Other key details of the ADP report showed annual pay growth decelerated yet again, settling at 6.4%. The slowdown in pay serves as a positive signal for the Fed. It indicates that inflationary pressures, such as wage gains, are easing. Nonetheless, the fact that the labor market remains robust only amplifies the belief that future rate hikes are on the horizon.
Economic Indicators and the Week Ahead
Next week, the release of key indicators that shed light on both inflationary trends and sentiment within the market will shape the economic landscape. The Consumer Price Index (CPI) and Producer Price Index (PPI) will tell us if inflation is continuing to cool. Meanwhile, the Michigan Consumer Sentiment and NFIB Small Business Optimism surveys will provide the latest insight into prevailing sentiments among consumers and small business owners.
Current forecasts show both headline and core CPI may increase 0.3% from May. Headline PPI is forecasted to fall to 0.4% year-over-year while core PPI is forecasted to remain steady at 2.8% year-over-year. The preliminary report for the Michigan Consumer Sentiment Index, which could impact interest in the Consumer Discretionary Select Sector SPDR ETF (XLY), is predicted to show a slight increase from June’s final reading of 64.4 to 64.8. Lastly, the NFIB Small Business Optimism Index will reveal if concerns among small business owners have continued to worsen.
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