Just in: US CPI Inflation (July)
US inflation is cooling, but housing costs are still a major pain point. The latest Consumer Price Index (CPI) data (for the month of July 2024) showed a 0.2% month-on-month increase, with a year-on-year rise of 2.9%. While overall inflation is slowing, the core CPI, which excludes food and energy, also increased by 0.2% in July, bringing the year-over-year rate to 3.2%.
This marks the slowest pace since early 2021. However, nearly 90% of the monthly CPI gain is driven by housing costs, particularly rent, which went up by 0.4% after a smaller increase in June. This continues to put pressure on consumers despite other categories like energy and apparel seeing price drops.
Given the current data, the market's expectation for a significant rate cut by the Federal Reserve in September is waning, with traders now pricing in only a 25-basis-point cut rather than the larger 50-basis-point reduction previously expected. The bond market reacted with higher yields, indicating disappointment that the inflation data wasn’t softer.
From an investment perspective, the stickiness of housing costs is a red flag. While inflation in other sectors is cooling, shelter prices are still rising, which could mean continued pressure on consumer spending in the coming months. This might also affect sectors tied to consumer sentiment and spending, such as retail and automotive industries.
What do you think? Do you believe inflation is on the right track? Let's discuss!
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