Hurricanes complicate economic data

Just when markets and the Federal Reserve need good economic data to help make decisions for the next round of interest rate cuts, hurricane impacts muddying the water. 

The closely watched (and clear) Consumer Price Index (CPI) report for September showed overall prices rising 2.4% in the year ended September 30, the smallest 12-month increase since February 2021. Over the last year, food costs rose 2.3%, energy prices fell 6.8%, while all other prices rose 3.3%. Shelter costs have risen 4.9% over the last year, accounting for two-thirds of the total core CPI (excluding food and energy costs) inflation increase, with smaller contributions from motor vehicle insurance (up 16.3%) and medical care (up 3.3%). Producer, or wholesale, prices were unchanged in September, and rose 1.8% over the last year, down from 1.9% in August.

While these particular inflation reports appear unaffected by storms, weekly jobless claims do show a notable impact. Claims rose from 225,000 to 258,000—well above the 219,000 average since year-end 2021. Almost one-fourth of the rise in claims came from Florida and North Carolina, states that make up less than 10% of the national workforce.

Consumer sentiment, as measured by the University of Michigan survey, eased slightly lower in the first part of October. Respondents continue to cite high prices as their top concern, though they acknowledge inflation has fallen. Labor market expectations improved, as did views of nominal and real income, but they still expect inflation to exceed income gains in the year ahead. Some consumers appear to be withholding judgment about the longer-term direction of the economy with the upcoming election on the horizon.

Market focus now shifts to the raft of third-quarter corporate earnings reports, which should give good perspective on the economy and underlying employment trends.