### Summary
Former Toys "R" Us CEO Gerald Storch warned that the economy is likely to face a difficult holiday season due to persistent inflation. Other economic stresses such as rising interest rates, credit card debt, and student loans are also contributing to consumer difficulties.
### Facts
- Inflation remains sticky despite the Inflation Reduction Act that was passed a year ago.
- Sales of physical products have been declining for 11 consecutive months when adjusted for inflation.
- The July consumer price index (CPI) rose 0.2%, with prices climbing 3.2% from the same time last year.
- Pulte Capital CEO Bill Pulte suggests that the economy is in a period of stagflation with low growth and high inflation.
- Shelter costs, accounting for 40% of the core inflation increase, rose 0.4% for the month and are up 7.7% over the past year.
- Americans are spending $709 more per month on everyday goods and services compared to two years ago.
- Consumers are shifting towards value retailers in response to inflation.
- President Biden acknowledges that the Inflation Reduction Act was not solely aimed at reducing inflation but rather focused on generating economic growth.
### Summary
The UK economy is facing inflationary pressures as measures of underlying inflation remain high, leading to expectations of further interest rate rises. However, different sectors of the economy are experiencing mixed fortunes, with some industries booming while others face challenges. The cost of living crisis is far from over, with food price inflation still expected to remain high.
### Facts
- Measures of underlying inflation, such as core inflation, remain stuck at a high rate even as headline inflation falls.
- Services inflation has increased to a joint 31-year high.
- Two-year and ten-year gilt yields have risen to their highest levels since the 2008 financial crisis, indicating market concerns about inflation.
- Some sectors, such as travel firms, hotels, and restaurants, are booming due to increased consumer spending on leisure, while others, like construction firms, are facing challenges due to rising costs.
- Food price inflation is expected to remain in double digits for the rest of the year, contributing to ongoing cost of living pressures.
- Higher interest rates may be necessary to temper economic demand and align it with the reduced supply potential of the economy caused by factors such as fewer workers, trade barriers, and reduced investment.
- Rising interest rates could potentially hamper efforts to improve the economy's productivity.
- The housing market is experiencing a holding pattern, with longer mortgage terms being offered to manage rising interest rates.
- Bank of England governor Andrew Bailey does not consider the housing market situation a "correction" or crisis.
### emoji 📈💼💸🔒🔺💰
- Inflationary pressures persist in the UK economy.
- Different sectors of the economy are experiencing mixed fortunes.
- Food price inflation remains high, contributing to ongoing cost of living pressures.
- Interest rates are expected to rise further due to inflation concerns.
- The housing market is in a holding pattern with longer mortgage terms being offered.
- Market conditions and economic recovery remain uncertain.
### Summary
Inflation rates would be significantly lower if the "owner equivalent rent" component was removed from the consumer price index, according to an opinion piece.
### Facts
- Removing the "owner equivalent rent" (OER) component from the consumer price index (CPI) would result in a lower year-over-year inflation rate of about 1.5%, compared to the current rate of 3.2%.
- The personal-consumption expenditures price index (PCE) would also see a decline in the inflation rate, from 3% to approximately 2.2%.
- The author suggests that the inclusion of OER in these indexes causes inflation to be overstated.
- These findings indicate that inflation has fallen more than what current flawed price indexes suggest.
### Summary
Reserve Bank Assistant Governor Karen Silk says the Official Cash Rate is working despite sticky core inflation and record high employment.
### Facts
- 📈 Headline inflation has been falling for the past year, but non-tradable inflation has not declined significantly.
- 📉 Core inflation has been stuck at 5.8% for the past three quarters.
- 🏠 The average mortgage rate is steadily climbing towards 6%.
- 📊 There are signs that the OCR is working to restore balance in the economy, such as falling forward orders for business and decreasing durable spending.
- 💰 Demand for residential mortgages has fallen 32.9% in the six months ended March.
- 📈 The Reserve Bank expects non-tradable inflation to be lower in the coming quarter on an annual basis, but the quarterly rate may still be high.
- ⛽ Higher petrol prices could lead to tradable inflation having its hottest quarter in two decades.
- 🎯 The OCR mostly targets domestic, or non-tradable, inflation.
- 🎯 The Reserve Bank's forecasts have been criticized for missing its inflation forecast, but Silk defends the forecasts, stating that they are as accurate as any other local economic institution.
- 📆 The Reserve Bank has forecasted that headline inflation will be back in the target range one year from now.
- 🤔 There is doubt about whether inflation will drop below 3% in September 2024, as predicted.
- 💲 Another rate hike may be required to achieve the Reserve Bank's inflation target.
- 💱 Some economists believe that the economic downturn could be worse than expected, making a rate hike unlikely in the near future.
Removing the fictional "owner equivalent rent" (OER) from price indexes reveals that inflation has decreased more than reported, with the year-over-year inflation rate falling from 3.2% to 1.5% and the personal-consumption expenditures price index declining from 3% to 2.2%.
Inflation is causing a decline in affordability for average working individuals, with prices on everyday necessities such as groceries, gasoline, and housing rising significantly in the past two years due to government spending and the Fed's money-printing.
