Pre-Market Stocks: Pay Attention to This in Today’s US Inflation Report

That would signal investors that the Federal Reserve could continue to aggressively raise interest rates through the end of the year as it tries to rein in inflation.

“Upcoming inflation data will be more important in determining the pace of increases beyond July,” economists at Citi said in a note to clients this week.

The big question for policymakers and Wall Street is whether inflation has peaked. By eliminating volatile food and fuel costs, inflation in May is expected to decline slightly.

“I’m confident that inflation will be significantly lower next year and return to something we’ll be comfortable with in a short time,” Mark Zandi, chief economist at Moody’s Analytics, wrote in a column for CNN Business.

He pointed to the impact of the pandemic and said that following the European Union’s announcement of its oil embargo on Russia, “the worst of the economic consequences of Russian aggression also appear to be at hand”.

But what happens in the meantime remains unclear. High fuel and food prices fuel inflation in other parts of the economy. US gas prices are just a penny below $5 a gallon, and oil prices could rise further this summer, Goldman Sachs said this week.

One factor I’ve been following closely is the cost of housing, also known as “shelter inflation.”

Housing accounts for about a third of the value of the basket of goods and services that the US Bureau of Labor Statistics uses to track consumer prices, giving it significant weight in the overall inflation picture. In early 2022, it contributed to rising inflation alongside food and energy.

The shelter index was up 5.1% from a year ago, according to April data. Expected to show a similar increase in May.

This is already remarkable. But Citi economists caution that the data could be slow to reflect the mood for tenants, meaning there is a chance that housing costs will rise even more than expected in the coming months.

Check it out: Rents in Manhattan hit a record in May for the fourth month in a row. The average rent for an apartment rose to $4,000 a month, up 25% from a year ago — and that’s before the peak summer season for rental subscriptions.

Buyers also continue to feel the effects of record home prices, although rising mortgage costs are encouraging some Americans to delay purchases.

“Overall, while demand for housing has shown signs of slowing down recently, housing prices continue to rise at a strong pace and suggest that it will be some time (until next year) before housing prices start to slow further. “, said the Citi team.

On the radar: The Federal Reserve Bank of San Francisco wrote in February that rents and house prices could increase the CPI reading “for up to 24 months into the future.” That could complicate “peak inflation” hopes.

China’s economy is looking brighter. it’s still not clear

From big gains in tech stocks to robust trade data, China has had a lot of good economic news this week.

The positive developments come after the world’s second-largest economy was hit by widespread Covid lockdowns, a widespread crackdown on tech companies and a slump in real estate. Consumer spending and factory output shrank sharply in April, while unemployment rose to the highest level since the initial coronavirus outbreak in early 2020.

As China takes steps to gradually reopen businesses and officials introduce a series of measures to spur activity, there are signs that a renaissance may be at hand, reports my CNN business colleague Laura He.

Remember: earlier this week, the Wall Street Journal reported that Beijing’s cybersecurity review of Didi was about to end. The move would allow the ride-hailing giant to return to app stores in mainland China, nearly a year after Didi was removed for data privacy violations. Chinese tech stocks have soared.

There were other signs that Beijing’s efforts to rein in tech companies could also be waning. Bloomberg said Chinese regulators have started initial discussions on a possible revival of the Ant Group’s public offering, citing people familiar with the matter.

China also released strong trade data for the month of May, following a decline in April. The country’s exports increased by nearly 17% in May from a year earlier, compared with growth of just 3.9% in April. Imports rose for the first time in three months.

Still, analysts say more needs to be done to restore investor confidence in China, and some big risks have not disappeared.

“It will take time to repair business confidence, and Chinese asset sales could resume if China data proves disappointing again,” said Ken Cheung, chief Asian currency strategist at Mizuho Bank.

Americans lost half a trillion dollars in wealth in early 2022

Sometimes, swings in stock prices can seem abstract. But this year’s market turmoil has had real consequences, wiping out billions of dollars in American wealth.

The net worth of families and nonprofits dropped by half a trillion dollars to about $149 trillion in the first quarter, according to Federal Reserve data released Thursday.

This is a remarkable turnaround from the robust gains in wealth that began in mid-2020, fueled by soaring house and stock prices.

Fast backwards: The Dow and S&P 500 are down nearly 5% in the first three months of the year, while the Nasdaq is down nearly 9%. It was the worst quarterly performance for markets since the first quarter of 2020, when the Covid-19 pandemic rocked the US economy.

The decline in equities was partially offset by a $1.7 trillion rise in home values ​​and a continuing high personal savings rate. The ratio of household net worth to disposable income has remained close to its record high and remains well above its pre-pandemic level in 2019.

But the data is a reminder of why so many Americans are feeling bad about the health of the economy.

While spending remains robust and most economists do not expect a recession this year, the market sell-off has soured the general mood as the value of trading books and retirement accounts decline. About 58% of Americans own stocks, according to Gallup.

Next

The latest reading for the US Consumer Price Index comes in at 8:30 am ET.

Also today: A preview of University of Michigan data on consumer sentiment for June posts at 10 am ET.

Next week: The European Central Bank’s aggressive turn disrupted markets on Thursday. Now the spotlight will turn to the Federal Reserve, which announces its latest policy decision this Wednesday.

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