Uncertainly lurks behind improving business sentiment
Weekly Bond Commentary
Markets eased back to work after Labor Day in calmer manner.
In a surprise, small business optimism rose more than expected in August. The National Federation of Independent Business monthly survey showed that its index increased, but still remained below February’s high. Most survey views improved, led by plans to hire and increase inventory, but they were offset somewhat by difficulty in finding qualified labor. The uncertainty index increased to its second-highest level since 2017 (after only March 2020), and fewer respondents foresaw higher sales and a better economy. All told, these are pretty solid responses from a key sector of the economy.
Weekly jobless claims were flat over the last week, while continuing claims ticked higher, to over 13.4 million, indicating that over 8% of the labor force remains out of work. The labor market has recovered unevenly, as many businesses have added back workers, while others continue to struggle. With Congressional inaction on further stimulus measures, uncertainty in many quarters continues to rise.
Consumer prices ticked higher in August, more so than had been expected. Following a 0.6% gain in July, retail prices rose 0.4% in August. Nearly half the gain was due to the sharpest rise in used car and truck prices since 1969, while the rest relates to the steady expansion in activity since the springtime lockdowns. Another positive sign: airfares rose 1.2%, after posting their largest monthly gain in over 20 years in July, but like much data they remain far below (more than 20%) pre-Covid levels.