- The Leading Economic Index fell by 0.4% in July, its 16th straight decline
- The current federal-funds rate target range is 5.25% to 5.50%
- Retail sales rose 0.7% in July
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Leading Indicators Register 16th Straight Decline: The Conference Board reported last week that its Leading Economic Index (LEI), a composite of ten U.S. economic indicators intended to signal turning points in the economy, fell by 0.4% in July from the prior month. The index has now fallen for the 16 straight months, signaling an uncertain economic outlook. The latest decline was primarily attributed to weakness in new orders, higher interest rates, decreased consumer sentiment, and reduced manufacturing hours. According to the Conference Board, "the index continues to suggest that economic activity is likely to decelerate and descend into mild contraction in the months ahead."
Fed Minutes Reflect Continued Inflation Concerns: Minutes released last week of the latest meeting of the Federal Reserve's policy-setting committee, held in July, indicated that officials remain concerned that the rate of inflation has remained well above the central bank's longer-run target of 2%. This sentiment drove the near-unanimous decision at the meeting to increase the target federal-funds rate by another 25 basis points to a range of 5.25% to 5.50%. Moreover, officials noted that further monetary policy tightening in the form of additional rate hikes could be required given "significant upside risks to inflation."
Retail Sales Growth Increases in June: Spending at U.S. retail and food service establishments grew 0.7% in July from the prior month, the U.S. Department of Commerce reported last week. This was more than double the pace of growth in June and was the largest monthly increase since January. Compared to the prior year sales were up 3.2%. Keying the stronger result in July was internet sales, which jumped 1.9% on the month and 10.3% versus the prior year, partly resulting from Amazon's latest Prime Day promotion. Restaurants also showed strength, with sales rising 1.4% and 11.9% versus the prior month and year, respectively.