Four Factors to Watch
1. Infrastructure Bill— House to vote next week
House Majority Leader Steny Hoyer confirmed that the House will vote on the bipartisan infrastructure bill a week from today, despite the fact that the larger $3.5 trillion bill still faces a number of obstacles. Hoyer stated in a letter to lawmakers that the House will vote on the infrastructure bill the last week of September “pursuant to the rule passed in August.”
That agreement was struck between House Speaker Nancy Pelosi and a small group of moderates that have been vocal about not supporting the bill if the larger, Democratic-backed social-spending package isn’t completed by then. Nevertheless, the work on the $3.5 trillion package was completed last week by the September 15 goal set by Democratic leaders.
The House returns today from its summer recess, and Pelosi will begin collecting votes. The Democrats’ thin majority in the House leaves a margin of only three defections.
2. COVID-19 Case Numbers—Cases stabilizing; deaths still on the rise
In the last week, the seven-day average of daily COVID cases in the U.S. rose from 147,816 to 150,366. Nearly 155,000 new cases were reported on September 16. In early July, daily fatalities were under 200. Now, the seven-day average is approaching 2,000. More than 3,400 deaths were reported on September 16.
The seven-day average of COVID cases rose slightly in California and dropped in Texas and Florida:
- California: increased from 10,071 to 10,313
- Texas: decreased from 19,214 to 16,063
- Florida: decreased from 14,276 to 11,816
3. Inflation— Prices cool in August
The consumer price index, excluding food and energy components, edged up 0.1% last month. That was the smallest gain since February and followed a 0.3% rise in July. Used car and truck prices saw a decline of 1.5% after five consecutive months of increases. Airline fares slid 9.1% due to the Delta-variant-fueled spike in COVID cases.
But with trillions of dollars in personal savings accrued through the pandemic, high prices are still not dampening demand; inflation is still running at 5.3%, despite the slowdown.
4. Retail Sales—A surprise increase in August
In the face of waning consumer confidence, U.S. retail sales beat projections in August. Sales got a lift from back-to-school shopping and child tax credit payments from the government.
Leading the way was a spike in online purchases of 5.3%—a significant turnaround from the drop of 4.6% in July. The steady decline in auto purchases kept the unexpected increase somewhat in check, however.
Despite the dwindling stimulus and the flaring Delta variant, spending has largely remained resilient and robust. Sales are up 15.1% from a year ago and are 17.7% above their pre-pandemic level.
After Q3 GDP forecasts were downgraded last week, the surprise lift in retail sales spurred Morgan Stanley to raise its estimate from 3.3% to 5.0% and Goldman Sachs to raise its forecast from 3.5% to 4.5%.