Inflation Stays Hot
Talk of peak inflation appears to have been premature following the latest release of the CPI.
The Consumer Price Index rose 1.0% in May, and the core CPI, which excludes food and energy, rose 0.6%, according to the U.S. Bureau of Labor Statistics (BLS). The CPI and core CPI exceeded expectations of 0.7% and 0.5%, respectively, per Dow Jones Newswires.
Annually, the CPI hit a fresh 40-year high of 8.6% vs 8.3% in April, and the core CPI slowed to 6.0% from 6.2% in April.
The inflation narrative changed little over the last month. U.S. Bureau of Labor Statistics (BLS) data highlighted that inflation has moderated for most consumer goods, but services, food, and energy remain a big problem.
The Producer Price Index, which measures wholesale inflation, showed no signs of easing when it was last released a month ago—April data, U.S. BLS.
A Bloomberg News story early last week pointed out that some measures of semiconductors, shipping containers, and fertilizer prices have come down.
Business Insider noted that lumber prices have tumbled recently, but we’re not seeing anecdotal evidence of slowing inflation creep into the broad-based CPI in a major way.
Look at the graphic below. Inflation outside of food and energy has roughly held within a 0.5—0.6% range in seven of the last eight months. The temporary slowdown in March occurred primarily due to a steep drop in used cars.
Bottom line
Investors have yet to see a peak in inflation, which raises the odds that the Fed will continue to take aggressive action.
However, our friends at ITR Economics (www.itreconomics.com) are seeing a few events and trends of which to take notice. ITR Economics is not in the camp that thinks oil is going to $150 - $175 bbl. That projection smacks of straight-line forecasting that ignores that global growth is slowing (therefore demand is slowing) and that OPEC output is slated to rise. ITR Economics reports it is getting tentative, but promising, upside signals regarding the general economy for the second half of 2023.
If you have any questions or would like to discuss any other matters, please let me know.
Clark S. Bellin, CIMA®, CPWA®, CEPA
President & Financial Advisor, Bellwether Wealth
402-476-8844 cbellin@bellww.com
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