Inflation Data for June

Acceleration

High inflation.
Higher wages.
Higher retail sales.

An avalanche of new data paints a conflicting picture of the U.S. economy.

What To Know & Why It Matters

The Latest News

• New data shows inflation at the highest year-over-year increase in 40 years.
• Inflation = rise in prices and a decline in purchasing power.
• Translation: As inflation rises, your money buys you less.
• Economists expect to see some inflation in a growing economy, but this kind of record inflation sparks fears that higher prices, outpacing wages, will constrain consumers and add to the risk of a recession.

Something To Note:

• Inflation Is Everywhere: The data showed “broad-based” inflation; prices rose in nearly every category from food to clothing, auto sales to rental costs.
• Why? Inflation can happen for a series of reasons, and the culprit(s) and solution(s) for inflation have been debated for decades. One reason we’re seeing inflation now? High demand and low supply continue to push prices higher as supply chain disruptions and higher energy costs impact markets.

A Mirage?

• Americans Are Spending More: New retail data shows an increase in retail sales in June vs. May. American consumers fuel economic growth!
• HOWEVER: The above appears encouraging BUT the data is not adjusted for inflation. Americans spent more on items like gasoline, and may have had to spend more to still buy less (because of higher prices due to inflation). Even if wages increase, higher inflation can drown out the benefit of those extra dollars.

What To Watch:

• Gas Prices: Gas prices have dropped about 50 cents from a historic high of a national average of $5 a gallon in June. Whether a drop in prices will continue is TBD, but this *may* offer some relief to consumers. Some economists believe energy prices will determine how long inflation hangs around.
• Borrowing Rates: To try to “cool” the economy, the Federal Reserve will likely continue to raise a key rate that impacts borrowing costs. This means loans will likely become more expensive, which can in turn slow the economy.

Are we headed towards a recession?

The nation’s largest banks, such as JPMorgan Chase, have recently reported concerns about the economy and also optimism since consumers are still spending. A recent survey showed Americans are feeling slightly better in July about the economy (but still near historic lows, first measured during the Great Recession). Your feelings matter because they translate into behavior! If you feel negative about the economy, you may shop less; if you feel optimistic, you may tend to shop more.

How do you feel about the future?