Consumer sentiment falls slightly

Aug. 14:

The preliminary University of Michigan Consumer Sentiment survey’s August index was 71.2, a little lower than July’s 71.6. Consumers’ expected rate of inflation over the next year dropped slightly from 3.4% last month to 3.3%. 

State of the market

The slight decline in inflation expectations did little to mollify the bond market, which still has a gloomier perspective after last week’s Consumer Price Index report. Worries over the state of the Chinese economy have not  triggered a flight to quality, and Treasury yields continue to creep upwards.

As of this morning, chances of a rate hike at the Nov. 1 Federal Open Market Committee meeting stood at about 41% per Fed funds futures, as the market seeks to divine how the Federal Reserve will deal with stubborn inflation.

The Dow traded down this morning.

Economic calendar

Tuesday, Aug. 15

• Advance Retail Sales
• Import Price Index
• Business Inventories
• Empire State Manufacturing Survey

Wednesday, Aug. 16

• Housing Starts/Building Permits
• Industrial Production/Capacity Utilization
• The Fed releases minutes from the July 26 Federal Open Market Committee meeting.

Thursday, Aug. 17

• Philadelphia Fed Manufacturing Business Outlook
• Weekly Initial Jobless Claims
• Leading Indicators

Treasury calendar

There are no auctions of Treasury notes or bonds this week.

By Mike Kraft, Executive Director and Commercial Real Estate Treasurer for Commercial Banking