Inflation

US inflation accelerated to a fresh 40-year high in May, a sign that price pressures are becoming entrenched in the economy. That will likely push the ...

US inflation accelerated to a fresh 40-year high in May, a sign that price pressures are becoming entrenched in the economy. Shelter, food and gas were the largest contributors. The consumer price index increased 8.6% from a year earlier in a broad-based advance, Labor Department data showed Friday. The widely followed inflation gauge rose 1% from a month earlier, topping all estimates.

The U.S. inflation rate reached 8.6 percent in May, its highest level in more than 40 years, putting pressure on employers to raise wages to keep pace.

"It is very unusual to see so many companies planning a second round of adjustments," said Rebecca Toman, vice president of the survey business unit at Pearl Meyer. "Normally, budgets are set well in advance for an annual rise. Also, if the first 10 days of June are anything to go by, the next monthly measure would be higher." "Yet, these organizations will find themselves at a significant strategic and operational disadvantage if demand continues as anticipated—especially as other employers offer higher base pay salaries." A May survey of 337 U.S. companies by pay consultancy Pearl Myer found that about one-third of organizations are considering or planning to provide midyear salary increases in 2022: The May CPI measure came in higher than consensus expectations that the annual rate would stay unchanged at 8.3 percent, indicating that "signs of inflation peaking in April were wrong," according to The Kobeissi Letter, an industry commentary on global capital markets. The U.S. inflation rate reached 8.6 percent in May, its highest level since December 1981, the U.S. Department of Labor (DOL) reported on June 10, putting pressure on employers to raise wages to keep pace.

Consumer prices rose 1% during month and 8.6% from a year ago, adding more pressure on Fed to cool the economy.

Inflation rate sends stock markets into tailspin as S&P 500 falls over 2.6% and Nasdaq down over 3.4%

The war in Ukraine and the continuing disruption to global trade caused by the coronavirus pandemic have both contributed to rising prices for food and energy. Food and energy prices are more volatile than other categories included in the CPI, and the labor department publishes a “core prices” index which excludes them. The food index rose 1.2% in May as the food at home index increased 1.4%. The Fed’s price stability resolve is going to be really tested now. Inflation is now running at a rate last seen in December 1981. According to the latest CPI report the energy index rose 3.9% over the month, with the gasoline index rising 4.1%. Other major component indexes also increased.

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Inflation rate of 8.6 per cent exceeds expectations, setting the stage for more monetary tightening. Read more at straitstimes.com.

"The market had expected that we'd see at least a plateauing or flattening out of inflation but it seems that inflation pressures continue to build and we've seen a further broadening of price pressures in this report," said Shaun Osborne, a foreign exchange specialist at Scotiabank. Friday's report showed the consumer price index (CPI) jumped 8.6 per cent compared to May 2021, topping analyst estimates and up from 8.3 per cent in the 12 months ending in April. The broad-based S&P 500 shed 2.9 per cent to 3,900.86, while the tech-rich Nasdaq Composite Index tumbled 3.5 per cent to 11,340.02.

We'll send you a myFT Daily Digest email rounding up the latest Equities news every morning. Wall Street's S&P 500 and Nasdaq stock indices recorded their worst ...

America's rampant inflation is imposing severe pressures on families, forcing them to pay much more for food, gas and rent.

Inflation has remained high even as the sources of rising prices have shifted. But their spending on plane tickets, hotels and entertainment has continued to rise. But with wages rising steadily for many workers, prices are rising in services as well. And with China easing strict Covid lockdowns in Shanghai and elsewhere, more of its citizens are driving, thereby sending oil prices up even further. Congressional Republicans are hammering Democrats on the issue in the run-up to midterm elections this fall. Lower-income and Black and Hispanic Americans, in particular, are struggling because, on average, a larger proportion of their income is consumed by necessities.

WALL Street stocks sank Friday (Jun 10) after inflation exceeded expectations in a much-anticipated report that sets the stage for more monetary tightening.

US President Joe Biden speaks about the economy and inflation from the deck of the USS Iowa, in Los Angeles, on June 10, 2022. PHOTO: AFP. Updated.

Meanwhile, the conflict in Ukraine has sent global oil prices above US$100 a barrel. The CPI surge "raises the probability of even more aggressive Fed rate hikes to tamp down on inflationary expectations," said Mickey Levy of Berenberg Capital Markets, adding that a pause in rate hikes in September is "looking increasingly unlikely." Food and fuel prices have accelerated in recent weeks since the Russian invasion of Ukraine sent global oil and grain prices up, and American drivers are facing daily record gas prices, with the national average hitting US$4.99 a gallon on Friday, according to AAA. Reacting to the latest inflation figure, he blamed "Putin's Price Hike" for most of the increases, saying in a statement: "We must do more - and quickly - to get prices down here in the United States." But the new data dealt a crushing blow to his efforts, as the consumer price index (CPI) jumped 8.6 per cent compared to May 2021, up from 8.3 per cent in the 12 months ending in April and topping what most economists thought was the peak of 8.5 per cent in March. Some economists expected the easing of pandemic restrictions to cause a shift of US consumer demand towards services and away from goods, which they said would ease inflation pressures, but prices for services increased as well.

Today's rising inflation is tied directly to the rising cost of oil, gas and coal, which account for 79 per cent of all energy spending.

