Mark Vitner
Mark Vitner
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There was a huge sign of relief when the number came in above 100, and that's why the market rallied, ... There was a thought that the combination of rising interest rates and higher gas prices would knock it below 100.
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We expect a big jump in consumer confidence now that the effects of Katrina and higher gas prices are further behind us. Higher confidence will lead to a better-than-expected holiday shopping season as well.
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While core finished goods are still relatively tame, there are signs that price increases are accelerating further back in the production pipeline, ... Typically the Fed continues tightening until this series tops out. But with prices up only modestly, they will likely continue to make only modest adjustments.
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Virtually all indices remain at solid levels. It's a very strong reading for manufacturing overall. The most disturbing thing is the prices paid which is almost at crisis levels.
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While it seems counterintuitive, higher gasoline prices are actually helping restrain core inflation, ... With more money being spent for gasoline, consumers have fewer dollars left for discretionary purchases. The net result is that firms are slashing prices on everything from cars to beer in order to move product.
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When combined with the run-up in employee health-care costs, ... the inability to raise selling prices is the single most important reason that job growth has been lagging so much during this recovery.
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The prices paid is still way up there, inflation is still running a little hot, enough that the Fed will continue to raise interest rates.
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It (consumer sentiment) was a little higher than expected, but the stock market has come back, gasoline prices have come down, and the weather has been beautiful and that has to affect consumers somewhat.
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As long as energy prices remain high, they're likely to move in baby steps. I just don't think it's a slam dunk that they raise rates in December.
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I think we'll see gas prices rise earlier than usual and faster.
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People keep asking, 'How can it be that we haven't seen energy prices bleed over into the core?' ... Our belief is that it will eventually show up in the core CPI, but it may not show up in 2005. It may be in first quarter of 2006.
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High gasoline prices gradually eat away at income. The effect isn't felt all at once. We have seen consumers change their behavior in recent months and there should be further changes if prices stay at these levels.
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I don't know if the gas prices and interest rates will knock consumer confidence down in coming months, ... I think they're more likely to hold it where it is now, which is good, but not great.
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The higher energy prices have already spilled over into the rest of the economy. But it probably will not cause major problems for the economy.