Pay attention to this number in today’s US inflation report Pay attention to this number in today’s inflation report | CNN Business (2024)

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign upright here. You can listen to an audio version of the newsletter by clicking the same link.

London CNN Business

The latest data on consumer prices in the United States showed that annual inflation unexpectedly rose to a 40-year high in May, underscoring concerns about household finances and piling pressure on political leaders who say they’re doing everything they can to address the problem.

What’s happening: The Consumer Price Index rose by 8.6% in the 12 months to May. It had fallen slightly to 8.3% in in April.

That signals to investors that the Federal Reserve could continue to aggressively hike interest rates through the end of the year as it tries to get inflation under control.

“Upcoming inflation data will be most important for determining the pace of hikes beyond July,” Citi economists said in a note to clients earlier this week.

The big question for policymakers and Wall Street is whether inflation has peaked. When stripping out volatile food and fuel costs, annual inflation in May rose 6%, slightly lower than in April.

“I’m confident that inflation will be meaningfully lower by this time next year and back to something we will feel comfortable with not too long thereafter,” Mark Zandi, chief economist of Moody’s Analytics, wrote in a column for CNN Business.

He pointed to the fading impact of the pandemic, and said that after the European Union’s announcement of its oil embargo on Russia, “the worst of the economic fallout from Russia’s aggression also appears at hand.”

But what happens in the interim remains murky. High fuel and food prices feed through to inflation in other parts of the economy. US gas prices are hovering just a cent below $5 a gallon, and oil prices could go even higher this summer, Goldman Sachs said this week.

One factor I’ve been watching closely is the cost of housing, also known as “shelter inflation.”

Housing represents about a third of the value of the basket of goods and services that the US Bureau of Labor Statistics uses to track consumer prices, which gives it significant weight in the overall inflation picture. In early 2022, it was a contributor to rising inflation alongside food and energy.

The shelter index climbed 5.5% over the last year, according to data for May. That was the biggest increase since February 1991.

That’s already notable. But Citi’s economists warn that the data can be slow to reflect the environment for renters, which means there’s a chance housing costs jump by even more than expected in the coming months.

Check this out: Rents in Manhattan hit a record high in May for the fourth consecutive month. Median rent for an apartment climbed to $4,000 a month, surging 25% from a year ago — and that’s before the peak summer season for lease signings.

Buyers also continue to feel the effects of record high home prices, though rising mortgage costs are encouraging some Americans to delay purchases.

“Generally, while housing demand has just recently shown signs of slowing, house prices continue to rise at a strong pace and suggest it will be some time (well into next year) before shelter prices could start to slow further,” Citi’s team said.

On the radar: The Federal Reserve Bank of San Francisco wrote in February that rents and home prices can push up the CPI reading “for as long as 24 months into the future.” That could complicate “peak inflation” hopes.

China’s economy is looking brighter. It’s not in the clear yet

From big gains in tech stocks to robust trade data, China has had plenty of good economic news this week.

The positive developments come after the world’s second largest economy was battered by widespread Covid lockdowns, a sweeping crackdown on tech companies and a real estate slump. Consumer spending and factory output both shrank sharply in April, while unemployment has surged to the highest level since the initial coronavirus outbreak in early 2020.

As China takes steps to gradually reopen businesses, and authorities introduce a slew of measures to stimulate activity, there are signs that a revival may be around the corner, my CNN Business colleague Laura He reports.

Remember: Earlier this week, The Wall Street Journal reported that Beijing’s cybersecurity review of Didi was about to wrap up. The move would allow the ride-hailing giant to return to app stores in mainland China, almost a year after Didi was removed over data privacy violations. Chinese tech stocks leaped.

There were other signs Beijing’s efforts to rein in tech companies could be easing, too. Bloomberg said Chinese regulators have started early stage discussions on a potential revival of Ant Group’s public offering, citing people familiar with the matter.

China also released strong trade data for the month of May, after a slump in April. The country’s exports jumped nearly 17% in May from a year ago, compared with only 3.9% growth in April. Imports rose for the first time in three months.

Still, analysts say more needs to be done to repair investor confidence in China, and some big risks haven’t gone away.

“It will take time to repair the business confidence, and sell-offs in Chinese assets might resume if China data proved to be disappointing again,” said Ken Cheung, chief Asian foreign exchange strategist for Mizuho Bank.

Americans lost half a trillion dollars in wealth in early 2022

Sometimes, swings in stock prices can feel abstract. But this year’s market turmoil has had real consequences, erasing billions of dollars in Americans’ wealth.

The net worth of households and nonprofit organizations dropped half a trillion dollars to about $149 trillion in the first quarter, according to Federal Reserve data released Thursday.

That’s a notable turnaround from the robust gains in wealth that began in mid-2020, fueled by skyrocketing prices of homes and equities.

Quick rewind: The Dow and the S&P 500 each dropped nearly 5% in the first three months of the year, while the Nasdaq plummeted nearly 9%. It was the worst quarterly performance for the markets since the first quarter of 2020, when the Covid-19 pandemic upended the US economy.

The decline in equities was partially offset by a $1.7 trillion increase in the value of real estate and a continued high rate of personal saving. The ratio of household net worth to disposable income remained near its record high and continues to be far above its pre-pandemic level in 2019.

But the data is a reminder of why so many Americans have been feeling lousy about the health of the economy.

Even though spending remains robust, and most economists don’t expect a recession this year, the market sell-off has soured the overall mood as the value of trading portfolios and retirement accounts dwindle. About 58% of Americans own stock, according to Gallup.

