Announced this morning, the Consumer Price Index increased 1.0% in May and 8.6% on an annual basis, more than expected. Monthly prices for Fuel Oil, up 16.9%, Utility Gas Service (natural gas), up 8.0%, and Gasoline, up 4.1%, were all strong. Prices for Used Cars and Trucks also increased, up 1.8% in the month after falling -0.4% in April. The core rate, which excludes prices for food and energy, increased 0.6% in May and 6.0% on an annual basis, only slightly more than expected.
Overall, inflationary measures remain stubbornly elevated, as the headline number on an annual basis tenaciously moves three tenths higher than the previous month while most were expecting a slight decline. Increases exist across the spectrum of the report categories, with energy prices as a strong contributor. While the headline number ticked higher than the previous month (8.6% versus 8.3% previously) the core rate was slightly less (6.0% versus 6.2% previously). As spending continues to shift from goods to services, the health of consumer balance sheets remains a key point in determining whether spending can continue as the Federal Reserve moves through their policy tightening in the coming months.
In all, the 10-year US treasury yield ticks slightly higher following the report and equity futures are lower as we head into the market open.
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