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Inflation Rises Again In June

July 18, 2022 by Paul Myers, Myers Capital Management

Last week the inflation data was released for June and inflation once again ticked higher. And not just higher, it was higher than expected. In their weekly market recap, JP Morgan, one of the Portfolio Strategists we utilize for client accounts, commented not only on June’s inflation but on where inflation may be headed in future months…

While markets were anticipating a hot headline CPI reading, the June CPI report showed even hotter-than-expected inflation, with core inflation most surprisingly exceeding expectations. Headline CPI rose by 1.3% m/m and Core CPI rose 0.7% m/m, translating to year-over-year gains of 9.1% and 5.9%, respectively. Sharply higher energy and food prices once against propelled headline inflation higher, while within core inflation, the lagged “bad news” of higher costs of inputs and labor is broadly pushing prices higher. We still expect that the Fed will hike interest rates by another 0.75% later this month. Thereafter, the broad-based impact of higher food and energy prices across core components may add pressure on the Fed to hike interest rates even further this year.

On the bright side, we see promising signs of inflation coming off its highs in July. Oil and gas prices have dipped meaningfully (down 11% and 4% from June), as have airline fares (down 8%), and this should lead to a deceleration of price pressures in the coming months. Consumer 1-year and 5-year inflation expectations also came down in the University of Michigan’s preliminary July results, dropping from 5.3% to 5.2% and from 3.1% to 2.8%, respectively. If these trends continue, June may mark the last hot month of headline inflation, with stickier components taking the baton going forward. This should provide some inflation relief to the Fed and consumers. However, the question remains whether the Fed will exercise the patience for this lagged “good news” to flow through, or race to stomp out demand before it does.

Filed Under: Myers Cap Post

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Myers Capital Management, Inc. (“MCMI”) is a registered investment adviser located in Abington, PA. MCMI’s website is limited to disseminating general information about its advisory services and access to additional investment-related information, publications, and links. Accordingly, the publication of MCMI’s website on the Internet should not be construed by any consumer or prospective client as MCMI’s general solicitation to effect or attempt to effect transactions in securities or the rendering of personalized investment advice for compensation. We do not collect personally identifiable information about you when you visit our website unless you voluntarily provide it by sending us an email or other electronic communication(s). If you choose to share with us personal information, we will retain it in our electronic communications archive. Any subsequent, direct communication by MCMI with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. MCMI does not take any responsibility, representations, or warranties regarding the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, including website links. All such information is provided solely for convenience, guidance, and informational purposes only, and all users should be guided accordingly. Investments involve risk and, unless otherwise stated, are not guaranteed. This website and information are not intended to provide investment, tax, or legal advice and no warranties are implied. Before implementing any strategy, consult with a qualified financial adviser and/or tax professional. Insurance products and services are offered and sold through Myers Capital Management, Inc., and individually licensed and appointed insurance agents. For information about MCMI, please refer to the SEC’s investment adviser public information website at www.adviserinfo.sec.gov or upon written request from Myers Capital Management, Inc. No product or service is offered or will be sold in any jurisdiction in which such offer or solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction. This web site is intended to be made available only to individuals in the United States, and the information on the web site is only for such persons. • Copyright Myers Capital Management, Inc.
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