It also rocked a system rattled by the volatility of extreme and difficult resources such as fracked oil and bitumen. Those who did not believe in business as usual left before the Germans arrived, sailed to Russia or America or joined the resistance. Putin’s destructive war against the Ukrainian people has disrupted global oil and gas supplies guaranteeing high oil prices for years to come. Even if the global fleet of internal combustion vehicles (about 1.5 billion) were to stop growing, “decarbonizing 50 per cent of it by 2030 would require that we manufacture about 600 million new electric passenger vehicles in nine years — that’s about 66 million a year, more than the total global production of all cars in 2019. Now they propose to “electrify the Titantic” as ecologist William Ophuls puts it, at a time of expensive fossil fuels, indebted financial systems and mineral shortages. It means returning to standards of living prevalent in the 1960s and 1950s. In addition, the electricity to run those cars would have to come from zero-carbon sources. Neither side recognizes that today’s inflation is but a harbinger of the unravelling of our complex, interdependent, globalized economy as fossil fuels become more expensive and in key ways irreplaceable by so-called renewables. “The goal of industrial-scale transition away from fossil fuels into non-fossil fuel systems is a much larger task than current thinking allows for. As a consequence energy price volatility began to rock the globalization project. Yes, fossil fuels still drive the global economy despite ubiquitous headlines on the progress of a green energy transition that promises endless “clean” growth. This supposed debate avoids unpleasant realities such as rising global consumption and growing rates of energy use in a finite world.

President Joe Biden told Democratic donors that they should expect high inflation to persist “for a while,” after new data released Friday show prices ...

Expectations about the pace of price growth had been one of Fed Chair Jerome Powell's top assets. Now they may be turning into a liability.

Now that investors have learned their lesson the hard way, there’s a risk that inflation expectations may start to drift sustainably higher from here, creating a whole new set of problems for the Fed. That delusion set the stage for the sharp selloff Friday in stock and bond markets after a Labor Department report showed consumer prices rose 8.6% in May from a year earlier, a new four-decade high and well above economists’ expectations. Wall Street is finally getting the message that inflation isn’t going to go away easily.

Wall Street's shuddering realization that inflation got worse last month, not better as hoped, sent markets reeling on Friday.

Usually, the gap is wide, with 10-year yields higher because they require investors to lock away their dollars for longer. The 10-year yield climbed to 3.15% from 3.04% and touched its highest level since 2018. Some hoped to change the industry for the better. “The fact is that the Fed has very little ability to control food prices,” Rick Rieder, BlackRock’s chief investment officer of global fixed income, said in a statement. The economy has already shown some mixed signals, and a report on Friday indicated consumer sentiment is worsening more than economists expected. During the day, it touched its highest level since George W. Bush’s presidency, according to data from Tradeweb. The growing expectation is for the Fed to raise its key short-term interest rate by half a percentage point at each of its next three meetings, beginning next week. The COVID-19 pandemic brought a reckoning to restaurants as workers quit in droves. The Federal Reserve has already begun raising interest rates and making other moves to slow the economy, in hopes of forcing down inflation. Instead, the U.S. government said inflation accelerated to 8.6% in May from 8.3% a month before. But the damage is broadening out as retailers and others are warning about upcoming profits. “No relief is in sight, but a lot can change between now and September,” Jacobsen said.

Stocks fell sharply on Friday following Wall Street's cold realization that inflation got worse last month, not better, as investors had been hoping.

The 10-year yield climbed to 3.15 percent from 3.04 percent and touched its highest level since 2018. “The fact is that the Fed has very little ability to control food prices,” Rick Rieder, BlackRock’s chief investment officer of global fixed income said in a statement. Usually, the gap is wide, with 10-year yields higher because they require investors lock away their dollars for longer. The economy has already shown some mixed signals, and a report on Friday indicated consumer sentiment is worsening more than economists expected. The growing expectation is for the Fed to raise its key short-term interest rate by half a percentage point at each of its next three meetings, beginning next week. During the day, it touched its highest level since George W. Bush’s presidency, according to data from Tradeweb. The Fed’s moves on interest rates heavily influence that second part. But the damage is broadening out as retailers and others are warning about upcoming profits. “No relief is in sight, but a lot can change between now and September,” Jacobsen said. Wall Street took Friday’s reading to mean the Fed’s foot will remain firmly on the brakes for the economy, dashing hopes that it may ease up later this year. Wall Street came into Friday hoping a highly anticipated report would show the worst inflation in generations slowed a touch last month and passed its peak. The Dow Jones Industrial Average was down 830 points, or 2.6 percent, at 31,442 as of 1:15 p.m. Eastern time, and the Nasdaq composite was 3.5 percent lower.

U.S. consumer prices accelerated in May as gasoline prices hit a record high and the cost of food soared, leading to the largest annual increase in nearly ...

There had been hope that the shift in spending from goods to services would help to cool inflation. China's zero COVID-19 policy, which dislocated supply chains, is also seen keeping goods prices strong. The U.S. central bank is expected to raise its policy interest rate by an additional half a percentage point in July. The Fed faces a mighty challenge breaking this potential wage-price spiral." Record high house prices are forcing many people to remain renters. New motor vehicle prices advanced 1.0%. Underlying inflation was fueled by hot rents. Natural gas prices accelerated 8.0%, the most since October 2005. The broadening and relentless price pressures are forcing Americans to change their spending habits, and heightened fears of either an outright recession or period of very slow growth. Food prices have soared following Russia's unprovoked war against Ukraine. Prices of other energy goods also soared last month. Prices of dairy and related products notched their largest gain since July 2007.

PRESIDENT Joe Biden cautioned that US inflation could last “for a while” after data on Friday (Jun 10) showed that politically sensitive price pressures ...