US retail sales, produces prices rise; jobless claims lower than forecast

A slew of US economic data on Thursday showed stronger-than-expected numbers that stoked worries about sticky inflation and reinforced the view that the Federal Reserve is likely to keep interest rates higher for longer.

US producer prices rose 0.7% in August, compared with expectations of a 0.4% increase. US retail sales also climbed 0.6% last month, against estimates of a 0.2% rise, while initial jobless claims for the latest week fell to 220.000. Economists polled by Reuters had estimated 225,000 claims.

MARKET REACTION

STOCKS: US stock futures held gains in the wake of the data.

FOREX: The dollar index rose 0.23% to 104.960

TREASURIES: The yield on 10-year Treasury notes initially rose after the data, but was last little changed at 4.24%.

COMMENTS:

SAMEER SAMANA, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, CHARLOTTE, NORTH CAROLINA
"Inflation pressures remain pretty much persistent throughout the economy. When you see oil and gasoline prices ... it doesn't take very long for truckers and shippers, the logistics companies to start passing along into some of those higher energy costs and surcharges."

"We've been waiting to see exactly which of these inflation data trends would kind of knock the market off its axis. In our minds, it's only a matter of time. And it won't get any better in the September data because oil has ticked up since August."

"The longer we stay in this unstable equilibrium with steady growth, high inflation and central banks that are tightening policy, the worse the economic and market fall out when it occurs."

"It'll probably lead to over tightening and when the slowdown starts to happen central bankers won’t be fast to react. That's the real concern, an over tightening mistake."

"It seems like the Fed will have to go further. We've been in that camp for a while. Folks that haven't been in that camp may have to come around to it."

GREG BASSUK, CHIEF EXECUTIVE OFFICER OF AXS INVESTMENTS, NEW YORK
"Investors are largely brushing off the hotter than expected inflation numbers, just like the consumer price index came in hotter than expected. One of the reasons why investors are taking it in stride is because the data was largely driven by a jump in energy and gas."

"It's likely that while the Federal Reserve won't love the August inflation data, it also is soft enough that they likely won't react to it either. That's why the markets are holding up."

"With August coming in hotter than expected for both consumer and producer prices, investors should brace for another potential rate hike this year. However, for that reason, we think all eyes should be laser-focused on other economic data points to gauge whether the economy is still in line for a soft landing, avoidance of a recession."

PETER ANDERSEN, FOUNDER, ANDERSEN CAPITAL MANAGEMENT, BOSTON
"I'm hoping that the Fed will take the data as trying to discern the general trend and not necessarily react to one set of data points that have come out this week."

"If the Fed were to look at this as a trend, I believe they still will be on pause in September next week. As we approach the last quarter of the year, I would expect that they would continue to pause based on my estimate that the economy will show continued strength, but also subdued inflation."

"We still have many rate hikes that have not even matured to a year, and so time is our friend in the sense that the prior hikes that are less than a year old are coming up to be a year old, and as they work their way through the economy, the Fed should be satisfied that the prior hikes have done the job."

ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER, DAKOTA WEALTH, CONNECTICUT
"Most of the rise in prices is coming from energy. A lot of people are not really expecting this rise in oil prices to necessarily last throughout the winter and into the spring."

"I still believe we have seen the last of the rate hikes, but there is a possibility small that November still has the potential to bring another rate hike. I'd have to see more data to believe that right now."

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN
"July's Beyonce Bounce or Swift Surge was revised down from 0.7% to 0.5% and August's surprising strong 0.6% rise was mostly thanks to more expensive gasoline. Since inflation was about 0.6% in August, real spending was basically flat. Over the last year, real retail sales growth has been negative. It's not all sunshine and roses for consumers."

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