The numbers for Consumer Price Index were released this week showing where our economy is today and how inflation is being handled. Monthly CPI was at +0.1% vs the -0.1% expected. Year-over-year it came in at 8.3%.
Looking into the report in depth, it shows that the food index increased over the last year. It is at the largest 12-month increase since the period ending May 1979.
The energy index rose 23,8% over the past 12 months. The index for electricity rose 15.8%, the largest 12-month increase since the period ending August 1981.
As you can see, consumer prices are still rising too fast and this will force the Federal Reserve to continue trying to slow down the economy. The overall CPI rose 8.3% from one year ago. This is not the 9.1% or the 8.5% we saw in the last two months, but the number is still too high.
One of the biggest factors that is contributing to inflation are the high rent prices. Rent rose by 6.7% from one year ago. That is the fastest growth in nearly 40 years. Rent prices are not going down any time soon. There is still a lot of demand for renting especially with the high mortgage rates and the high home prices that are pushing people out of the buying market.
The one-month gain to rents was 0.77%, which translates to a 9.6% increase in just one month. If more homes come on the market, this could help with the rental market. Rent growth may slow, but with a 6-9 month lag between market rents and CPI that suggests that rent may continue higher at least through the rest of this year.
Not only are hourly earnings rising by much less at 5.2%, but wealth in the stock market has declined by $6 trillion from the first to the second quarter. This is causing many Americans to feel stretched as well as having their standard of living falling.
The only wealth that has stayed strong through all of this volatility is housing wealth. Real estate wealth rose by $1.2 trillion in the second quarter. This means that there is a lot of equity to tap into during these volatile times. Right now, $11.5 trillion is the total amount of equity that homeowners have. To tap into this equity, look into HELOCs and cash-out refinances.
We can help you hedge against volatility. Reach out to us today to discuss your options.