Moderating Further: July 8 – 12

Inflation cooled in June’s summer heat. Here are the five things we learned from U.S. economic data released during the week ending July 12.

Consumer prices slipped in June. The Consumer Price Index (CPI) declined 0.1 percent on a seasonally adjusted basis. The Bureau of Labor Statistics measure had held steady in May. Energy prices fell 2.0 percent (gasoline prices plummeted 3.8 percent), while food prices grew 0.2 percent. Net of both energy and food, core CPI inched up 0.1 percent, half of May’s 0.2 percent advance. Prices fell for used cars/trucks (-1.5 percent), transportation services (-0.5 percent), and new vehicles (-0.2 percent). Prices increased for shelter (+0.2 percent), medical care commodities (+0.2 percent) and services (+0.2 percent), and apparel (+0.1 percent). Headline CPI has grown 3.0 percent over the past year, while the 12-month comparable for the core price measure was +3.3 percent.

Wholesale prices saw a moderate gain in June. The Producer Price Index (PPI) for final demand grew a seasonally adjusted 0.2 percent after the Bureau of Labor Statistics indicator held steady in May. After removing food, energy, and trade services, core PPI was unchanged in June after growing 0.2 percent during the prior month. Wholesale goods prices fell 0.5 percent, with deadlines for both energy and food. Services PPI jumped 0.6 percent, while trade services PPI surged 1.9 percent. PPI has risen 2.6 percent over the past year, with the core measure up 3.1 percent over the same 12-month period.

Consumer confidence continued to wobble in early July, even as inflation concerns waned. The University of Michigan’s Index of Consumer Sentiment fell by 2.2 points to a seasonally adjusted 66.0 (1966Q1=100). The measure was 7.7 percent below its year-ago mark. The current conditions index declined by 1.8 points to 64.1 (-16.2 percent versus July 2023), while the expectations measure dropped by 2.4 points to 67.2 (-1.6 percent versus July 2023). Consumers’ expectations for short-term and long-term inflation slightly declined to +2.9 percent each. The press release noted, “[n]early half of consumers still object to the impact of high prices.”

Consumers took on more debt in May. The Federal Reserve reports outstanding non-real estate consumer credit balances grew by $11.3 billion to a seasonally adjusted $5.065 trillion. Balances have grown 2.0 percent over the past 12 months. Outstanding revolving credit balances (e.g., credit cards) swelled by $7.0 billion to $1.345 trillion (+6.7 percent versus May 2023). Nonrevolving credit balances, including that for automobiles and college, increased by $4.4 billion to $3.720 trillion (+0.5 percent versus May 2023).

There was a slight uptick in small business owner sentiment in June. The Small Business Owner Optimism Index increased by a whole point to a seasonally adjusted 91.5 (1986=100). The National Federation of Independent Business has increased by three points over the past four months and was up a half point from a year earlier. Four of ten index components made positive contributions: current inventories, economic expectations, plans to increase inventories, and earnings trends. One measure—current job openings—weighed on the index. Inflation was the most common issue reported by survey respondents.

Other U.S. economic data released over the past week:

• Jobless Claims (Week ending July 6, 2024, First-Time Claims, seasonally adjusted): 222,000, -17,000 vs. the previous week, -10,000 vs. the same week a year earlier). 4-week moving average: 233,500 (-4.6% vs. the same week a year earlier).
• Wholesale Trade (May 2024, Merchant Wholesaler Inventories, seasonally adjusted): $901.7 billion (+0.6% vs. April 2024; -0.5% vs. May 2023).
• Monthly Treasury Update (June 2024, Federal Budget Deficit Thus Far in Fiscal Year 2024): -$1.268 trillion (-9.0% vs. comparable 9 months in FY2023).

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.