Consumer Price Growth Slows, Up 0.2% in June and Up 3% Over Last Year… The growth rate was less than expected, and the annual increase was the slowest rate since March 2021.
What it means— Investors pushed stocks higher on the news, as they took lower inflation rates to mean the Fed will stop raising rates after the next meeting. The inflation news also led investors to sell the U.S. dollar and put a bid under long bonds. It seems like everyone is onboard for the Fed to stop raising rates, which means eventually they will lower rates, giving us the long-awaited pivot. Everyone, that is, except the central bankers. In several speeches this month, the bankers pointed out that we’re not done fighting inflation. Perhaps they were looking past the headline Consumer Price Index (CPI), which showed a big annual rate drop from 4% to 3%, and focusing on the core CPI (excluding food and energy), which fell half as much and remains elevated at 4.8%. That’s a long way from the Fed’s 2% target. The markets might have zoomed higher, but the Fed still has not declared victory.
The Annual Producer Price Index Rose 0.1% in June, the Smallest Increase in Almost Three Years… The core Producer Price Index (PPI), which excludes food and energy, rose 0.1% in June and 2.6% over last year.
What it means— The PPI measures the change in prices that manufacturers pay for supplies. The index peaked near 12% in 2022 and now sits at almost zero. That’s awesome, but most of the reduction happened because energy prices have dropped dramatically since last year. If other prices continue to walk higher and energy prices stabilize, then PPI will remain near 3%, well above the Fed’s overall inflation target of 2%. The report persuaded investors to push stocks higher, and now it feels like we’re overbought. Don’t be surprised if we take a bit of a breather in late July as investors try to figure out the next step in the Fed’s strategy on how long to hold rates at current levels. The longer rates remain high, the more businesses must pay for financing, which eats into corporate profits.
Initial Jobless Claims Fell Last Week by 12,000… Initial jobless claims were 237,000 last week, lower than the nearly 250,000 expected. Continuing claims were up 11,000 to 1.729 million, which is very low by historical standards.
What it means— The Federal Reserve has pushed the overnight rate up by more than 500 basis points in the last 18 months, and yet the economy remains on track. While workers make less than they did in 2020 after adjusting for inflation, they’re still employed, which is the main driver of consumer spending. We might not get much growth in the months ahead, but so far it doesn’t look like we’re driving into the ditch, either.
Man Attempts To Rob Atlanta Nail Salon, Everyone Ignores Him… A man entered the Nail First Salon in Atlanta, Georgia, with his hand in a bag, intimating he had a gun. He yelled for everyone to get down and that it was a robbery… but no one reacted. Patrons either looked away, bored, or continued with their business. The salon owner answered the business phone as the would-be thief tried to get his robbery back on track without success. Eventually, the suspect left the salon without taking anything, but perhaps he left behind a little bit of his pride.
Maine Woman Punches Bear While Protecting her Dog… Lynn Kelly, 64, of Porter, Maine, was working in her garden when her dog ran into the woods. The pooch ran back to the house with a black bear close on its heels. Kelly stood up to increase her stature, which is recommended when confronted by a black bear, but then took things a bit further. Instead of slowly retreating, Kelly punched the bear on the nose. The bear grabbed Kelly’s wrist, necessitating a few stitches, but then let go and returned to the woods.
Data supplied by HS Dent Research
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