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Weak Inflation Persists in July CPI

Friday, August 11th, 2017

For the second straight day, weaker-than-expected inflation reads have hit the tape ahead of the market open. Yesterday’s Producer Price Index (PPI) swung to a negative 0.1% from what was expected to be a 0.2% gain. And now this morning we see the July Consumer Price Index (CPI) coming in at a paltry +0.1%, both on the headline and core (ex-food & energy). Year over year, CPI is up just 1.7% on both headline and core.

Car sales, both new and used, fell 0.4% for the month, and Telecom and Physician Services were also down last month. And, as we mentioned yesterday when the weak PPI numbers came out, we currently see inflation almost non-existent — especially considering the run-up in the stock market, consumer confidence and a strong U.S. labor market all pointed to inflation having grown by now. We’re not even sniffing 2% yet, and this is something most economists are continually readjusting in their projections.

So the September meeting for the Federal Open Market Committee (FOMC) now has a mere 2.5% chance for a new interest rate hike. Six months ago, even three months ago, that number was much higher. Even chances of a December hike are melting before our eyes: analysts now gauge a 31% chance a new quarter-point hike will take effect in the last month of the year. Again, these numbers are reliant on future inflation metrics such as PPI and CPI.

Retail Q2 Earnings Sweep-Up

Long-beleaguered big-box retailer J.C. Penney JCP is trading way down in today’s pre-market following the company’s earnings miss in its Q2 earnings report. A loss of 9 cents per share was wider than the 6-cent loss expected in the Zacks consensus estimate. Quarterly sales actually outperformed estimates, bringing in $2.96 billion as opposed to the $2.87 billion expected. Comps were down 1.3% from an already low Q2 2016, ands as a result shares have tumbled nearly 23% in early trading, and now look to open at an all-time (45-year) low.

World’s Biggest Landlord

Yesterday, global asset management firm Blackstone BX joined forces with Starwood Waypoint Homes SFR to form an $11 billion joint venture that will effectively control 82K single-family homes in the U.S. The entity, called Invitation Homes INVH, will carry a total enterprise value of approximately $200 billion, making it effectively the world’s biggest landlord.

Mark Vickery
Senior Editor

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