease soon. The Federal Reserve recently lifted its benchmark rate to tame inflation and appears inclined to raise it again before the year ends.[S1]
