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What happened last week?
It was a mixed session for equity investors with the TSX as the only major North American index that added overall value. All of the equity indexes have performed well in 2024, and over the past year. The recent small setbacks for the U.S. indexes have not tarnished their exemplary longer-term performance. For the week, gold moved downward and oil, the biggest mover of the week, rose nearly 4%.
A slate of U.S. inflation indexes, consumer, producers of imports and exports, made the most important news last week, and initially moved equities higher before ending the week in a downward direction.
- The Consumer Price Index (CPI) increased 0.4% in February, a minor increase from January’s 0.3%. Over the last year the all-items index rose 3.2%. Shelter and gasoline contributed more than 60% of February’s one-month price inflation.
- The Producer Price Index (PPI) for final demand rose 0.6% in February after increasing 0.3% in January and decreasing 0.1% in December. On an unadjusted basis, the final demand index rose 1.6% over the past year, which is the largest increase since September 2023 when the PPI rose 1.8%. Much of the increase can be traced to the rise of the price of gasoline.
- U.S. import prices increased for the second consecutive month in February, rising 0.3%. Despite recent advances, prices for U.S. imports decreased 0.8% over the past year.
Sifting through the data shows that inflation for U.S. consumers was only 0.1% higher than expected on an annualized basis, and more importantly still above the Federal Reserve’s goal of 2%. Despite the latest inflation numbers running above goal, the Fed will begin lowering interest rates this summer. According to CME’s FedWatch tool, the likelihood of lower rates in June are 58%, and nearly 78% in July. At this time most analysts predict two Fed rate cuts in 2024, with the Bank of Canada following the same direction. BLS CPI release BLS PPI release
BLS IPI and EPI release
CNBC and CPI
CME FedWatch tool
Inflation and rates BoC rates
What’s ahead for this week and beyond?
In Canada, inflation news will dominate domestic economic news with the Consumer, Producer, Raw Materials and New Housing Price Indexes scheduled for release.
In the U.S., February building permits, housing starts, National Association of Home Builders Index, and existing home sales will be reported. The Federal Reserve will announce its interest rate decision monetary policy on Wednesday afternoon.
Globally, Japan’s consumer inflation, machine orders, capacity utilization, and trade balance, European Union’s Harmonized Index of Consumer Prices (HICP), wages and labour costs, and consumer confidence, Great Britain’s consumer, producer and retail price indexes, and retail sales will be announced.
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