For many of us, the rest of this week will just be a collection of hot/muggy days in Houston; however, if you are paying attention to the financial markets, there is a lot going on! There are several Federal Reserve (FED) Chairs speaking which could provide some insight on future interest rate policy, jobless claims are announced for last month, and earnings season starts tomorrow. Most importantly, the June 2023 inflation number was released this morning and came in lower than expected.
We have had several clients inquire how the inflation calculation (i.e. consumer-price index (CPI)) works. According to the Bureau of Labor Statistics, CPI is a measure of the average change over time of the prices paid for a market basket of goods and services. The 3.0% annual inflation figure announced today generally means that prices are 3% higher today than they were one year ago.
How did inflation drop from 4% to 3% in just one month?
Great question. June 2022 was the last month of significant month-over-month inflation (prices rose 1.2% from May 2022 to June 2022 alone). Since the annual calculation only takes into account the last 12 months of price data, the 3% figure released today no longer includes the large increase recorded June 2022. In other words, the June 2022 figure “fell off” and was replaced with a much lower number. This has resulted in annual inflation slowing from approximately 4% to 3% in just one month. This represents the lowest inflation reading since March 2021. While the fight on inflation is not over, we are moving in the right direction.
Going forward, we do not think inflation moves lower at the same pace we have seen over the past 6 months. To use a golf analogy… it is much easier to go from a 13 handicap to a 10 handicap than it is to go from a 5 handicap to a 2 handicap.
About the Author
Matt Price serves as a Partner and Managing Director for The Price Group of Steward Partners. He resides in Houston with his wife, Emily, their four children and "Fisher" the family golden retriever. Matt studied at the University of Pennsylvania – Wharton School of Business for his Certified Investment Management Analyst (CIMA®) designation after receiving his undergraduate degree from the University of Tennessee - Knoxville. Over the past 12 years, Matt has helped families make high quality, common sense decisions regarding their wealth and their legacy. Matt firmly believes everyone needs a wealth coach!
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The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
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