Inflation, Retail Sales, Bank Profits Loom Large as Midterms Approach
Key economic reports and corporate earnings are set to release in the coming week, potentially influencing voter sentiment ahead of the U.S. midterm elections.
The upcoming week is poised to bring significant economic updates, including inflation figures, retail sales data, and the latest earnings reports from major U.S. banks. These developments come as the U.S. midterm elections draw nearer, with inflation emerging as a dominant issue.
The housing market is expected to show little change in existing home sales for September, according to economists. This follows a difficult August for the sector, which saw sales decline to their slowest pace in over a year. Rising mortgage rates, which have now reached their highest level in nearly three years, are a primary factor hindering prospective homebuyers. The housing sector has experienced a slump since 2022, with sales of previously occupied homes remaining flat last year at a 30-year low.
Inflationary pressures are anticipated to continue. The Labor Department is projected to report that the consumer price index increased by 0.2% month-over-month in September, and 3.6% year-over-year. A day later, the producer price index is expected to show a rise from the 5.4% registered in August, further indicating inflationary trends. Recent price hikes on consumer goods, such as Doritos, have been attributed to increased costs for fuel, aluminum, and commodities. The price of oil has also remained elevated, with average gasoline prices above $4 per gallon and diesel prices near record highs, contributing to overall inflation and straining household budgets.
Consumer spending in September may have pulled back, with forecasters expecting a modest increase. However, consumers surprised observers in August with robust spending, expanding retail sales by 1.2% despite concerns over higher prices. The National Retail Federation is also set to release its holiday shopping forecast this week.
Financial institutions are expected to report strong third-quarter earnings, benefiting from a volatile stock market that increases trading desk activity and from continued consumer spending that supports lending and fee revenue. Analysts anticipate significant profit boosts for major banks like JPMorgan Chase, Citigroup, and Bank of America. High interest rates, implemented by the Federal Reserve to combat inflation, are expected to persist and continue to benefit banks on loans.