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.
But gas here is at $5, including diesel. Such bilge.
Real inflation is between 12 and 17%. Still. Interest rates have to go up another 500 bps before you see the market finally getting the picture.
Right now, business are just raising prices because they can. Supermarket chains outright came out and said as much, as did airlines.
Unless and until the interest rate climbs above the inflation rate, the inflation rate will go up, not down. Shrinkflation is definitely not cranked into this number either.
Try getting a pound of coffee. Milk is now coming in less than a half gallon.
Oh yeah it is great to lose your job for “the greater good”. You Republican’ts crack me up.
**************
Do you want Trump back in the White House?
If you do, a recession with job losses will be part of the equation.
Without a recession many people will stick with the ‘nursing home guy’ regardless of inflation.
it’s core that counts. it is still the problem.
The Titanic sank less fast than the previous half-hour. What a break for the passengers.
Fuel at $3.35 in central Texas. That is way more than the $1.85 in November 2020.
Brace yourself for lots of it.
Yes, I was a victim of that recession so screw that. F Volker. May he rot in hell.
Hi.
In the fwiw department inflation is cumulative and perpetuating.
Bad bad juju.
And for those at DU, the solution is Fed gov has to stop spending more than it takes in.
Sheesh.
5.56mm
grocery prices increased far more than 2%.
Which means prices will stay at higher level combining all inflation rates since Biden was selected. I bought a grass edger for $78 in 2019. I need a replacement. New price at Home Depot for same edger model is now $129. Thank you Biden for nothing.
No worries. More Food stamps will be issued to accommodate.
There is never money shortage for welfare.
EXCLUDING FOOD AND ENERGY.
OH...okay
Meat prices are putting a lie to that figure.
Hamburger is up OVER 33% alone.
Yep, just like 1987 was way way higher than 1979. Prices
Never drop, just hoping to slow the increase
A loaf of Wal Mart white sandwich bread was 84 cents.
Last week==$1.38
That is 64% higher-—for the cheapest bread on the shelf.
More and more people have had the opportunity to live with electric cars, and the opinion tide is turning.
Hybrids have staying power, IMO. Electrics are a niche vehicle. Golf carts, fork lifts, short trips. Anyone that bicycle commutes could use an electric.
Prices are still going up and may be forever higher than they were during the Trump years unless we enter a deflationary period.
-PJ
I don’t know how they can call inflation 4% when prices are literally doubling.
High inflation has been with so long now that year over year measurements are no longer giving us the true picture of how much things have gone up. Basically, they’re telling us that these higher prices are the new normal.
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