Posted on 07/12/2023 9:37:40 AM PDT by Red Badger
KEY POINTS:
The consumer price index rose 0.2% in June and was up 3% from a year ago, the lowest level since March 2021.
Excluding food and energy, core CPI increased 0.2% and 4.8%, respectively.
Soft gains in food prices and declines in used vehicle and airline prices helped keep inflation down, while shelter prices continued to rise.
Worker wages adjusted for inflation increased 1.2% from a year ago.
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Inflation fell to its lowest annual rate in more than two years during June, the product both of some deceleration in costs and easy comparisons against a time when price increases were running at a more than 40-year high.
The consumer price index, which measures inflation, increased 3% from a year ago, which is the lowest level since March 2021. On a monthly basis, the index, which measures a broad swath of prices for goods and services, rose 0.2%.
That compared with Dow Jones estimates for respective increases of 3.1% and 0.3%.
Stripping out volatile food and energy prices, core CPI rose 4.8% from a year ago and 0.2% on a monthly basis. Consensus estimates expected respective increases of 5% and 0.3%. The annual rate was the lowest since October 2021.
In sum, the numbers could give the Federal Reserve some breathing room as it looks to bring down inflation that was running around a 9% annual rate at this time in 2022, the highest since November 1981.
“There has been significant progress made on the inflation front, and today’s report confirmed that while most of the country is dealing with hotter temperatures outside, inflation is finally cooling,” said George Mateyo, chief investment officer at Key Private Bank. “The Fed will embrace this report as validation that their policies are having the desired effect – inflation has fallen while growth has not yet stalled.”
However, central bank policymakers tend to look more at core inflation, which is still running well above the Fed’s 2% annual target. Mateyo said the report is unlikely to stop the central bank from raising rates again later this month.
Fed officials expect the inflation rate to continue falling, particularly as costs ease for shelter, which makes up about one-third of the weighting in the CPI. However, the shelter index rose 0.4% last month and was up 7.8% on an annual basis. That monthly gain accounted for about 70% of the increase in headline CPI, the Bureau of Labor Statistics said.
“Housing costs, which account for a large share of the inflation picture, are not coming down meaningfully,” said Lisa Sturtevant, chief economist at Bright MLS. “Because rates had been pushed so low by the Fed during the pandemic and then increased so quickly, the Federal Reserve’s rate increases not only reduced housing demand — as intended — but also severely limited supply by locking homeowners into homes they would have otherwise listed for sale.”
Wall Street reacted positively to the report, with futures tied to the Dow Jones Industrial Average up nearly 200 points. Treasury yields were down across the board.
Traders are still pricing in a strong possibility that the Fed will enact a quarter percentage point rate hike when it meets July 25-26. However, market pricing is pointing toward that being the last increase as officials pause to allow the series of hikes to work their way through the economy.
When inflation first began to accelerate in 2021, Fed officials and most Wall Street economists thought it would be “transitory,” or likely to fade once factors specific to the Covid pandemic wore off. They included surging demand for goods over services and supply chain clogs that created scarcity for vital items such as semiconductors.
However, when inflation proved more stubborn than anticipated, the Fed began hiking, ultimately raising benchmark rates by 5 percentage points through a series of 10 increases since March 2022.
The muted increase for the headline CPI came even though energy prices increased 0.6% for the month. However, the energy index decreased 16.7% from a year ago, a time when gasoline prices at the pump were running around $5 a gallon.
Food prices rose just 0.1% on the month while used vehicle prices, a primary source for the inflation surge in the early part of 2022, declined 0.5%.
Airline fares fell 3% on the month and now are down 8.1% on an annual basis.
The easing in the CPI helped boost worker paychecks: Real average hourly earnings, adjusted for inflation rose 0.2% from May to June and increased 1.2% on a year-over-year basis. During the inflation surge that peaked last June, worker wages had run consistently behind the cost-of-living increases.
Figures don’t lie, but liars figure......................
Easing would mean a long period of deflation.
Fact vs. Propaganda, has begun to pull the curtain back on the Electric cars nonsense.
Oh yeah it is great to lose your job for "the greater good". You Republican'ts crack me up.
Trickery will get them everywhere and the gullible lemmings follow them off the bridge.
Correct. Inflation is a hidden tax on our income. So we need to get a handle of it right away.
Point taken. My point is that inflation always has a 2% target - because dropping below 0% into "disinflation" (recession) is a much worse outcome for the American consumer.
Existing loans become very difficult to service, along with massive job loss.
Multitudes of bankruptcies occur - with the underlying assets (wealth) confiscated by the banks.
Gee - it's "almost" like they plan the cycle to play out the way it is...
If people truly understood debt-based money and the labor servitude they have put themselves into then it would be quite the awakening...
I don’t either. Later on today I will go to “shadow stats” to see what the actual inflation rate is without the constant manipulation/ changes to the formula.
Yaye only 2%! 🙄
Funny.😉
As Mr.Spock or Criminal Minds’ Dr.Reid would say, that is statistically provable as a joke basis.
Table 43:
whites 25,143
black or African American 29,677
Since most of what we consume is imported I don't see that happening.
The beatings will continue until morale improves.
If a company sells widgets for $10 and demand drops then they can offer a sale in the hope of driving more demand.
If the consumer is still not buying then the company could face possible bankruptcy.
What's the one last thing a company could try in order to stay solvent?
Correct...raise their prices, hoping that existing loyal customers will still buy and they can make enough sales to stick around...
In other words...a recession (money supply deflation) can be accompanied by price inflation. The worst of all economic worlds.
Last point - this is global in scope. No country will skate by - unlike most regional recessions we have previously experienced.
Tighten your seat belts...China is sinking first...
Except this is a global recession - affecting all imported goods as well.
China is the first to take it on the chin - followed by Europe - followed by the US.
The US is still arranging deck chairs on the Titanic so they can hear the orchestra better...
I thought they shoot for a 2% a year inflation increase? This is 2.4% a year. I hope they hold off on another interest rate increase.
You need to read more about Paul Volcker's actions at the Fed back in the early '80s. The medicine he prescribed was harsh but effective.
The Fed is a bit late today. And the medicine isn't bitter enough. So we are paying for it.
Audit Biden’s statistics. Without audits, they’ll cheat.
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