“A few deflationary contributors from a month ago won’t repeat this time, such as airlines and lodging, but we’re likely to see a large deflationary impulse from used cars,” he says. Over time, most economists think the government’s measure will converge with private rent indexes, but that process has taken longer than most of them expected. The cost of shelter was up 6.5 percent in November from a year earlier, a bit better than the 6.7 percent increase in the year through October and down from a peak of more than 8 percent earlier this year. Rents are up 6.9 percent over the past year, the first time that figure has dropped below 7 percent in more than a year.
Below please find a selection of commentary from economists, strategists and other market pros on what to expect from the next CPI report, sometimes edited for clarity or brevity. Trends will also be noted in the CPI report about how the most recent findings compare over time, for both individual indexes and the overall inflation rate. Core CPI, excluding energy and food, is expected to be up 0.3% in December, gaining 5.7% on a year-over-year basis. Patterson is paying more attention to communication from Fed officials over the past few weeks, which he believes implies they are more likely than not to keep rates on hold for longer than the market anticipates.
But investors took the news in stride, with the S&P 500 hitting another record high this week. Prior to this morning’s release, investors saw the odds of a rate cut in March at 48%, according to the CME FedWatch Tool. In the data released Thursday, the bureau reported that the personal savings rate fell to 4% in the fourth quarter from the 4.2% rate logged in the third quarter. In recent months, goods inflation has decelerated rapidly, while core inflation has remained stickier. Analysts at Bank of America expect this pattern to continue in December, as a decline in used car prices pushes goods inflation lower while sticky rent prices push services prices higher. “We expect core goods and core services to continue to paint two different pictures,” they wrote in a Tuesday note to clients.
- The Federal Reserve monitors price changes to ensure economic growth remains stable.
- Yardi Matrix, a commercial real estate data firm, said that the average asking rent at U.S. multifamily developments fell to $1,718 per month in October from the month before, and was up 0.4 percent year over year.
- In addition to the headline data, there is also something called “core CPI” inflation.
Competition has been fierce in some important markets, driving down fares and profits. That hadn’t been much of a problem for most of the recovery from the pandemic. Weather and other disruptions limited the supply of flights last year and in 2021, as did shortages of trained pilots, parts and planes, among other factors.
President Biden won’t be weighing in on these numbers until later this morning, but suffice it to say his economic team will be happy with this report. It’s exactly the sort of cooling they want to keep seeing, at a time when price increases are crippling the president’s economic approval rating. Private rental indexes from companies like Zillow and Apartment List have been slowing for more than a year, and even show rents falling outright in some markets.
On the one hand, the organism will publish the quarterly Consumer Price Index (CPI) for the last quarter of 2023, and on the other hand, the Monthly CPI, estimated annually, for December. Additionally, the quarterly report includes the Trimmed Mean Consumer Price Index, the Reserve Bank of Australia’s (RBA) favorite inflation gauge. Nonetheless, there are some, early signs that major prices whether for housing or food is starting to moderate. However, the strength of those trends and whether they start to appear in October’s CPI Report remains to be seen.
What items are decreasing in price?
That was the first outright decline since the onset of the Covid-19 pandemic in April 2020. Within services, the bureau reported the largest drivers of the December increase were financial services and insurance, health care, and recreation activities, specifically gambling. Prices for goods kept falling in December, according to Friday’s data, marking the third consecutive month of declines. Consumers also scaled back their spending on services, with spending decelerating to a 0.3% increase from 0.4% in November. Americans cut back at restaurants and hotels, but spent more on financial services, insurance, and health care, as well as a few recreational activities like gambling.
Breaking Down the Monthly CPI Report
Wilmington Trust chief economist Luke Tilley said a 12% decline in gasoline prices in December and other decreases in energy prices — for expenses like home heating — helped drive inflation lower. “We welcome it with open arms. It’s good news,” said KPMG chief economist Diane Swonk of the expected decline. “It’s great and it helped to fuel consumer spending in the https://traderoom.info/ fourth quarter. … But it’s still not enough.” Stocks are nudging higher ahead of the release of the consumer inflation report, adding to gains from Monday and supported by a dip lower in Treasury yields. Futures on the S&P 500, which allow investors to bet on the market before trading officially opens, rose 0.2 percent immediately ahead of the data release.
