Tuesday, June 18, 2024
There was a lot of good news last week about the cost of products and services in the United States.
- First, inflation is slowing down. For the second month in a row, inflation slowed. Headline inflation was 3.3 percent year over year, lower than April's 3.4 percent.
In May, prices for gasoline and fuel oil, new cars, and clothing moved lower, while the cost of shelter, medical care, and eating out increased. Over the last 12 months, the price of used cars and trucks has dropped the most (-9.3 percent), while the cost of auto insurance has increased the most (+20.3 percent).
- Second, wholesale prices dropped in May. "U.S. producer prices unexpectedly declined in May by the most in seven months, another welcome development that will strengthen the Federal Reserve's confidence in moderating inflation. The producer price index for final demand decreased 0.2% from a month earlier, lower than all estimates in a Bloomberg survey of economists. Compared with a year ago, the PPI rose 2.2%...," reported Matthew Boesler of Bloomberg.
- Third, some companies are lowering prices. Over the past few years, a lot of companies boosted corporate profits by lifting prices. Now, as consumers pull back on spending, they're reversing course. Abha Bhattarai of The Washington Post explained:
"…[company] markdowns, and the consumer spending slowdown that prompted them, mark a turning point in the post-lockdown economy, after the sharpest surge in inflation in decades.… Happy consumers mostly have themselves to thank: The price cuts are mostly due to shoppers pulling back on spending, contributing to a gradual slowdown in economic growth…That means retailers are feeling the pinch. After a period of record-high sales and profits, many are struggling to keep customers and attract new ones. Their answer: lowering prices."
It remains to be seen how lower prices will affect companies' performance and stock values.
Last week, the Standard & Poor's 500 chalked up four new closing highs and finished the week higher, reported Jacob Sonenshine of Barron's. The Nasdaq Composite also gained, while the Dow Jones Industrial Index moved lower. U.S. Treasury bonds rallied with yields on all but the shortest maturities moving lower.
For more information on how to be financially prepared, contact our office at (405) 340-1717 or email greg@womackadvisers.com
Greg Womack
1366 E. 15th Street
Edmond, OK 73013
Phone: (405) 340-1717
www.womackadvisers.com