The S&P 500 hits a new record high as investors ignore flat inflation data

The hotter-than-expected inflation reading in February was largely driven by two items: shelter and gas.

The shelter index rose 5.7% on an unadjusted annual basis and 0.4% on a monthly basis, a slowdown from the 6% annual increase in January and the 0.6% monthly rise.

According to economists, housing inflation is largely responsible for the rise in core inflation readings.

The rental index and equivalent rent to owners increased by 0.5% and 0.4% on a monthly basis, respectively. The owner-equivalent rent is the hypothetical rent a homeowner would pay for the same property. In January, the rental index rose by 0.4% while the OER index rose by 0.6%.

“While core services inflation was hot again, critical core services excluding housing weakened compared to last month while housing inflation fell,” highlighted Seema Shah, chief global strategist at Principle Asset Management.

Shah said the deflationary trend was positive but warned that price pressures would ease “very gradually.”

“This reading is almost enough to keep June rate cut expectations stable – but another reading like this next month would push the first cut into the second half of the year, putting the soft landing narrative into question,” the economist said.

Energy prices – largely responsible for the increase in headline inflation – rose after several months of declines, supported by gas prices. The index jumped 2.3% in February after falling 0.9% in January. However, the index fell by 1.9% year-on-year.

Gas prices rose a whopping 3.8% from January to February after falling 3.3% the previous month. This was largely due to seasonality and Swipe back In using US refineries.

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Other indices that rose in February included apparel, entertainment, and used cars and trucks.

The BLS noted that the airline ticket price index rose 3.6% in February after a 1.4% increase in January. The vehicle insurance index increased by 0.9% during the month.

The food index jumped by 2.2% in February compared to last year, with food prices stable from January to February. The household food index also remained flat during the month after rising by 0.4% in January.

However, dining out rose 0.1% month-on-month after rising 0.5% in January.

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