Inflation in the Gulf Cooperation Council (GCC) countries remains lower than global and Middle Eastern counterparts, with factors such as reduced food costs and declining energy prices driving the gradual deceleration, according to an analysis by Kamco Invest. However, inflation in the housing sector was felt in the GCC countries, with notable increases in Saudi Arabia, Kuwait, and Dubai. The report also highlighted declining inflation in the education sector in Saudi Arabia and a marginal uptick in inflation in Bahrain and Oman.
Core inflation in the UK may continue to remain high and volatile due to the implementation of Brexit, discrepancies in wage growth, the direct effects of Brexit on prices, and fiscal policy challenges, which could result in higher and more unpredictable inflation compared to the US and euro area.
The Federal Reserve may be the cause of rising housing prices and the low supply of existing homes, which could lead to increased inflation and concerns about the Fed's response to the cost of living. Lowering interest rates and unlocking the supply of homes could help alleviate the issue.
Inflation has decreased significantly in recent months, but the role of the Federal Reserve in this decline is questionable as there is little evidence to suggest that higher interest rates led to lower prices and curtailed demand or employment. Other factors such as falling energy prices and the healing of disrupted supply chains appear to have had a larger impact on slowing inflation.
US inflation has slowed over the past year and wages are not a reliable indicator of future price increases, according to Federal Reserve officials.
Americans are expecting high inflation to persist over the next few years, with a median expectation of 3.6% one year from now and estimates of around 3% three years from now, according to a survey by the Federal Reserve Bank of New York. This suggests that sticky inflation may continue to be a concern, as it surpasses the Fed's 2% target. Consumers also anticipate price increases in necessities such as rent, gasoline, medical costs, and food, as well as college tuition and home prices.
The Consumer Price Index is expected to show an increase in inflation in August, with headline inflation rising to 3.6% and core inflation easing to 4.4%, but the market is accustomed to this trend and the Federal Reserve is unlikely to change its rates at the upcoming meeting.
The United States is experiencing inflationary pressures due to rising home prices and rental costs, posing challenges for homebuyers and renters, and potentially leading to broader increases in related services and inflation in other categories. Fed regulators are expecting deflationary trends in the future, but the interaction between housing data and the broader economy is crucial. The imbalance between supply and demand in the housing market needs to be addressed for prices to stabilize.
The latest inflation report is expected to show a steady increase in consumer prices, with economists predicting a 3.6% overall inflation compared to last year, indicating that inflation is gradually coming down but still remains above the Federal Reserve's target.
Despite a spike in gas prices, the rise in inflation appears to be easing gradually, with core prices exhibiting a slower increase in August compared to July, suggesting that price pressures are being brought under control.
The Consumer Price Index (CPI) for this month shows that core CPI and all items CPI were slightly above expectations and accelerating, with the primary contributors to the acceleration being core services ex housing and energy, which may be a concern for the Fed. Additionally, owner's equivalent rent was a significant positive contributor to the monthly change in CPI, while used cars and trucks had a negative impact. There is potential for a re-acceleration of inflation, which could have negative implications for equity markets.
Housing affordability is expected to worsen due to the delayed impact of higher mortgage rates, with home prices predicted to rise 0.7% year over year and reach a new record high, according to Morgan Stanley.
US inflation is expected to continue its slowdown in the coming months due to easing car prices, declining rents, and a potential slowdown in the job market.
Wages in Brighton and Hove have outpaced inflation, while the UK as a whole has seen a real-terms pay increase for the first time since March 2022, although low-paid workers in certain sectors continue to experience wage stagnation.
"Inflation expectations can influence actual inflation, as people's behavior and attitudes towards the economy play a role in price changes," according to Joanne Hsu, director of the Surveys of Consumers at the University of Michigan.
Inflation in Britain slowed for a third consecutive month in August, defying expectations of a rise due to higher fuel prices, with consumer prices rising 6.7 percent compared to the previous year, driven by slower increases in food prices and a decline in hotel room costs. Core inflation also fell more than anticipated, indicating a potential easing of inflationary pressures, though price growth remains uncomfortably high. The Bank of England is set to announce its decision on interest rates, with growing speculation that rates may be held steady due to signs of slowing inflation and a weak economy.
The retail, leisure and hospitality, and accommodation and food services industries experienced wage growth that outpaced inflation due to the high demand and staffing shortages after the pandemic, but there are no guaranteed inflation-proof industries, and it is important for individuals to focus on securing jobs that offer upward mobility and higher income to keep up with inflation.
The recent decline in inflation and potential end to interest rate hikes may not solve systemic problems in the housing market, as rising energy prices and high mortgage rates continue to squeeze the market and push house prices down.
Singapore's consumer price index inflation eased slightly in August, largely due to softer services and food prices, although increased fuel prices continued to support inflation; however, the Monetary Authority of Singapore (MAS) expects core inflation to further moderate in the coming months.
Despite expectations of higher interest rates causing a spike in unemployment and a recession, the Federal Reserve's rate hikes have managed to slow inflation without dire consequences, thanks to factors such as replenished supplies, changes in the job market, and continued consumer and business spending.
