August 3

8/3 – WEEKLY COMMODITY SUMMARY:

• The Federal Reserve chose to leave interest rates unchanged last week, despite calls to raise rates and get a better handle on inflation. With fuel prices elevated, there will be price pressure at every level of the supply chain. The CPI was up 3.5% (yoy) in June and PCE rose 3.7%, well above the Fed’s 2% target.

• A potential problem is that U.S. GDP growth slowed significantly, from 2.1% in Q1 to 1.5% in Q2. Federal government non-defense spending declined 12.9% in Q2 (vs Q1) and non-residential construction was down 5.0%. It was consumers who saved the day, with spending up 3.2% in Q2 – but that was likely due to tax cuts that boosted tax return checks.

• So, the economic ice is getting thinner. The stock market is too dependent on AI investment, and average Americans are having trouble meeting basic needs. The U.S. needs GDP growth in the 2.5-3.0% range to support job growth. Sub-2% growth is often the road to recession.