Lukewarm Inflation, Flat Consumer Spending Raises Doubts About Rate Hike

Ahead of Friday’s major U.S. Non-Farm Payrolls report, investors had the chance to react to a slew of fresh economic data on Tuesday. The minor reports included personal income, final manufacturing PMI, construction spending and ISM manufacturing prices. The major reports were Core PCE Price Index, Personal Spending and ISM Manufacturing PMI.

The U.S. Personal Consumption Expenditure (PCE) price index was unchanged for June following a revised figure of no change for May which was originally reported as a 0.1% decline. The year-on-year increase declined slightly to 1.4% from 1.5% previously as weak energy prices continued to undermine the index.

U.S. personal income was also flat at 0.00%. This represented a decline from the 0.3% month-on-month growth reached in May. It also missed Wall Street expectations of a 0.4% rise.

Consumer spending, inched higher to 0.1% in June, matching economist forecasts. However, it was down from 0.2 percent in May.

The ISM manufacturing index came in at 56.3, coming in just below the 56.5 percent expected by economists.

Gold

Comex gold prices rose to a seven-week high on Tuesday, pushed higher by the lukewarm U.S. inflation data and the nearly flat consumer spending. The data and the reaction from traders suggests investors are betting the Fed will not raise interest rates a third time later this year.

Crude Oil

Crude oil prices fell nearly 2 percent after reports showed that OPEC’s output rose in July despite the cartel’s attempt to slash production.

According to Bloomberg News, OPEC’s July output rose by 210,000 barrels a day. Separately, market-monitoring firm Petro-Logistics said the producer group’s output was up by 145,000 barrels a day last month. These reports follow Monday’s report from Reuter that implied a jump of 90,000 barrels a day from OPEC members.

U.S. Stock Market

All three major U.S. stock indexes posted gains for the first time in a couple of sessions on Tuesday. The Dow hit another record high and closed in on 22,000. The catalyst behind the market’s strength was corporate quarterly earnings results that continued to top expectations.