Inflation also rises
Yesterday, still Risk of rising inflation Despite two months of weaker than expected reports, we did not expect our view to be confirmed the next day.
But that is exactly what is happening today. Producer Price Index The Bureau of Labor Statistics’ Producer Price Index (PPI) report shows that final demand rose 0.2% in June, double the forecast. Additionally, the previous month’s Producer Price Index was revised up significantly, with final demand now trending flat from a 0.2% decrease.
Year-on-year PPI growth was 2.6%, the highest 12-month increase since March 2023. The index is currently Five consecutive months of increaseIt casts doubt on the idea that inflation is on track to reach 2%.
A temporary drop in energy prices helped lower inflation in June, Underlying inflationary pressures were even stronger. That’s lower than the headline final demand figures suggest. The PPI, an indicator of final demand energy, fell 2.6% for the month. Final demand food prices fell 0.3%.
Excluding food and energy, producer prices rose 0.4% for the month and 3% over the 12 months. Biggest year-over-year increase Since April 2023, core producer prices have risen for six consecutive months and have risen every month this year. In addition, the year-on-year second derivative growth rate has been increasing, Inflation is getting worse, not worsening.
Prices fell 0.5%, almost entirely due to energy prices. Excluding energy and food, core prices were flat for the month. This is because Commodity deflation is probably over Therefore, it is no longer expected to have an effect on reducing the overall inflation rate.
Services prices signal strong demand
Final demand services prices rose 0.6%, the fifth increase in the past six months. No progress in curbing service price inflationNearly all of the increase in services was driven by an increase in trade services, a measure of profit margins for retailers and wholesalers. That’s encouraging for business and helps explain why small business confidence and small caps have been rallying recently, but it’s not encouraging for inflation. Demand remains very high.
The service price details include some encouraging signs of economic growth, We are not on the brink of a recession.More than a quarter of the increase in services came from a 3.7% increase in wholesale margins on machinery and vehicles. Business Investment have arisen, and merchants who respond to them are able to exercise pricing power.
this is, The economy doesn’t need the Federal Reserve to cut interest ratesProfit margins are expanding and commodity prices are stable, but service prices are still rising. The economy is still growing at a healthy pace, coupled with still very low unemployment and solid job growth (even if much of it is in the government or government-related sectors). Further Fed easing would be unwarranted and would unnecessarily risk pushing inflation even higher.
Consumers remain very unhappy with inflation
Another reason the Fed will avoid cutting interest rates: Inflation is dampening consumer confidence.
The University of Michigan’s Consumer Sentiment Index unexpectedly fell in early July as households became deeply dissatisfied. How inflation has affected the cost of livingWhile political commentators and some economists like to focus on the latest numbers, consumers tend to feel the cumulative weight of inflation.
(Photo: Karolina Kaboompics/Pexels)
“Despite expectations that inflation will ease, consumers continue to express frustration with continued high prices,” Joan Hsu, director of the University of Michigan Bureau of Consumer Research, said in a statement. “Nearly half of consumers spontaneously expressed dissatisfaction that rising prices are reducing their standard of living, matching the all-time high recorded two years ago.”
it is Bad news for Joe Biden That’s good news for Donald Trump. Democrats had hoped the president would outperform Trump in the polls, and much of that hope hinged on the idea that public opinion would improve as inflation weakens. But that hasn’t happened. Instead, public opinion is moving in the opposite direction.
Polls show that the public generally trusts Republicans, and Trump in particular, to be better on the issues of inflation, the persistence of inflation, and the psychological burden of inflation. Increase the chances of a Republican victory in the November election.
As I mentioned earlier this week, Inflationary Election He strongly supports the Republican Party.
