Inflation

Full coverage of the markets and U.S. consumer-price index for May.

Prices for used cars and trucks rose 1.8% in May from April, reversing three months of declines. May’s increase was driven by sharp rises in the prices for energy, which rose 34.6% from a year earlier, and groceries, which jumped 11.9% on the year. The Labor Department on Friday said that the consumer-price index increased 8.6% in May from the same month a year ago, marking its fastest pace since December 1981.

US inflation accelerated to a fresh 40-year high in May, a sign that price pressures are becoming entrenched in the economy.

Rent of primary of residence climbed 5.2% from a year earlier, the most since 1987. Rising demand for travel and entertainment this summer, particularly among wealthier households who have the savings to support discretionary spending, as well as tight labor market conditions will likely maintain upward pressure on services inflation in the coming months. Energy prices climbed 34.6% from a year earlier, the most since 2005, including a nearly 49% jump in gasoline costs. Furniture, including bedding, was one of the few categories to post a monthly decline. That will likely keep the Fed on a trajectory of 50-basis-point hikes beyond July, even though the economy is cooling.” US inflation accelerated to a fresh 40-year high in May, a sign that price pressures are becoming entrenched in the economy. There are growing risks that price pressures in those categories will continue to build. That raises the risk of a recession, which some economists already saw as likely next year. “There’s little respite from four-decade high inflation until energy and food costs simmer down and excess demand pressures abate in response to tighter monetary policy,” Sal Guatieri, senior economist at BMO Capital Markets, said in a note. In May, prices for necessities continued to rise at double-digit paces. Two-year Treasury yields jumped, stocks opened lower and the dollar rose. Shelter, food and gas were the largest contributors.

The figure will heighten pressure on the Federal Reserve to continue raising rates aggressively.

Many large retailers, including Target, Walmart and Macy’s, have reported that they’re now stuck with too much of the patio furniture, electronics and other goods that they ordered when those items were in heavier demand and will have to discount them. That’s up from about 7.5% in February, a steep increase in such a short period. “With the food, gas and rent — holy cow,” he said. They’ve cut off Netflix and Hulu. His car’s catalytic converter was stolen recently — an increasingly common theft — for the rare metals they contain that have shot up in price. In light of Friday’s inflation reading, the Fed is all but certain to carry out the fastest series of interest rate hikes in three decades. Congressional Republicans are hammering Democrats on the issue in the run-up to midterm elections this fall. His main job pays $800 a week, he said, which “used to be really good money and is now just above dirt-poor.” Lower-income and Black and Hispanic Americans, in particular, are struggling because, on average, a larger proportion of their income is consumed by necessities. Restaurant prices jumped 7.4% in the past year, the largest 12-month gain since November 1981, reflecting higher costs for food and workers. The government’s shelter index, which includes rents, hotel rates and a measure of what it costs to own a home, increased 5.5% in the past year, the most since 1991. The widespread price increases also elevated so-called “core” inflation, a measure that excludes volatile food and energy prices. That’s the thing that makes it concerning, because it means it’s likely to persist.”

Inflation rate sends stock markets into tailspin as S&P 500 falls over 2.6% and Nasdaq down over 3.4%

The war in Ukraine and the continuing disruption to global trade caused by the coronavirus pandemic have both contributed to rising prices for food and energy. Food and energy prices are more volatile than other categories included in the CPI, and the labor department publishes a “core prices” index which excludes them. The food index rose 1.2% in May as the food at home index increased 1.4%. The Fed’s price stability resolve is going to be really tested now. Inflation is now running at a rate last seen in December 1981. According to the latest CPI report the energy index rose 3.9% over the month, with the gasoline index rising 4.1%. Other major component indexes also increased.

Currently, in premarket, the S&P 500 futures are down just over 1% and Nasdaq futures are off just under 1.5%. That comes following markets dropping close to ...

For options traders, the high volatility presents a number of trading opportunities and by keeping trades small, it may allow for more diversified positions in uncorrelated assets. While that may mean an increase in borrowing fees for consumers, it is also a healthy sign of economic growth. For retail traders, the message remains the same. At the same time, the yield on 10-year notes is back up over 3% and oil, which many had hoped would level off is now trading near $122/barrel. And following the release of this morning’s CPI, Friday looks like another day of more volatility. Expectations were for an 8.3% Y/Y increase but when the number was released, it was slightly higher than expected at 8.6%. That was the highest increase since 1981 with energy leading the way and heating fuel in particular up 16.9%.

Consumer prices surged 8.6 per cent last month from 12 months earlier, faster than April's year-over-year surge of 8.3 per cent.

Many small businesses are still struggling to keep up with rising costs for supplies and labour, a sign that price hikes will continue. A report from the World Bank this week made clear that high inflation is a global problem that threatens to slow economies around the world. Some large retailers, including Target, Walmart and Macy’s, are now stuck with too much of the patio furniture, electronics and other goods that suddenly are no longer in demand. They are increasingly turning to credit cards, with total card debt rising sharply in April, the Fed reported, though such debt has only barely surpassed pre-pandemic levels. The government’s shelter index, which includes rents, hotel rates and a measure of what it costs to own a home, increased 5.5% in the past year, the most since 1991. In light of Friday’s inflation reading, the Fed is all but certain to implement the fastest series of interest rate hikes in three decades. Yet even as the number of ships waiting to unload at the port has dropped sharply, inflation has not. His main job pays $800 a week, he said, which “used to be really good money and is now just above dirt-poor.” On a month-to-month basis, prices jumped 1% from April to May, much faster than the 0.3% increase from March to April. Contributing to that surge were much higher prices for everything from airline tickets to restaurant meals to new and used cars. Congressional Republicans are hammering Democrats on the issue in the run-up to midterm elections this fall. Many households accumulated savings from government stimulus aid during the pandemic and are now having to draw on those savings to pay bills. That’s the thing that makes it concerning, because it means it’s likely to persist.”