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CNN
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U.S. inflation has slowed steadily since hitting a four-decade peak in June last year and is expected to cool further thanks to falling car prices and rents. And if the U.S. job market continues to slow, that could help drive it down even further.
And while rising energy costs have pushed up so-called headline inflation – the latest consumer price index rose 3.7% in August from a year earlier, faster than the 3.2% annual rise in July – core inflation, which excludes volatile food and energy prices Watch out, slowed to an annual rate of 4.3% in August, slower than July’s 4.7%.
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Overall, the data is leading economists to forecast that inflation will continue to slow in the coming months.
“At the moment we are seeing some weakening in the price dynamics of goods as a whole, especially used cars, but we are also seeing that prices for new vehicles are slowing down and we expect that prices will continue to fall until the end of the year,” José Torres , senior economist at Interactive Brokers, told CNN.
“High interest rates are significantly dampening demand in the automotive sector, and reduced credit availability has also resulted in consumers being unable to make purchases in this sector.”
Prices for used cars and trucks fell for the third straight month in August, falling 1.2% in the month compared to July. In August they were 6.6% lower than in the same month last year. New car prices rose slightly by 0.3% month-on-month in August, after falling 0.1% in July and remaining flat in June.
However, the ongoing strike by the United Auto Workers could put a damper on the expected decline in vehicle prices as inventories shrink due to slower production.
Accommodation costs, which make up a large portion of the CPI, are also expected to fall in the coming months. These costs increased by 0.3% in August compared to the previous month. It was the lowest increase since January 2022.
“We’ve seen rental costs come down quite a bit over the last year. “We’re also seeing single-family home rents falling quite significantly, and as that’s reflected in official inflation measures, we think there’s a lot more weakness to come in this sector,” said Sarah House, senior economist at Wells Fargo.
She added that the expected slowdown in both the labor market and the overall economy could help curb inflation in the services sector, which includes services provided by businesses such as restaurants and hospitals.
A recent San Francisco Fed paper argues that protective inflation could turn negative in the second half of 2024, which could help both headline and core inflation fall.
Saira Malik, chief investment officer at Nuveen, told CNN that financial markets like the Fed are more focused on core inflation and have already priced in a rise in headline inflation. Despite the expected decline in inflation, investors expected the Fed to keep interest rates stable and not lower them any time soon, she said.
“It could take a little longer than expected for inflation to fall to 2%, and inflation next year in the 2% to 3% range is reasonable,” she said. “But if core inflation turns out to be too high, markets will price in another rate hike.”
A major Chinese real estate company has suspended repayments of offshore debt, deepening turmoil in the troubled sector, my colleague Michelle Toh reports.
Sino Ocean, which says it is one of the country’s 20 largest real estate developers, said in a stock exchange filing on Friday that it would temporarily halt payments and suspend trading on U.S. dollar-denominated bonds as the company undertakes a broader Taking on debt restructuring.
The company said it made this decision as it faced “increasing liquidity pressure” due to a decline in revenue across the industry since 2021, which has impacted its ability to repay its debt.
So far this year, the group has experienced “a rapid decline in contracted sales and increased uncertainty around asset disposals,” it said.
“The group respectfully requests that creditors give the group some time to resolve the current liquidity issue and work with its advisors to formulate a plan.”
Read more here.
Monday: The National Association of Home Builders releases its September housing market index.
Tuesday: Statistics Canada releases inflation data for August. The US Department of Commerce releases August numbers on housing starts and building permits. Japan’s Finance Ministry releases trade flow data for August.
Wednesday: Earnings from FedEx and General Mills. The UK Office for National Statistics releases August inflation data. The Federal Reserve announces its latest interest rate decision and releases a series of new economic forecasts.
Thursday: Earnings from Darden Restaurants. The Bank of England announces its latest monetary policy decision. The U.S. Department of Labor reports the number of workers who filed for unemployment benefits in the week ending September 16. The US Department of Commerce reports the country’s financial inflows and outflows in the second quarter. The National Association of Realtors reports sales of existing homes in August. The Bank of Japan announces its latest interest rate decision. The President of the European Central Bank, Christine Lagarde, gives a speech.
Friday: S&P Global publishes business surveys measuring economic activity in the U.S. manufacturing and services sectors.
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