Article source: ConstructConnect
Inflation, Stock Markets and Interest Rates
The U.S. ‘all-items’ Consumer Price Index (CPI) in April was +2.0% year over year. The ‘core’ rate of inflation, which omits mainly food and energy items that display notable price volatility, was +2.1% y/y. It seems that inflation, at least for now, has become untethered from what is transpiring in the economy at large. A highly-charged jobs market and solid gross domestic product (GDP) growth aren’t causing the usual (i.e., pre-recession) ascending price effect.
Technological advances by leading firms in many industries have helped to keep price increases retrained. Examples include Amazon in retail; Uber in ride-sharing; and iPhones in photography.
The big economic issue at present is the escalation of America’s trade dispute with China. The major stock market indices, which were recovering nicely from setbacks in December, have lately been wobbling once again. Investors had the impression that a trade deal was imminent.
The Federal Reserve has come under criticism for paying more attention to the stock markets than the ‘real economy’ when setting its interest rate policy. Since inflation has been taken out of the equation, it will be interesting to observe what will prompt the next Fed interest rate move.
With the foregoing as backdrop, there are also the following nuggets to be gleaned from the latest public and private agency data releases. The soil is fertile and the crop abundant.
