US DATA: Small Businesses Imply Largest Tariff Price Increases Have Passed
Small business optimism continued its improvement from lows seen after April tariff announcements in August. Both backward- and forward-looking price metrics pulled back further after some recent increases although a longer-term trend remains one at a level above that consistent with the 2% inflation target.
- The NFIB small business optimism index firmed slightly more than expected in August as it ticked up to 100.8 (cons 100.5) from 100.3 in July for technically its highest since January.
- It extends what has been a trend recovery from the 95.8 seen after reciprocal tariff announcements in April. For context, the index saw a recent high of 105.1 in December, fully reflecting US election results, an average of 93 in 2024 and a very long-term 52-year average of 98.
- Ahead of Thursday’s US CPI report for August, the net share who increased prices compared to three months ago fell for a second month to 21% (lowest since Oct 2024) vs 29% in Jun and a recent high of 32% in Feb.
- It’s below the 23% averaged in 2024 but remains above pre-pandemic averages of ~12%.
- Also on the softer side, the net share expecting to increase prices over the next three months fell for a second month to 26%, the joint lowest since Sep 2024, having recently peaked at 32% in June.
- It’s back below the 28% averaged in 2024 but remains above the 22% averaged pre-pandemic.
- The two price metrics therefore point to some cooling in price pressures after an initial firming in the early stages of the second Trump administration, although from a longer-term trend perspective they continue to point to some stabilization at level above those historically consistent with 2% inflation.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
