On June 10th local time, the U.S. Department of Labor released data showing that the U.S. Consumer Price Index (CPI) rose 1.0% month-on-month in May, up 8.6% year-on-year, and is expected to rise 8.3%, a year-on-year increase of 40 years. Several economists have warned that the United States may face long-term high inflation. As the Fed starts a cycle of interest rate hikes to cope with inflation, the outside world is worried that aggressive rate hikes may trigger a recession.
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U.S. inflation unexpectedly rose to a 40-year high; U.S. stock index futures plunged before the trading session, Nasdaq futures and S&P 500 futures fell by more than 1%, Dow futures fell by 0.7%
U.S. May CPI hit this Friday (8:30 am in the East of the United States on June 10, and 8:30 pm in China). This will set the tone whether the Federal Reserve should raise interest rates more radically to suppress inflation and the global macroeconomic trend, but economists generally believe that it is not optimistic.
Economists expect that the CPI in May will grow by 8.3% year-on-year, the same as last month, and the month-on-month increase of 0.7%, higher than the 0.3% last month. The already high energy, food, rent and medical expenses will continue to heat up; the core CPI (excluding energy and food) is expected to grow by 5.9% year-on-year, down from 6.2% last month.
After the Fed raised interest rates by 25 basis points in March and 50 basis points in early May, investors can have a first glimpse of the impact of this round of interest rate hikes on inflation. However, from the recent performance of US stocks and economists' perspectives, the current interest rate hike process has not effectively suppressed inflation, and the Fed is still too "weak". The trading volume of the S&P 500 and Nasdaq index this week contracted significantly compared with last week, and investors are clearly preparing for Friday's "big battle".
Energy, food, air tickets, and new car prices may continue to rise
There was no sign of easing in Russia and Ukraine in May, which will drive energy and food prices to continue to be hot.
According to data from the American Automobile Association (AAA), as of May 30, the average retail price of gasoline in the United States reached US$4.62 per gallon, up about 52% year-on-year, continuing to rise from the 43.6% year-on-year increase of gasoline in the April CPI report. Data released on the 9th showed that the price had reached US$4.97 per gallon, approaching the $5 mark. U.S. natural gas futures prices also hit record highs in May (below). With the rise in demand for travel and the rise in fuel prices, this trend will continue to spread to air ticket prices.
In addition, affected by supply bottlenecks, U.S. car sales in May fell 29% year-on-year to 1.1 million units, further worsening from the 17% decline in April. This may push up the price of new cars, and the impact on the demand/price of used cars also needs to be watched.
Investors will also pay attention to the trend of housing costs in May, which accounts for about one-third of the CPI and has no obvious connection with the conflict between Russia and Ukraine. Whether the Federal Reserve's interest rate hike can suppress housing costs or whether inflation will continue to spread to all areas of the United States' economy will be clear tonight.
Inflation still has not peaked?
US Treasury Secretary Yellen pointed out on Thursday that there is a risk of further rise in food and energy prices in the United States. "Supply and demand are the main driving forces of inflation. In terms of fighting inflation, the first thing to do is to deal with the "Feder"."
All banks also have doubts about whether US inflation peaked. After the CPI reached 8.5% in March, the index fell back to 8.3% in April.
Wells Fargo senior economist Sarah House believes that oil prices have not peaked yet, so CPI has not peaked, and CPI is expected to rise 8.4% in May. "The CPI in May may show that the Fed has not achieved stabilization of prices, but is a little further away from its target. It has not reached its peak yet. I think CPI will last at the current level for several months. Before the fall, we cannot see a significant slowdown in CPI."
Aditya, global economist at Bank of America, is a drastic economist at Bank of America. Bhave believes that inflation has reached its peak, "CPI is on the downward path, but this is not the key to the problem. From the perspective of the Federal Reserve, the focus is where we will go. In May, CPI is mainly driven by energy prices, but the core CPI will also rise, because inflation has become no longer driven by supply shortages, but spread widely to various expenditure areas."
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