Retail Sales, CPI, PPI, Consumer Sentiment, 2027, Four Seasons, and this week in 1776
This Week, Economically Speaking
Well, the spending finally slowed down.
The biggest news of the week was the Retail Sales number. Expectations were for a 0.1% increase, compared to June’s increase of 0.2%.
It fell 0.6%. That was the largest decline since May of last year. So, what drove that?
Online sales fell 0.2%, auto dealer sales dropped 1.8%, and gas stations' receipts fell 0.9%, due mostly to falling fuel prices.
Part of the whole thing is that the tax refunds have wrapped up and that certainly helped fuel the growth in the prior months.
The CPI – Consumer Price Index aka headline inflation – came in right at expectations: 3.4%, down slightly from June’s 3.5%.
Falling energy costs were the driver on this one, while shelter and food were up slightly.
Taking out the fuel and food, the core CPI came in at 2.5%, down from 2.6%.
A decline is a decline; we’ll take it.
The PPI – Producer Price Index, which can be a leading indicator of where the CPI will be down the road – was unchanged month-over-month, and the year-over-year increase held at 4.7%, down from 5.5% in June.
Service costs continued to climb, up 0.2%, but that was more than offset by the drop in energy of 3.1%.
Finally, the U. of Michigan Consumer Sentiment initial survey was released.
In July, it was 54.9, and it was expected to come in at 54.0.
It came in at 50.6. Hmm.
The survey asks many questions, one of which is where the respondents think inflation will be in 1 year and 5 years. Survey says…
4.3% for one year and 3.3% in five.
It turns out they are less optimistic about personal finances and future business conditions too. That’ll keep the score in the 50s.
Sooo… the Fed gained some breathing room.
After weak jobs data in the prior week, softer inflation, and weak retail sales, the case for another near-term rate hike became much harder to make.
Fingers crossed.
Budgeting for 2027
It’s that time of year when you need to think about next year's budget.
One of my sources of information is Kiplinger's. Well, they have their forecast out for the year.
GDP growth of 2.1% in 2026 and 2.2% in 2027. No recession, folks.
They expect the Fed to raise rates from 3.5% to 4% by year-end 2027.
That’ll impact car loans – about 7% - and home equity loans and lines of credit at 7.25%.
The 10-year Treasury bond will stay at about 4.5% and 30-year mortgage rates at 6.5%. Nothing new there.
Inflation will end up at 3.6% this year and slowly decline to 3% by year-end 2027.
Wages & salaries will be up 3% with total benefit compensation rising 4%; health insurance is expected to rise 6.7%.
As far as gasoline costs go, you might as well ask the trusty 8-Ball, but if you need a number for a plug, use $3.50/gallon (just not in California).
Budget $4.25 to $4.50 for diesel.
Is electricity a key part of your business? Look for a 5-7% increase.
Insurance costs will be dependent on you.
Any recent claims? Captain Obvious says your premium will increase by up to 10%.
Is your commercial property well managed with low hazards? Staying flat. The same goes if your company has robust cyber security measures in place.
Otherwise, look for increases of up to 10%, or more.
Fees for professional services – think CPAs and lawyers – rising 5-8%.
Finally, higher tech hardware costs coming your way, courtesy of the billions being poured into AI. Why make a chip for your laptop when they can make a bunch for your AI servers?
Buy your IT now; I’m told it may even be too late, so whatever you have budgeted, at least double it.
Happy 2027.
Cruising
Want to take your mind off of the 2027 budget? Tired of the humdrum of a Carnival Cruise? Looking for something a little more exclusive?
The Four Seasons folks have a ship, er, yacht, for you.
There are 94 cabins. The base cabins are all suites with king beds, a double sink vanity in the bathroom and plenty of walk around space.
All for $30,000 for the week. And like my Hampton Inn, it does include breakfast, but that’s it.
You’d think you’d get an unlimited ice cream bar.
America 250 – This Week in 1776
Six weeks ago, the Declaration of Independence was finalized on July 3 and published on July 4.
Given that it took 4 to 6 weeks for a ship to cross the Atlantic, King George was just finding out about the impertinent colonists.
Regardless, a massive British invasion force sat poised outside New York, and in 10 days, the largest battle of the Revolutionary War would be fought.
The Battle of Long Island – also known as the Battle of Brooklyn - Washington's 10,000 man army would suffer defeat to Howe’s 32,000.
You can read the Wikipedia entry here.
The only silver lining was that against all odds, the army was able to escape by dark of night and live to fight another day, keeping the Revolution alive.
Public Service Announcement for All Homeschoolers
If you homeschool your children, mark your calendar for September 15.
That is the day that the Reagan Presidential Library is offering free admission to homeschooled students. Click here for more information.
Folks, we are in the last three months of the year. Why three? Once you hit Thanksgiving, everyone has to work in unison to close sales, test the product or service, and then deliver or implement it. It can be done, but if you don’t want to be working your phone screen Christmas Eve, you need to wrap it up by November 20. That’s three months.
One more thing. The Football Hall of Fame was held a week or two ago, and a player by the name of Larry Fitzgerald gave a wonderful speech at the ceremony. It’s a 15-minute listen, and it does help to know a little bit about football, but regardless, you’ll still get the gist assuming you watch it. He details how important mentors are, as well as the support and camaraderie of teammates and the staff that surrounded him. Hall of Famers didn’t get to the top by themselves, and Mr. Fitzgerald acknowledges that. BTW, that applies to any profession. You can’t do it on your own, and you have to put in the time. Towards the end, he wraps it up nicely, stating:
Surround yourself with people who will tell you what you need to hear, not what you want to hear… Remember, there’s never much traffic on the extra mile of life. Bring others along with you; don’t just pursue excellence for yourself, help others pursue it too.
If you can do that as a business owner or manager, you will make it into your own Hall of Fame.
