Weekly Market Update: January 14, 2018
Lessons From Last Week
The ongoing federal government shutdown is challenging for the 800,000 federal government workers affected. As the shutdown continues, creditors are stepping up to help federal workers manage financial obligations and they will, as they always have in these circumstances, receive back pay for the time off. The shutdown is not expected to have a visible impact on the overall economy and the steady and low level of jobless claims so far is reassuring on that score.
Core consumer price index (CPI) inflation edged up 0.2 percentage points in 2018 compared with the average in the previous four years, easily falling under the heading of noise. Slightly faster increases in the core CPI reading were concentrated entirely in prices of used cars and household furnishings and operations, items that account for 6 percent of the overall CPI. Prices for everything else were either unchanged or down slightly compared with the average changes in the previous four years. The 2018 core personal consumption expenditures (PCE) chain price reading (the Fed’s focus), which will be reported at the end of the month, is likely to show that core inflation was slightly below 2 percent.
What to Expect This Week
December retail sales headlines may look soft, owing to weak energy prices and some pullback from earlier strength. Import prices are expected to drop, reflecting falling energy prices and the impact of earlier dollar strength versus the Chinese yuan. Housing indicators likely implied continued moderate activity.
On Tuesday, the House of Commons is expected to reject the withdrawal bill detailing the terms that Prime Minister May reached with the EU. That complicates the outlook for the next steps when the UK is scheduled to exit from the EU on March 29. Possible scenarios include extending the March 29 formal exit deadline, a confidence vote that could lead to a new government, a new election or a second referendum.
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