Billed by Deutsche Bank’s Jim Reid as the “most eagerly anticipated data point in recent memory” in his popular morning macro update, the US consumer prince index print just landed for May.
For context, a poll by Reuters of US economists expected a month on month increase of 0.4 per cent from April to May, versus the far-above-expectations print of 0.8 per cent between March and April.
So what have US prices done since? Well, just above expected:
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 per cent in May on a seasonally adjusted basis after rising 0.8 per cent in April, the U.S. Bureau of Labor Statistics reported today. Over the past 12 months, the all items index increased 5.0 per cent before seasonal adjustment; this was the largest 12-month increase since a 5.4-per cent increase for the period ending August 2008.
The index for used cars and trucks continued to rise sharply, increasing 7.3 per cent in May. This increase accounted for about one-third of the seasonally adjusted all items increase. The food index increased 0.4 per cent in May, the same increase as in April. The energy index was unchanged in May, with a decline in the gasoline index again offsetting increases in the electricity and natural gas indexes.
So, unlike last month, economists were more on they money this time. Although a 5 per cent rise in prices is nothing to be sniffed at. Perhaps notable, particularly for the inflation hawks however, was that core CPI, ie inflation less food and energy, beat expectations — coming at 0.7 per cent versus estimates of 0.5 per cent. Not quite the 1970s, sure, but a beat the nonetheless.
Yet, once again, it seems auto prices are a major factor. Glancing at the data, used cars and truck prices rose 7.3 per cent month-on-month. According to Bespoke’s George Pearkes, that means rust buckets alone accounted for 40 per cent of the April to May increase in core inflation. Those semi conductors just can’t come fast enough.
So, how have equity markets reacted? Well, not aggressively. At pixel the Nasdaq is off 0.1 per cent, while the S&P 500 and Dow are up 0.2 and 0.4 per cent respectively. Return of the inflation trade? Well, with the 10 year still at 1.5 per cent — although moving a touch higher, granted — we’re not so sure.
Source: Economy - ft.com
