Consumer and Wholesale Inflation Remain Red Hot
Inflation remains hot on both the consumer and wholesale levels. Here are the key stories to note:
Consumer Inflation Near 40-year Highs
Wholesale Inflation Remains Elevated
Initial Jobless Claims Rise for Second Straight Week
Small Business Expectations for Better Business Conditions Hits 48-year Low
Fed Chair Jerome Powell Confirmed for Second Term
Consumer Inflation Near 40-year Highs
The Consumer Price Index (CPI), which measures inflation on the consumer level, rose 0.3% in April, just above the expected 0.2% gain. On an annual basis, CPI eased slightly from March’s reading of 8.5% (which was the hottest reading in 41 years) to 8.3%. While the year over year figure did decline, it was hotter than the 8.1% expected. Core CPI, which strips out volatile food and energy prices, rose by 0.6%, coming in hotter than the 0.4% gain expected. Year over year, Core CPI decreased from 6.5% to 6.2% but was higher than the 6% anticipated.
What’s the bottom line? Not only does inflation lead to higher costs of goods, but it is also the arch enemy of fixed investments like Mortgage Bonds because it erodes the buying power of a Bond’s fixed rate of return. If inflation is rising, investors demand a rate of return to combat the faster pace of erosion due to inflation, causing interest rates to rise as we’ve seen this year.
In addition, within the report, rents rose 0.6% in April and increased 4.8% on a year over year basis. While this data has started to increase, the CPI report is still not capturing the double digit increases year over year that many other rent reports are showing.
Wholesale Inflation Remains Elevated
The Producer Price Index (PPI), which measures inflation on the wholesale level, rose 0.5% in April. On a year over year basis, PPI declined from 11.2% (which is the highest level on record since the methodology for collecting data was changed in 2010) to 11%. Core PPI, which also strips out food and energy prices, came in below expectations with a 0.4% increase in April. The year over year figure decreased from 9.6% to 8.8%.
What’s the bottom line? Producer inflation remains elevated, which often leads to hotter consumer inflation levels, as producers pass those higher costs along to consumers.
For a free consultation to find out what you are preapproved for to purchase or a free mortgage fitness check up to make sure your current mortgage fits what your short and long-term financial goals are, as well as your payment and equity objectives, please call me at (702) 592-0722 or email me at michael.scialabba@benchmark.us.
Michael Scialabba
Home Loan Strategist
NMLS#408827