Watch this number in today’s US inflation report. Watch this number in today’s inflation report

That would signal to investors that the Federal Reserve could continue to raise interest rates aggressively through the end of the year to keep inflation under control.

“The upcoming inflation data will be most important in determining the pace of increases beyond July,” Citi economists said in a note to clients this week.

The big question for policymakers and Wall Street is whether inflation has peaked. Factoring out volatile food and fuel costs, inflation is expected to ease slightly in May.

“I’m confident that inflation will be significantly lower by this time next year and will return to levels we are comfortable with not too long after that,” wrote Mark Zandi, chief economist at Moody’s Analytics, in a column for CNN Business.

Noting the waning effects of the pandemic, he said that following the announcement of the European Union’s oil embargo on Russia, “the worst economic fallout from Russian aggression is also imminent.”

But what happened in the meantime remains a mystery. High fuel and food prices cause inflation in other parts of the economy. US gas prices are hovering just a cent below $5 a gallon, and oil prices could rise even higher this summer, Goldman Sachs said this week.

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

Housing accounts for 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, giving it significant weight in the overall inflation picture. In early 2022, it contributed to rising inflation alongside food and energy.

According to data for April, the shelter index rose 5.1% last year. A similar increase is expected for May.

That’s remarkable. However, economists at Citi warn that the data may be slow to reflect the environment for renters, meaning housing costs could rise even more than expected in the coming months.

Check this out: Rents in Manhattan hit a record high for the fourth straight month in May. The average rent for an apartment rose to $4,000 a month, up 25% year over year — and that’s ahead of the peak rental season.

Buyers continue to feel the effects of record-high home prices, although rising mortgage costs are encouraging some Americans to delay buying.

“While demand for property has only recently shown signs of slowing down, property prices in general continue to rise strongly, suggesting that it will be some time (well into next year) before property prices could fall any further said the Citi team.

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

China’s economy is looking better. Its not clear yet

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

The positive developments come after the world’s second largest economy was hit by widespread Covid lockdowns, a sweeping crackdown on tech companies and a real estate slump. Both consumer spending and factory production fell sharply in April, while unemployment rose to the highest level since the coronavirus first broke out in early 2020.

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

Remember: Earlier this week, The Wall Street Journal reported that Beijing’s review of Didi’s cybersecurity was nearing completion. The move would allow the ride-hailing giant to return to mainland China’s app stores nearly a year after Didi was removed over privacy breaches. Chinese tech stocks soared.

There were also other signs that Beijing’s efforts to rein in tech companies may also be slacking off. Bloomberg said Chinese regulators had started talks about a possible revival of Ant Group’s IPO at an early stage, citing people familiar with the matter.

China also released strong trade data for May after a slump in April. The country’s exports rose nearly 17% year on year in May, compared to growth of just 3.9% in April. Imports rose for the first time in three months.

Still, analysts say more needs to be done to restore investor confidence in China and some big risks have not gone away.

“It will take time to restore business confidence and the sell-off in Chinese assets could resume if data out of China disappoints again,” said Ken Cheung, chief Asian foreign exchange strategist at Mizuho Bank.

Americans lost half a trillion dollars in wealth as of early 2022

Fluctuations in stock prices can sometimes feel abstract. But this year’s market turmoil had real consequences, wiping out billions of dollars in American wealth.

Net worth of households and nonprofits fell by 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 wealth gains that began in mid-2020 and were fueled by skyrocketing real estate and stock prices.

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

The decline in stocks was partially offset by a $1.7 trillion increase in home values ​​and a sustained high personal savings rate. The ratio of household net worth to disposable income remained near its record high and remains well above pre-pandemic levels in 2019.

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

Although spending remains resilient and most economists do not expect a recession this year, the sell-off in markets has dampened overall sentiment as the value of trading portfolios and retirement accounts tumbles. According to Gallup, about 58% of Americans own stocks.


The last reading of the US CPI comes at 8:30am ET.

Also today: The early reading of the University of Michigan consumer sentiment data for June will be released at 10:00 am ET.

Coming next week: The European Central Bank’s dovish move angered markets on Thursday. Attention now turns to the Federal Reserve, which announces its latest monetary policy decision this Wednesday.


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