Data from private companies like Zillow and Apartment List have shown rents rising more slowly — or even falling outright in some markets — for more than a year. An experimental measure from the Labor Department has told a similar story. Energy analysts had feared that such cuts would keep fuel prices high, but robust production in other countries — as well as weakened demand for oil — have beat back potential price spikes. A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. As a senior writer at AOL’s DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities. For the record, the CPI report is released monthly by the Bureau of Labor Statistics, based on price data collected over the course of the month.
Australia Monthly Consumer Price Index (YoY)
But try as the Fed might to tame inflation by increasing unemployment, the labor market has thus far refused to play along. These facts alone make it harder for the Fed to ease up on its rate policy. The next CPI report is giving traders and investors even more agita than usual. Fears are running high that a hot January inflation print will force the Federal Reserve to send interest rates ever higher and keep them there for cmc markets review longer. With two decades of business and finance journalism experience, Ben has covered breaking market news, written on equity markets for Investopedia, and edited personal finance content for Bankrate and LendingTree. While the CPI may seem like complicated economic data, it impacts consumers in a variety of ways, from capturing their purchasing power to determining eligibility and payment amounts of government programs.
However, after this upcoming CPI reading, things may improve on the most recent nowcast analysis. May’s monthly increase is forecast at 0.3%, and that, compared with sharply rising prices from May 2022 falling out of the series could finally bring annual CPI below 5% for the first time since 2021. Markets desperately want the Fed to stop raising interest rates – and especially look forward to a time when the central bank pivots to rate cuts – but that won’t happen until after inflation is under control. There’s also the very real fear that rising rates could cause the economy to fall into a recession. Stock futures rose sharply following the fresh numbers, up almost 1 percent for the day on the S&P 500.
A gauge of the cost of meat, poultry and fish declined 0.4 percent after rising 0.7 percent the month before. Overall, food prices rose 0.2 percent over the month, a modest slowdown from October, when prices climbed 0.3 percent. He also downplayed concerns over sticky housing inflation, with investors and analysts pointing to more up to date industry measures that show a slowdown is still on the horizon. “The next step down in inflation will likely be driven by shelter where price pressures have decreased significantly over the last year but are not yet evident in the CPI data,” said Mr. Temple. Currently markets expect the Fed to hold rates steady at that June meeting with a small chance the Fed elects to make another small hike in interest rates. That would likely only occur if inflation came in well above expectations.
That will hopefully be done through continued interest rate hikes, which discourage spending. Far from slowing, the pace of core inflation is expected to have risen by another half percent, following a 0.4% gain in September. The CPI can sometimes be affected by an increase in the price of a certain commodity. For example, a hike in oil prices can impact transportation, food, utilities, and retail sales. The huge increase in the price of one commodity can cause a domino effect, which can make investors and traders change their strategies in the Forex market. The most interesting thing for traders is that the central banks make policy decisions based on the Consumer Price Index data.
On an annual basis, however, food prices rose less slowly compared to a year ago. They were up 3.3 percent in the year through October, down from 3.7 percent in September. But overall food prices are still much higher than they were a year ago, and prices have been climbing at a faster rate than normal. The November CPI report is expected to show that consumer prices were roughly flat on a monthly basis for a second straight month, lowering the annual gain to 3.1%, according to Barclays and Nomura. The drop likely was driven by another decline in gasoline prices and a modest uptick in food costs, the two research firms say. Last month, CPI data revealed that annual inflation eased substantially in October from 3.7% to 3.2%.
The U.S. is likely past peak U.S. inflation, but the Fed is concerned inflation won’t fall as fast as they would like. October’s CPI report may show a month-on-month acceleration compared to the past two months, but the real question is where core inflation for products like food and shelter is heading. “The big picture is that the Fed doesn’t need to worry that stronger economic growth will stoke inflation because it hasn’t,” writes Sonu Varghese, global macro strategist at Carson Group.
