“It goes like this, the fourth, the fifth
The minor fall, the major lift”…
Hallelujah! Consumer price growth was cooler than expected in the US last month, closely-watched data released just ahead of the June FOMC meeting showed.
In fact, the headline gauge was unchanged in May from April. Core prices, meanwhile, rose 0.2% (rounded), the slowest MoM pace of 2024. The unrounded print was 0.163%, the slowest since August of 2021, and consistent, if maintained, with a return to the Fed’s target.
On a YoY basis, headline price growth was 3.3%. The core gauge rose 3.4%, below estimates.
A look at the breakdown showed grocery prices were flat in May from April. The last four monthly prints on the food at home gauge are 0%, -0.2%, 0% and 0%. Grocery price growth is now running just 1% YoY. The peak, in August of 2022, was 13.5%.
Electricity prices were likewise unchanged in May from the prior month, marking a second consecutive unchanged month.
Although the used car series rose for the first time since February, new vehicle prices fell a fourth month. Both series are in deflation territory on a YoY basis, the used series deeply so.
Apparel prices slipped for the first time since January, the services less energy aggregate posted its coolest month-to-month print in quite a while (0.2%) and transportation services costs fell on a MoM basis for the first time since September of 2021. The shelter gauge rose 0.4%. Again. That’s the “norm.”
Do note: Both CPI-derived “supercore” measures fell on a MoM basis. The core services ex-shelter print was -0.05% and core services less rent and OER -0.04%, versus 0.46% and 0.42% the prior month.
Needless to say, the release was welcome news at the Eccles building. Wednesday’s update was the first good CPI report of 2024 and among the best reports in years. The timing — five and a half hours before the release of the new dot plot and six hours before Jerome Powell subjected himself to a media waterboarding session — was fortuitous, although I suppose left-leaning reporters now have an excuse to wonder aloud about the relative wisdom of the “higher for longer” messaging.
When considered with the string of soft data markets and policymakers received prior to the May jobs report, NFP and AHE now look like outliers, particularly in the context of the first four-handle UNR print since January of 2022 and the second-largest drop on the household survey of the pandemic era.
The new dot plot could’ve “safely” tipped two cuts for 2024. Instead, the Committee leaned narrowly hawkish, projecting just a single reduction this year, but four cuts in 2025.
Was amusing to watch a hopped-up Rick Santelli — when he is not — complain bitterly after the numbers were released that the FOMC is going to take rates down to 0%. Everyone needs to take a chill pill.
That’s just entertainment. Do you really think those cartoon characters are like that in real life? I mean, sure, their on-air personalities generally reflect their in-person disposition, but Rick’s not walking up to random people on the street in Chicago and screaming at them. All of this stuff’s entertainment. Witness Bloomberg’s live blog using exclamation marks after every other sentence this morning. There isn’t a single person anywhere on Main Street today who cares anything about this. I’m looking out the window right now onto a busy street in a third-tier US city and I don’t see anybody running around shouting about CPI. Just miserable people in a rat race and the same homeless woman in a wheel chair telling everybody who passes her to “have a blessed day.”
I sometimes disagree with Santelli – particularly on the more political side of things but find him not only entertaining but worth listening to regarding bond and currency markets (but, what do I know?). And his 2009 Tea Party rant surely was a classic moment in financial entertainment media, as well as politically influential. Together with the Haynes Bottom, peak-CNBC…
In the aftermath for the GFC, we would avidly tune into Santelli’s rants, hoping to catch when he keeled over from a stroke.
But give him credit – he was the inventor or at least popularizer of the Tea Party moniker.
I recall one of Santelli’s rants of the era. He was going on about the tyranny of big banking (about to receive a bailout from Bush) from the floor of some exchange, with the well-paid employees unknown trillions of $$$ of distressed capital standing behind him nodding like the yahoos you see behind trump at one of his rallies.
I used to sit on a bond trading desk. RS to put it mildly was considered a joke by all of us, no matter the political view any of us had. He was viewed as an entertainer, no more, no less. My favorite cnbc event was when Joe kernen interviewed the Irish government finance chief and was shocked when he was told that Ireland did not use the British pound, but used the euro. You cannot make this stuff up.
Forever and ever amen
Shelter inflation unbowed at 0.4% MOM (equiv to 4.9% annualized). If shelter does not disinflate, while energy, food, and other goods inflation disinflate to 0% (0% ann), then services ex-shelter/energy has to disinflate to 0.1% (1% ann) for CPI to be <0.2% (2% ann). Maybe that is possible, but it would be much better to see shelter disinflate.
Latest real-time data indicates rent decline is decelerating. Per NAR, “May 2024 marks the 10th year-over-year rent decline in a row for 0-2 bedroom properties observed since trend data began in 2020. Asking rents dipped by $13, or -0.7%, year over year”. MFD REIT quarterly reports indicate the same. Of course, shelter inflation lags real-time data. It hasn’t even started reflecting the start of the decline, nearly a year ago.