FED: Bostic Touts Atlanta Fed's Survey Network
Atlanta Fed’s Bostic (non-voter) in a moderated discussion, touting the bank’s surveys including its CFO survey and unstructured regional economic information network (in response to a question hinting at government shutdown data issues).
- "I feel like I got lucky that I got to be the Atlanta president because our bank, long before I got here, had decided that the federal statistics weren't enough for us to really understand what's going on in the economy. Basically all the federal statistics are backward looking. And we know through history there have been times when there have been big turns in the economy and people in our building were quite surprised by that. And so we decided that we need to supplement this federal statistics with information from other sources."
- "And so we have our survey center, and we do a bunch of surveys of businesses to try to get information about. For example, we survey CFOs and ask what's your hiring plan for the next 12 months? What's the likelihood you'll reduce prices in the next quarter to get some forward looking idea about what business, what actual decision makers are doing? And I will say in the survey side, we found that what people say they do, they actually wind up doing. And so it winds up being useful and predictive in ways that give me a sense of what the trajectory of the economy will be."
- "And then we have a third source, which is our regional economic information network. We basically pay a bunch of folks to have unstructured conversations with business leaders, 90 minutes to 2 hours. The unstructured nature is actually quite helpful because it creates space for new ideas to come up, things that we may not be seeing in the newspaper that can give us insights. And so over the course of an FOMC cycle, we'll talk to somewhere between 60 and 120 folks. And we try to do different size of businesses, different sectors, all that kind of stuff."
- Separately on AI: "For the last 18 months, maybe until about 3 or 4 months ago, it was like, yeah, we're dabbling in [AI]. We're going to try to find ways to try to understand it and see possibilities, but it's not anywhere that's critical. Today, everybody has it in some business process, and everyone is trying to think about ways they can get it to be even more productive or more useful in those processes. When I talk to CEOs, they see AI as more a labor complement than a labor replacer.
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LOOK AHEAD: US Macro: PPI (Wed) and CPI (Thu) Inflation
US PPI inflation is released on Wednesday before CPI inflation on Thursday, an unusual ordering that should see core PCE implications dialled in after the CPI release rather than the usual wide range waiting for specific PPI details. PPI will be watched more closely than usual this month after a far stronger than expected jump in last month’s July report fired a warning short over tariff-based cost pressures starting to feed through. That included a 0.6% M/M increase in our preferred core series of PPI ex food, energy & trade services, which strips out items such as the then booming portfolio management & investment advice category following the strength in equity markets. It's too early to gauge an accurate sense of analyst expectations for August.
CPI inflation on Thursday will then be the last major release ahead of the Sep 17 FOMC decision. Consensus looks for core CPI at 0.3% M/M after the 0.32% M/M in July, another monthly increase comfortably above a pace consistent with 2% inflation. August should in theory start to see the largest tariff impacts along with September and possibly October. Returning to July’s report, core goods inflation was softer than expected, at a still solid (by core goods standards) 0.2% M/M for a second month running but about half that of 0.4% expected by analysts. Instead, non-housing core services surprised higher. The latter was a “dangerous” development in the words of a usually dovish Chicago Fed’s Goolsbee (’25 voter), who speaking after Friday’s payrolls report is still undecided on a September cut whilst looking for August inflation data “to get more information”.
LOOK AHEAD: US Macro: Payrolls Preliminary Benchmark Revisions (Tue)
- The BLS on Tuesday will publish preliminary estimates of benchmark revisions, based off QCEW data for Q1.
- These will give an indication of the actual benchmark revisions on the Mar 2025 level of payrolls due with the Jan 2026 payrolls report released in early February.
- Bear in mind that the final benchmark estimate tends to nearly always be more negative than the preliminary figure – see historical values to the right.
- That doesn’t mean they can’t be large again after last year’s historically negative revision that lowered the level of payrolls by ~600k. Initial estimates we’ve seen look for another large downward revision, with the smallest being worth -550k but with wide ranges higher.
FED: Barclays Adds A Cut To 2025 Fed View
Barclays analysts now expect three Fed cuts in the remainder of the year, adding October to their pre-existing call for 25bp reductions in September and December. "Given the disappointing August employment report, we expect the FOMC to see more elevated downside risks to the employment side of the mandate."
- As for a 50bp September cut, "we think that the FOMC will view [that] as sending too strong a signal that labor market conditions are deteriorating. Indeed, we think that participants such as Powell understand that the slower pace of payroll employment reflects at least, in part, slower labor supply, which does not translate into increased labor market slack."
- For 2026 they continue to expect 25bp cuts in March and June to 3.00-3.25%, but "we do not think the FOMC will be able to cut rates more than twice next year, as we think that activity will show some slight acceleration, with the economy adapting to the new tariff environment and fiscal policy providing some support, and the unemployment rate will revert down amid limited increase in labor supply."
