Trend watch and what’s new this week
U.S. COVID-19 cases are rising modestly (slide 6). The rate of hospitalizations has held steady (slide 8), but the percentage of COVID-19 patients has ticked up in recent weeks.
The travel-related activity-based data (slides 5 and 7) remains mixed. Weekly air passengers strengthened to a three-week high, but restaurant bookings and hotel occupancy slipped. Rail freight also fell modestly during the latest week.
Temporary staffing (slide 15) has rebounded in the past two weeks, jumping to the highest reading since mid-December 2021.
Inflation watch –inflation appears to be peaking
Inflation, as measured by the Consumer Price Index (CPI), rose 0.3% MoM in April substantially cooler that the 1.2% MoM pace in March (slide 9). However, it’s up 8.3% from a year ago (slide 10). We also show the trend for several of the key components –housing, food, and energy.
On slide 11, we show core inflation, which excludes the volatile food and energy components. It appears that core inflation has peaked as used car prices have recoiled (slide 12) and shelter costs have stabilized (slide 13).
We also revisit lumber prices (slide 14), which is a key input for residential housing and remodeling projects. Lumber prices have been on a roller-coaster since the pandemic, repeatedly surging and plunging. Price has fallen 30% since early March 2022 but has increased in recent weeks.
Lastly, consumer sentiment slumped to an 11-year low (slide 16), according to the University of Michigan survey.
Inflation remains an obvious headwind for the U.S. economy. Consumers and investors remain understandably concerned about inflation, which erodes purchasing power. Indeed, inflation is rising at the fastest annual pace in 40 years after a one-two punch from the pandemic-induced recession of 2020 and now the Russian invasion, which has spiked global energy prices higher and is seeping into food prices.
We don’t expect higher food and energy prices to correct anytime soon; thus, prices will likely remain elevated for the foreseeable future. Moreover, given the amount of uncertainty for a resolution of the conflict, price volatility will persist, especially for crude oil, where daily 5% price swings have been commonplace.
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