The newly released measures of inflation in the GDP report suggest that the disinflation trend is continuing, with a focus on services inflation outside of housing.
Overall inflation has moderated recently in the United States and euro area, but core inflation remains sticky, creating a challenge for central banks trying to meet their inflation targets. Financial conditions have eased, complicating the fight against inflation by preventing a slowdown in aggregate demand. The combination of loose financial conditions and a monetary policy tightening cycle may have dulled the effectiveness of monetary policy. There are risks of a repricing of risk assets and potential vulnerabilities in the financial sector, emphasizing the need for central banks to remain determined in their fight against inflation.
Inflation is impacting Americans across the country, with the Miami-Fort Lauderdale-West Palm Beach metro area experiencing the highest increase in consumer prices at 7.8%, followed by Denver, Atlanta, Seattle, and Detroit, according to WalletHub. Housing prices are a major driver of high inflation in cities like Miami, and while experts anticipate a gradual cool-down of prices, patience is needed.
The US housing market is showing similarities to the 1980s, characterized by high inflation, surging mortgage rates, and pent-up demand, which could result in prices stabilizing or slightly falling, but not to the extent of the 2008 housing crash, according to Bank of America.
Consumers perceive inflation as much higher than official figures indicate at the moment, largely due to sharp increases in the price of things like restaurant dining, hotel accommodation, and gasoline.
Mortgage rates have increased over the last seven days, with both 15-year fixed and 30-year fixed rates rising, and there has also been an inflation in the average rate of 5/1 adjustable-rate mortgages. The Federal Reserve's rate hikes to combat inflation have indirectly influenced the mortgage rates, but there is still potential for further rate increases if inflation doesn't moderate.
The rapid decline of US inflation may not last due to potential upside risks in categories like used cars and airfares, raising concerns about whether price pressures in services components such as housing can slow down enough to sustain the downward trend.
The U.S. government's upcoming inflation report is expected to show a cooling off of inflation, with overall prices for consumers rising by 0.2% compared to August and 3.6% compared to a year ago, and core inflation expected to be up 4.1% from September last year, indicating slower price increases in September than in August.
The upcoming monthly inflation report is expected to show that inflation in the US is cooling off, with overall prices for consumers rising by 0.2% compared to August and 3.6% compared to a year ago, indicating slower price increases in September than in August. However, if the report reveals that inflation remained higher than expected, especially in core areas, it may prompt the Federal Reserve to raise interest rates again, further slowing the economy.
The housing market is currently in a bubble with high prices detached from demand, but it is unlikely to burst and a gradual deflation of the bubble would be beneficial, according to former regulator Sheila Bair.
The housing market is currently experiencing high mortgage rates and rising home prices, making affordability worse than in 2008, according to Goldman Sachs analysis. Despite stronger consumer fundamentals, housing affordability has deteriorated beyond 2006 levels, and without an increase in home supply, unemployment, or a drop in mortgage rates, home prices are expected to continue climbing.
The report on consumer prices in September shows that inflation remains steady but still poses challenges, leading economists to predict that the Federal Reserve will keep the possibility of a final interest rate increase this year open.
Investors are closely watching inflation data from Spain, France, and Sweden after US data showed sticky inflation, while the latest report from China highlighted persistent deflationary pressures, with markets now pricing in a 40% probability of a rate hike in December.
Competition in the housing market is easing faster than normal this fall, as home prices decrease and inventory becomes more available, according to a report by Zillow.
U.S. housing price increases have stalled, causing the Federal Reserve to pay closer attention to housing inflation as they strive to meet their 2% inflation goal.
Despite a slight improvement in month-to-month price gains, inflation remains a challenge for the Federal Reserve as prices continue to rise, particularly in areas such as housing and gas, burdening families and straining budgets. The Fed's efforts to control rising costs for gas, groceries, and rent are limited, leaving policymakers searching for effective solutions.
Headline inflation is expected to have eased in September, while pay growth is slowing, with economists predicting that annual inflation fell slightly to 6.5% from 6.7% in August, although it still remains well above the Bank of England's 2% target, and the jobs market weakening and reducing the need for employers to increase wages.
Next year, experts predict that prices in California will stabilize, with food and gasoline price increases slowing down, but housing costs potentially climbing more than the average rate of inflation.
The U.S. housing market is being negatively impacted by "Bidenomics," as mortgage rates reach their highest level since 2000, leading to a decrease in homebuyers and a limited number of homes on the market, while high inflation rates are making it difficult for Americans to afford basic necessities.
UK inflation remains high at 6.7%, above the Bank of England's target, while rising fuel prices and a weakening job market continue to put pressure on households; however, average wage growth outpaced inflation for the first time in two years, and state financial support is available to low-income households.
The rate of U.S. inflation is slowing, but it's not slowing as quickly as earlier this year, with the Federal Reserve expecting a 0.3% increase in the core PCE price gauge in September, indicating that progress towards the Fed's 2% inflation target will likely happen at a much slower rate in the months ahead.
