Reinhart Week in Review by Madison Investments 8.16.2024

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INFLATION

The Consumer Price Index (CPI) rose 0.2% in July. The core CPI, excluding food and energy, also rose 0.2%. Year-over-year, consumer prices are up 2.9% while core CPI has risen 3.2%. Producer prices (PPI) were lower than expected in July, rising 0.1% for the month and 2.2% over the past year.

Our Take: Inflation continues to moderate. The Fed will see one more CPI and PPI report before their next meeting. They are likely to cut rates at that meeting barring an upside surprise in the next report.

RETAIL SALES

Retail sales jumped 1.0% in July, far exceeding economist estimates for a 0.4% increase. Control group sales (which feed GDP calculations) rose 0.3% and were also above expectations.

Our Take: The strong retail sales report flew directly in the face of the recent narrative of an economic slowdown. The report is a reminder that the Fed will evaluate many data points when deciding on rates and that all the evidence will not necessarily point to a cut.

MUNICIPALS

In early August, Cleveland Mayor Justin Bibb sent a letter to Cleveland Browns owners Jimmy and Dee Haslam stating his desire to keep the team in Cleveland and encouraging the Haslams to support a “state-of-the-art modernization” of the current downtown stadium. To keep the Browns downtown, the City of Cleveland has proposed a $461 million investment in the existing stadium and redevelopment of the surrounding area. The overall renovation cost is estimated to be $1.2 billion. The Haslam Sports Group released a response this week indicating that they are exploring options including the construction of a domed stadium in Brook Park, a suburb near the airport. The Haslams proposed a 50-50 public-private split of the $2.4 billion Brook Park project.

Our Take: Using public money to finance stadium projects continues to be controversial. Many lawmakers and taxpayers balk at providing billionaire professional sports team owners funding when that money can be used to support other essential services in a community. Cuyahoga County issued a statement in support of keeping the Browns in Downtown Cleveland and that “renovation of the current stadium is the fiscally responsible choice for county residents and supports the region’s long-term economic and development goals”. The stadium debate will likely be resolved soon as the Browns’ lease with the city expires after the 2028 season, and it is estimated that a new stadium could take three years to build.

About Reinhart Fixed Income
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