Peaks And Valleys

Image source: Denis Belitsky, oksanka007 - Shutterstock

What's going on?

Data out on Friday showed that consumer prices in the US rose by more than expected last month, dashing optimistic economists’ hopes.

What does this mean?

Economists were hopeful that Friday’s inflation report would bring some good news, especially since the last two reports had shown signs that US consumer prices might’ve already peaked. Add in the fact that current price data is starting to be compared to 2021’s elevated prices, and you’d think the uptick would, you know, come down.

So imagine their disappointment when Friday’s data revealed that US consumer prices rose by a higher-than-expected 8.6% last month compared to the same time last year – a fresh over-40 year high. You can blame a lot of that on still-rising energy prices, including the exorbitant prices you’ll find at the gas pump these days. And wages just aren’t rising fast enough to keep up with those higher costs: inflation-adjusted wages fell 3% in May, marking the fourteenth straight month of declines.

Why should I care?

The bigger picture: Risky business.
Gas prices hit new record highs this month, which could be a sign that even higher inflation figures are still to come. That could force the Federal Reserve to bring in more aggressive interest rate hikes to try and curb the rise, but that move could slow down the economy even more. That’s risky: some economists already predict a recession at some point next year, and more rate hikes would only make that more likely.

Zooming out: Cathie’s still holding on.
At least someone has hope: renowned investor Cathie Wood – manager of the ARK innovation fund – thinks the huge inventories that some US companies are holding could end up cooling inflation going forward. After all, if retail giants like Target start selling billions of dollars worth of stock at huge discounts, then that should do its bit to pull down those consumer prices.

Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over one million Finimizers

Read next

Set Sail

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.