It’s the Economy That Matters: The Inflation Situation

Economic indicators are released every week to help provide insight into the overall health of the U.S. economy. In this article, we examine three important indicators from the past week: consumer price index, the producer price index, and retail sales. By examining these data points, we gain valuable information about inflation in the U.S., as well as consumer spending patterns and their response to the ongoing inflation battle.

Policymakers and advisors closely monitor economic indicators, such as these three, to understand the direction of interest rates, as the data can ultimately impact business decisions and financial markets. In the week ending on June 15, the SPDR S&P 500 ETF Trust (SPY) rose 3.14% while the Invesco S&P 500® Equal Weight ETF (RSP) was up 2.49 %. During its meeting last week, the Fed paused rate hikes but signaled that future hikes remain a very real possibility.

Consumer Price Index (CPI)

The relentless grip of inflation continues to loosen its hold, as the latest CPI data continues to move away from the extreme levels that have characterized the last few years. The consumer price index (CPI) rose 4.0% year-over-year and 0.1% month-over-month. The latest reading came in slightly lower than the expected 4.1% forecast and is down from April’s 4.9% increase. This marks the eleventh consecutive month that inflation has eased and is the lowest level in over two years.

Core inflation also showed signs of easing; however, the cooldown has been much slower than the headline number. Core CPI (excluding food and energy) rose 0.4% from April and increased 5.3% year-over-year, down from last month’s 5.5% increase. Both the annual and monthly increases met expectations. The latest reading is the lowest level for core CPI since November 2021. Although May’s data played a vital role in the Fed’s decision to pause rate hikes, headline and core CPI levels remain well above the Fed’s 2% target rate, so the possibility of future hikes remains on the horizon.

 Consumer Price Index