...

April CPI The Worst Ever Positive News

Facebook
Twitter
LinkedIn
Reddit
Tumblr
April CPI The Worst Ever Positive News

A wave of exhilaration swept across the financial landscape when the Consumer Price Index (CPI)-based monthly price increase came in somewhat lower than expected.

It is widely believed that if inflation declines, the Federal Reserve may reconsider lowering interest rates.

The release of the data on Wednesday led to record highs for the NASDAQ, S&P 500, and Dow Jones. The CPI figure was described as “encouraging” in a CNN headline, and according to a CIBC Private Wealth US analyst, the data “supports a Fed rate cut in the fall.” It was described as a “soft reading on consumer prices” by Yahoo Finance.

The news was fantastic—until it wasn’t.

The price inflation dragon that the US government and Federal Reserve unleashed during the pandemic is still very much afloat when you examine the data objectively and in a larger context. He may be sleeping, but that doesn’t mean he’s dead.

The CPI figures

Based on yearly data, prices increased by 3.4 percent in April, as reported by the Bureau of Labour Statistics (BLS). That exceeded forecasts and was down just a tad from the 3.5 percent reading from the previous month. In February and November of last year, the annual CPI print was 3.2% and 3.1%, respectively, to provide some perspective.

The monthly increase in prices was 3.3%. That was the main cause of the euphoria and came in below the predicted monthly growth of 0.4 percent. However, when you annualize that monthly figure, you get a 3.6 percent annual rate of price inflation—a far cry from the Fed’s fanciful 2 percent aim.

The last five months alone have seen a 1.6% increase in costs, which is hardly a reason for joy for those of us who must pay those rates.

When more erratic costs like food and energy are taken out of the equation (as if anybody can do that), the core CPI increased by 0.3 percent in April, which was a slight decrease from the 0.4 percent reading in February and March.

The core CPI was 3.6 percent annually.

Further context can be obtained by examining the core CPI data for the previous six months. October saw the lowest percentage at 0.2 percent, followed by November and December at 0.3 percent, January and February at 0.4 percent, and March at 0.3 percent. Since last July, the core CPI has been stuck in this range.

It is noteworthy that none of these figures approach the fictitious 2 percent price inflation objective set by the Federal Reserve. You could argue that there is a hint of cooling in the April statistics, but that has happened before. Late last summer, everyone was certain that prices were declining and inflation had been defeated.

In April, producer prices increased by 0.5 percent, while the index for final demand goods increased by 0.4 percent and the cost of final demand services increased by 0.6 percent.

Because producers pass on at least some of their increased costs to consumers, producer prices are typically a leading signal of price inflation.

Price inflation is still persistent when you consider all of the data in its proper context and examine it with objectivity.

JustMarkets

Remember that inflation is more severe than official statistics indicate. To understate the true rate of price increases, the government modified the CPI formula in the 1990s. The CPI is more like twice the official figures when calculated using the formula from the 1970s. Therefore, the CPI would have been closer to 6% if the BLS had been using the previous calculation. Furthermore, it would most likely be worse than that when employing an honest formula.

Examining the data in more detail reveals that the fast-rising costs of new and used cars contributed to the decline in the CPI overall. The price of used cars and trucks decreased by 1.4% per month. The cost of new cars decreased by 0.4 percent.

In the meantime, prices for apparel increased by 1.2 percent, services saw a 0.4 percent increase, energy prices increased due to a 2.7 percent increase in gasoline, and costs for housing increased at a 0.4 percent pace.

CPI

Workers are losing ground as prices climb even faster. Due to salaries not keeping up with growing costs, average earnings decreased by 0.2 percent for the month.

It’s reasonable to assume that the reason why automobile prices are declining is that consumers are unable to purchase a vehicle while other costs are rapidly rising.

When considered in that light, the CPI report offered very little consolation to those beset by growing costs. The monthly increase wasn’t quite as awful as anticipated, and the overall CPI data was finally better than anticipated. That’s about the only genuine plus.

