In May, the CPI in the United States was below expectations for the fourth consecutive month, indicating that tariffs have not yet affected the inflation level.
On Wednesday, June 11, the U.S. Labor Statistics Bureau announced that the CPI data for May fell short of expectations: the overall CPI increased by only 0.1% month-on-month, below the expected 0.2%, with an increase of 0.2% in April; the year-on-year CPI slightly rose by 2.4%, lower than expected, with April at 2.3%;
Excluding the volatile food and energy sectors, the core CPI increased by 0.1% month-on-month, which is lower than the expected 0.3% and a slowdown from 0.2% in April; year-on-year it is 2.8%, which is also below the expected 2.9%, with April at 2.8%, maintaining the lowest level since March 2021;
After the data release, the USD briefly fell about 20 points, now reported at 98.76. U.S. stock futures surged briefly, with all three major Equity Index futures turning positive, and the NASDAQ 100 Index futures rising by 0.4%. The yield on U.S. 10-year Treasury bonds fell briefly, now reported at 4.501%. Spot Gold surged briefly, now reported at $3348.32 per ounce.
Interest rate swaps indicate that traders expect a 75% chance of an interest rate cut by the Federal Reserve before September.
Prices of Autos and Outfits fell, leading to a slowdown in CPI due to energy.
Year-on-year, the cost price increase of services continues to slow, while the price increase of commodities is also relatively moderate.
Specifically, the prices of new and used cars have both decreased, and the prices of Outfits have also fallen, indicating that the cost increases from tariffs have not yet been passed on to consumers.
Meanwhile, the decline in energy prices dominated the slowdown in CPI, with gasoline prices falling by 2.6%, which somewhat limited the overall increase in CPI.
Categories such as toys and home appliances that are heavily affected by tariffs have risen in price.
Some categories that are significantly affected by the increase in import tariffs have indeed seen substantial price increases. Toy prices have risen the most since 2023, while the prices of large appliances have experienced the highest increase in nearly five years.
Grocery prices rose by 0.3% after falling in April. Prices for grains, fish, and bacon have increased, while egg prices dropped by nearly 3%. Ground beef prices have risen due to a historically low cattle inventory and strong demand.
One of the main drivers of inflation in recent years has been housing costs, which rose by 0.3% in May for the second consecutive month, remaining a major factor in the month-on-month increase across all categories.
Additionally, the indices that rose during the month included Medical, auto insurance, home decoration and operation, Personal Care, and education. The Medical index increased by 0.3% month-on-month, down from 0.5%; auto insurance rose by 0.6%, down from 0.7%.
The increase in tariffs has not yet appeared.
A series of lower-than-expected inflation data further demonstrates that consumers have not yet felt the pressure from Trump's tariffs, possibly because the most severe tariffs have temporarily stopped, or because businesses have absorbed the additional costs so far.
However, once tariffs are raised, it will become more difficult to shield consumers from these costs, which is also one of the reasons economists expect businesses to increase prices more significantly in the coming months.
The risk lies in the fact that American consumers continue to be burdened by years of high inflation after the pandemic, and their capacity to bear the load is limited, which will ultimately reduce spending. Companies like JM Smucker Co., which owns brands such as Folgers coffee and Twinkies, as well as Best Buy, have indicated that this will put pressure on profits, with the outlook largely depending on the progress of Trade negotiations.
Given the limited inflation transmission so far, a stable labor market, and ongoing uncertainty surrounding Trump's policies, the Federal Reserve is widely expected to keep interest rates unchanged at next week's meeting, with investors and economists particularly focused on the latest economic forecasts from policymakers.
Is investing always stepping on a landmine?Futubull AI is now online!Providing precise answers, comprehensive insights, and grasping key opportunities!
Editor/joryn
