Consumer Prices Up 0.4% Last Month, Up 4.9% Over Last Year… Per the Consumer Price Index (CPI), core consumer prices, excluding food and energy, rose 0.4% last month and were up 5.5% over the last year.
What it means— The short version is, “more of the same.” While the annual CPI was the lowest since April 2021, it was still about 5% and was 150% higher than the Fed target. Stripping out food and energy, which normally results in lower inﬂation (sometimes called inﬂation minus inﬂation), isn’t doing us any favors at the moment. The problem is shelter, which we’ve been discussing for more than a year. The category counts for more than 30% of the headline number and was up 0.4% for last month, in line with the overall index. But for the year, shelter was up a whopping 8.1%. Without that, inﬂation would have been 2.1%, essentially in line with the Fed goal.
This isn’t lost on people who watch the numbers closely. Since the Bureau of Labor Statistics lags real-time rent changes, which have been falling, we keep waiting for the metric to catch down to current levels and give inﬂation a reprieve. Eventually, the government’s estimate of housing costs should turn negative and subtract from inﬂation, albeit not much.
On a related note, the Producers Price Index (PPI) rose 0.2% last month, a bit less than the expected 0.3%, and was up 2.3% for the year, the smallest gain since January 2021.
The numbers didn’t change expectations for the Fed. Investors still think the central bankers will stand pat at the next meeting.
Senior Loan Ofﬁcer Opinion Survey Shows Weaknesses in Banks and Their Clients… The loan ofﬁcers reported that their institutions were tightening lending standards and fewer customers were asking for loans.
What it means— When you jack up short rates by 5% in just over a year, things change. The latest Senior Loan Ofﬁcer Opinion Survey (SLOOS) showed that banks are tightening lending standards because of economic uncertainty, falling client collateral values, and weakening bank positions. We didn’t need the survey to conﬁrm the obvious, but it does put some numbers to the situation. According to the survey, 46% of banks were tightening lending standards on commercial and industrial loans in the ﬁrst quarter, while the percentage of banks reporting rising demand for loans fell to -55.6% from -31.3% (negative numbers show falling demand).
Who would have thought? If banks are on shaky ground, commercial real estate values are crumbling, and consumers have to pay much higher interest costs on auto loans and consumer debt, then banks make credit harder to get.
Initial Jobless Claims Rose to 264,000 Last Week, Highest Since 2021… The numbers show a bit of weakness in the jobs market that hasn’t yet shown up in unemployment.
What it means— We’re inching closer to the 270,000+ mark that economists generally associate with a deteriorating jobs market. With unemployment sitting at a more than 50-year low and with continuing claims within a few hundred thousand of all-time lows, we still have a long way to go to reach the Fed 4.5% unemployment rate forecast. But we’re moving that direction. If bank failures accelerate and the economy slows markedly, the Fed might get its wish, which will be bad news for everyone else.
Woman Survives for Five Days on Lollipops and Wine… A 48-year-old Australian woman whom the police referred to as Lillian vacationed last month in Bright. She went on a day trip to Dartmouth Dam but took a wrong turn, and soon got her vehicle stuck in the mud. Without cell service, she couldn’t call for help, and due to health issues, she couldn’t hike out. She survived on the only snack she’d packed, lollipops. When she got thirsty, she turned to the only drink in the vehicle, a bottle of wine. The funny part is that Lillian doesn’t drink; she’d purchased the wine as a Mother’s Day present for her mom. The police credit Lillian’s rescue to the fact that she stayed with the car.
Data supplied by HS Dent Research
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