Interest rate reductions are desperately needed by all

The April CPI numbers appear to be viewed via a wishful prism by the majority of people. This is a result of everyone’s desperation for fee reductions. This also applies to the Federal Reserve’s central bankers.

Everyone is aware that a higher interest rate environment is unsustainable for this economy over the long run. The economy is heavily indebted, and rising interest rates act as a massive anchor.

Take a look at the growing cost of interest on the national debt.

Uncle Sam has already spent $624.5 billion in fiscal year 2024 paying interest. That represents an increase of 35.7% from the same time in the fiscal year 2023. Medicare and National Defense received less federal funding than interest payments. Social Security was the only area where spending was up.

Both the business and consumer sectors appear to be having issues with debt servicing costs.

The Federal Reserve hasn’t done enough to tame the inflation monster it unleashed over the past ten-plus years, despite discussion of rate decreases. The reason it still exists is that the Fed never made a firm commitment to destroying it.

We would be hearing about further rate hikes rather than impending rate cuts if the central bank was genuinely committed to getting price inflation back to 2 percent.

Without a doubt, 5.5 percent interest rates are excessive for a heavily indebted country. However, when compared to a CPI of more than 6% (using the more accurate 1970s methodology), they aren’t excessive.

Remember that throughout the pandemic, the Federal Reserve generated around $5 trillion in new money. Much of that money was taken by the US government and used as “stimulus” money for Americans who were not creating anything. This is the reason why the prices are increasing. A few rate increases and a small balance sheet decrease, on top of the trillions of dollars in inflation they caused during the Great Recession, were not nearly enough to undo that enormous monetary misconduct.

However, there is some merit to the general public’s optimism of rate decreases this autumn. The Fed’s central bankers will likely seize any opportunity to proceed with reduction. Even while price inflation is not dead and buried, this CPI figure and retail sales data that indicate spending is slowing could open the door just enough to allow them to slip through.

Now consider this: when an economic crisis arises, what will the central bankers do if the Fed is prepared to discuss rate reduction now, even with sticky inflation?

It’s also critical to keep in mind what rate reductions entail. We are reverting to the inflationary policies that initially brought us to this point.

To put it another way, it is too soon to celebrate inflation.

Massive Backlash Against Hamster Kombat Due to Unfair Airdrop

Despite spending a lot of time and energy on the game and being informed at first that keys were not important, players are furious that they are being called cheaters

Gold ETFs and Gold Mining ETFs What They Are and How They Work

Gold exchange-traded funds (ETFs) and ETFs focused on gold mining invest in firms that mine gold or in gold. Both provide an avenue to profit from rising prices, diversify, and

Trade With A Regulated Broker

M4Markets founders are people who are not just traders themselves, but people who have been in the finance sector for so long that they bring with them a wealth of valuable knowledge.

BlackBull Markets offers the full MetaTrader suite (MetaTrader 4 and MetaTrader 5) alongside multiple social copy trading platforms and a web app powered by TradingView.

Online trading on Exness‘ powerful trading platform with better-than-market conditions on the world’s financial markets and trading .

AvaTrade, we offer a wide variety of platforms for traders of all levels! Be empowered to trade CFDs on FX, Stocks, Commodities, Crypto, Indices.

Being an international broker and working with clients from different countries we understand that every person is unique in his values, no matter whether a trader or a partner.

For more than 13 years, they’ve purpose-built their platform and services to help you trade seamlessly and better capitalize on market opportunities.

Gate.io is the best exchange app. The interface is simple to operate and the customer service is quick. Some interesting activities and benefits are often presented!

FP Markets has developed a proud reputation as a Forex broker. In Australia, the company operates under an Australian Financial Services

Seraphinite AcceleratorOptimized by Seraphinite Accelerator
Turns on site high speed to be attractive for people and search engines.