Weekly Market Commentary August 18, 2025
Week in Review
Economic indicators released this week reflect a complex and evolving macroeconomic landscape, marked by persistent inflationary pressures and a labor market that remains resilient but shows early signs of moderation.
In July, the Consumer Price Index (CPI) rose 0.2% from the previous month of June, and 2.7% compared to the previous year. Core CPI — which excludes the more volatile food and energy components — climbed 0.3% month-over-month and 3.1% year-over-year, marking its highest annual increase since February. These figures indicate that inflation remains persistent, which may lead the Federal Reserve to maintain a cautious stance on monetary policy.
Wholesale inflation accelerated sharply, with the Producer Price Index (PPI) surging 0.9% month-over-month, marking the largest monthly increase in more than two years. The Core PPI, which excludes volatile components, rose 3.7% year-over-year, driven by increases in trade services and food categories. This points to rising wholesale costs that could feed into consumer prices.
Retail sales rose 0.5% in July, backed by strong auto demand and promotional events by prominent retailers. Core retail sales also increased 0.5%, suggesting resilient consumer spending, particularly on durable goods and online purchases, despite both inflation and tariff pressures.
Labor market data showed modest softening, with the initial jobless claims falling to 224,000, down 3,000 from the prior week. Continued claims dropped to 1.95 million, and the insured unemployment rate held steady at 1.3%, suggesting that while employment remains stable, hiring momentum may be easing.
Overall, recent data paints a picture of the economy that is growing steadily but is facing persistent inflationary pressures. Rising wholesale and consumer prices, coupled with resilient consumer demand and a gradually cooling labor market, suggest that the Federal Reserve is likely to remain vigilant. Market expectations for a September rate cut have moderated, with investors now anticipating a smaller adjustment than previously forecast.
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