Up next

The latest reading of the US Consumer Price Index arrives at 8:30 a.m. ET.

Also today: The University of Michigan’s early reading of data on consumer sentiment for June posts at 10 a.m. ET.

Coming next week: The European Central Bank’s hawkish turn upset markets on Thursday. Now attention will turn to the Federal Reserve, which announces its latest policy decision this Wednesday.

Pay attention to this number in today’s US inflation report
Pay attention to this number in today’s inflation report | CNN Business (2024)

FAQs

What was the US inflation report today? ›

US Inflation Rate is at 2.97%, compared to 3.27% last month and 2.97% last year. This is lower than the long term average of 3.28%. The US Inflation Rate is the percentage in which a chosen basket of goods and services purchased in the US increases in price over a year.

What did the inflation report say? ›

And boy did this report deliver. The June data beat expectations on nearly every front, with headline inflation experiencing an outright decline of 0.1% on a monthly basis—something not seen since the early days of the pandemic. On an annual basis, headline inflation slowed to a 3% pace, from 3.3% in May.

What is the US inflation report expected to be? ›

The inflation rate in the United States is expected to decrease to 2.1 percent by 2028. 2022 saw a year of exceptionally high inflation, reaching eight percent for the year. The data represents U.S. city averages. The base period was 1982-84.

What is the US core inflation numbers? ›

US Core Inflation Rate (I:USCIR)

US Core Inflation Rate is at 3.27%, compared to 3.42% last month and 4.83% last year. This is lower than the long term average of 3.68%. The Core US Inflation Rate is one of the most important metrics for the US Economy.

What is the main cause of inflation in the US right now? ›

So, from this research, the authors find that three main components explain the rise in inflation since 2020: volatility of energy prices, backlogs of work orders for goods and service caused by supply chain issues due to COVID-19, and price changes in the auto-related industries.

How bad is inflation today? ›

Key takeaways. The current annual inflation rate is 3%, but between May and June, inflation edged lower (-0.1%) on a monthly basis, the first decline since the pandemic.

Is this the highest inflation in US history? ›

Inflation in the U.S. is measured by the consumer price index (CPI) calculated by the Bureau of Labor Statistics. The highest year-over-year inflation rate observed in the U.S. since its founding was 29.78% in 1778. Since the CPI was introduced, the highest inflation rate observed was 20.49% in 1917.

What is the CPI rate right now? ›

Basic Info. US Consumer Price Index is at a current level of 313.05, down from 313.22 last month and up from 304.00 one year ago. This is a change of -0.06% from last month and 2.98% from one year ago.

What is a healthy inflation rate? ›

The Federal Reserve targets a 2% annual inflation rate as a sign of a healthy economy. Inflation can be caused by factors such as increased production costs or high demand for goods and services, and expectations for higher inflation can also contribute to rising prices.

Which country has the highest inflation rate? ›

Top 10 Countries with the Highest Inflation Rates (Trading Economics Jan 2022) With an inflation rate that has soared above one million percent in recent years, Venezuela has the highest inflation rate in the world.

What is China's inflation rate? ›

China Inflation Rate is at 0.20%, compared to 0.30% last month. This is lower than the long term average of 1.68%.

What is the true inflation rate in 2024? ›

The annual inflation rate for the United States was 3% for the 12 months ending June, compared to the previous rate increase of 3.3%, according to U.S. Labor Department data published on July 11, 2024. The next inflation update is scheduled for release on August 14 at 8:30 a.m.

What state is number 1 in inflation? ›

Where is inflation the highest and lowest? See if your state made the list. The five states with the fastest inflation: 1. Florida, 12-month inflation: 3.9% - Americans have streamed into the Sunshine State since the pandemic for its warm weather, beaches and lower costs, especially compared to the Northeast.

Can you have inflation and recession at the same time? ›

In economics, stagflation (or recession-inflation) is a situation in which the inflation rate is high or increasing, the economic growth rate slows, and unemployment remains steadily high.

What are three positives of inflation? ›

Answer: Inflation favourably impacts the economy in the following ways: Higher Profits since producers can sell at higher prices. Better Investment Returns since investors and entrepreneurs receive incentives for investing in productive activities. Increase in Production.

What has been the US inflation rate? ›

The annual inflation rate in the United States has increased from 3.2 percent in 2011 to 8.3 percent in 2022. This means that the purchasing power of the U.S. dollar has weakened in recent years. The purchasing power is the extent to which a person has available funds to make purchases.

What were the last results of the CPI? ›

The Consumer Price Index for All Urban Consumers (CPI-U) increased 3.0 percent over the last 12 months to an index level of 314.175 (1982-84=100). For the month, the index was unchanged prior to seasonal adjustment.

What is the CPI expectation for June? ›

The CPI year over year is forecast to rise 3.1% in June after rising 3.3% in May. Core CPI year over year is forecast to rise 3.4% in June after rising the same amount in May.

References

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Dean Jakubowski Ret

Last Updated:

Views: 5405

Rating: 5 / 5 (50 voted)

Reviews: 89% of readers found this page helpful

Author information

Name: Dean Jakubowski Ret

Birthday: 1996-05-10

Address: Apt. 425 4346 Santiago Islands, Shariside, AK 38830-1874

Phone: +96313309894162

Job: Legacy Sales Designer

Hobby: Baseball, Wood carving, Candle making, Jigsaw puzzles, Lacemaking, Parkour, Drawing

Introduction: My name is Dean Jakubowski Ret, I am a enthusiastic, friendly, homely, handsome, zealous, brainy, elegant person who loves writing and wants to share my knowledge and understanding with you.