Highlights of the Latest CPI Data
The most recent Consumer Price Index (CPI) statistics for April revealed interesting insights into retail sales and core inflation, leading to speculations about potential rate-cutting actions by the Federal Reserve. This development also triggered a surge in optimism in the market, as seen in the S&P 500’s positive response.
CPI Inflation Data Overview
- The overall consumer price index rose by 0.3% in April, aligning with economists’ forecasts.
- Year-over-year CPI inflation rate dropped to 3.4%, in line with expectations.
- Core CPI, excluding volatile food and energy costs, showed a monthly increase of 0.3%, with the annual rate declining to 3.6% from 3.8% in March.
Retail Sales Performance Analysis
Retail sales in April did not meet the predicted 0.4% rise, remaining flat instead. Excluding automobiles, retail sales saw a 0.2% increase, consistent with projections. However, the initial 1.1% gain in non-auto retail sales was later revised down to 0.9%.
Detailed CPI Breakdown
In April, energy costs rose by 1.1%, while food prices remained stable. Costs for food consumed outside the home increased by 0.3%, offsetting a 0.2% decrease in costs for food consumed within. Additionally, there was a 0.4% decline in new vehicle prices and a 1.4% drop in used cars and trucks prices.
The cost of housing showed a steady increase, with both rent and owner’s equivalent rent rising by 0.4%. Conversely, rates at hotels and motels decreased by 0.2%. While airline ticket prices decreased by 0.8%, the cost of medical care and transportation services went up by 0.4% and 0.9%, respectively.
Implications for Fed Rate-Cuts
The core PCE price index, a key inflation indicator for the Fed, rose by 0.24% in April. Market reactions have adjusted expectations for a rate cut by the Fed, with probabilities shifting for both the July 31 and September 18 meetings.
Market Response and S&P 500 Performance
Following the CPI report release, the S&P 500 surged by 0.8% and hit a record intraday high. This increase came after recent advances driven by positive healthcare inflation data from the producer price index. The index closed just 0.15% below its previous record high set on March 28. Additionally, the yield on the 10-year Treasury fell by seven basis points to 4.37%.
