Oil topped $100 per barrel as violence in the Iranian conflict renewed, pushing up expected September inflation. Average gasoline prices remain well above $4 per gallon, and diesel prices sit just below September’s record highs. Banks are poised to report large profit gains even as households face higher energy, borrowing and housing costs.
Energy Costs Reach Households
A Bloomberg survey of economists puts September’s expected monthly consumer price index rise at 0.6%, up from 0.4% a month earlier. That would mark the biggest increase in five months. The Bureau of Labor Statistics is due to release the figures Wednesday.
The Labor Department is also expected Wednesday to report that the consumer price index rose 0.2% from the previous month and 3.6% from a year earlier. The article gives both projections. On Thursday, the department will release the producer price index, which measures inflation before it reaches consumers. Economists expect the index to rise from 5.4% in August, which was up from 4.8% in July.
The U.S. reported last month that inflation accelerated in August as gas prices spiked after renewed fighting in the Middle East. The U.S. war with Iran is entering its eighth month, and neither side has been willing to concede ground. Energy costs have added pressure to household budgets and businesses.
PepsiCo said last week it was raising prices on Doritos and other products, citing higher fuel, aluminum and commodity costs. Those increases pass the costs on to consumers. Inflation reports, retail sales figures and major banks’ financial results are due during a week when inflation is drawing attention ahead of U.S. midterm elections less than a month away.
Borrowing Costs and Housing
The Federal Reserve recently raised its benchmark interest rate to cool inflation and is leaning toward another increase by year’s end. High rates weigh on households and businesses, but they also let banks charge more for loans. The expected September inflation increase supports expectations that the Fed won’t raise rates this month.
The National Association of Realtors is scheduled to report existing-home sales for September on Tuesday. Economists believe sales held steady from August, when they fell to their slowest annual pace in more than a year. Rising mortgage rates have thwarted prospective buyers.
Freddie Mac reported Thursday that the average long-term U.S. home-loan rate had risen for a seventh consecutive week and stood higher than at any point in nearly three years. The housing sector has struggled since 2022. Sales of previously occupied homes were essentially flat last year, at a 30-year low.
Banks’ Gains Amid Household Pressure
Banks have recorded record profits this year as volatile stock markets boosted trading activity, commissions and fee revenue. Continued consumer spending also supported fee and lending revenue. Analysts expect JPMorgan Chase to report a 47% increase in profits and Citigroup a 61% increase when both release third-quarter earnings Tuesday. Bank of America is expected to report a 36% profit gain Wednesday. Morgan Stanley and several other banks and financial institutions are also due to report results during the week.
Economists expect Americans to have pulled back on shopping in September as the holiday season approaches. Most forecast retail sales will rise 0.65%. Consumers spent strongly in August despite complaints about higher prices at gas stations and grocery stores: retail sales rose 1.2%, nearly twice the forecast increase. The National Retail Federation will release its holiday forecast next week.