Has inflation peaked? Three signs that prices could drop soon 2022-05-01 06:45:19


gallon gas costs More than double its cost in January 2021. housing prices It rose 19.8% year over year in February. And in March, groceries Cost 10% more than they did a year ago.

Fortunately, some analysts believe that the burden may ease soon, and that we have reached an inflationary peak.

This week, the Federal Reserve will meet and is likely to announce plans to raise interest rates, a tool used to combat rampant inflation. However, investors fear that an acceleration of interest rate hikes could drag the economy into recession.

Ryan Detrick, chief market strategist at LPL Financial, believes that it’s possible that inflation has already peaked on its own, and that the Fed could start to taper off interest rates by the second half of the year.

Core PCE IndexThe Federal Reserve, which is closely watched to gauge prices of goods and services, grew 5.2% in March, excluding food and energy prices, missing economists’ expectations and falling on a monthly basis for the first time since October 2020.

Analysts at UBS also said this month that they expect inflation to peak in March and then decline “sharply”.

Dietrick points to three main economic indicators of this belief: lower used car prices, no “steady” inflation, and a relative decline in supply chain chaos (although China Covid related lockdowns could put an end to it).
Chip shortages caused by supply chain kinks and the Russian invasion of Ukraine made it difficult to get a new car, and the prices of used cars and trucks rose correspondingly. In February, the price of a used car increased by about 45% Year after year , according to Mannheim used car value index. But it has since fallen to about 25%. It shows from the two-month decline that used car prices, which make up 4% of the CPI, could finally return to pre-pandemic levels.
Atlanta Fed Breaks Inflation into two categories: viscous and elastic. Sticky inflation is a basket of goods that tend to change more slowly and always in prices, such as the cost of education, public transportation, and car insurance. Elastic inflation includes items that move up and down cost more quickly: gas, clothing, milk, and cheese.

During the stagflation of the 1970s, viscous and elastic inflation grew. But flat inflation so far has been relatively flat compared to elastic inflation, which is a good sign that this may remain temporary.

Of course, it may take some time for viscous inflation to catch up, but Dietrich says he’s optimistic. He said the elastic inflation is like a rubber band, you can stretch it too far and it will still bounce back.

And while the shutdowns in China may hurt the global supply chain, the problems appear to be receding — at least for the time being. Dietrick said that if companies could easily get more supplies, then prices for items would fall and consumers wouldn’t pay much for goods and services.

Shipping rates from Shanghai to Los Angeles, New York or Rotterdam are down an average of 28% from last year’s peak, according to LPL Financial data. The schedule reliability of container ships also continues to improve, according to new data from Analytics company Sea-Intelligence. March also saw the third consecutive month of declines in average delays for container ships.

Dietrick said the downward movement in inflation could be surprising as a result, especially for durable goods. However, he cautioned, it’s hard to tell if we’re seeing the light at the end of the tunnel or the oncoming train.

Buffett and Munger’s Big Day

Investors flocked to Omaha this weekend for Berkshire Hathaway’s annual shareholder meeting, the first since 2019.

There, they watched market gurus Warren Buffett and Charlie Munger make remarks about the state of the economy and the stock market. They also enjoyed the sweet treats served by Berkshire-owned See’s Candies and Dairy Queen, my CNN business colleague Paul R. La Monica. Reports.

Among all the ice cream and caramel cones, Berkshire revealed on Saturday that it bought more than $51 billion in stock during the first quarter of 2022, though Buffett described his current investment temperament as “sluggish.”

More than $3 billion of that was their own stock, but other big names included Chevron, Apple, Bank of America and American Express. Together, these four stocks make up nearly two-thirds of the fair value of Berkshire’s nearly $388 billion portfolio.

Charlie Munger used his platform on Saturday to speak out against bitcoin and cryptocurrency, which he compared to a “venereal disease” earlier this year.

Munger said Saturday that if an investment advisor wants to put retirement funds into bitcoin, “just say no,” in an apparent blow to Fidelity’s recent announcement of its intention. Allowing people to buy bitcoins for their 401(k) accounts.
He also attacked what he called the “disgusting” surge in gambling-like attitudes toward investing, popularized by M shares. Munger recently said “break up” in Robinhood online trading platform share price It was “some justice”.

next one

Monday: ISM manufacturing spending on construction profits Foxconn and Clorox

Tuesday: Job Opportunity and Employment Turnover Survey (JOLTS); Factory orders Profits from Match Group, Starbucks, Lyft and Airbnb

Wednesday: ADP employment report; Federal Open Market Committee statement; Federal Reserve Chairman Jerome Powell’s press conference; Earnings from CVS, Dine Brands, Applebee’s, Yum Brands, and Uber

Thursday: weekly unemployment claims mortgage rates; Earnings from Budweiser APAC and Kellogg’s

Friday: April jobs report; Earnings from Under Armor and Draft Kings