Economic Update: Inflation, Jobs Report, Construction Supply Shortages, and more!

SVN Miller Economic Update

We invite you to review SVN’s latest economic update providing information on Inflation, Jobs Report, Construction Supply Shortages, and more!

1. INFLATION

• According to the Bureau of Labor Statistics, consumer prices rose by a seasonally adjusted 0.6% in May from the month prior. While the month-over-month reading was lower than April’s growth rate (0.8% MoM), May’s 5.0% year-over-year change in average prices represents the fastest rate of annual inflation since August 2008.

• Through May, food prices are up 0.4% month-over-month and 2.1% year-over-year. Annual price inflation for food and beverages is less than half of what it was in June 2020, when prices were growing at a 4.3% annual clip. Energy prices are up 27.8% from one year ago, though they were effectively unchanged from the month prior. These data reflect the supply-side sensitivities that food and energy prices are often subject to and the tendency for greater volatility.

• Core-CPI, a slimmed-down inflation measure that excludes food and energy, rose 0.7% in May following a 0.9% month-over-month increase in April. These “core’ prices are up a total of 3.8% from one year ago, well above the 2% growth that policymakers peg as ideal and marks the highest rate of annual core inflation since 1992.

• Roughly one-third of the additional pricing pressures observed in May from the prior are attributable to the used cars and trucks market, which saw average prices climb a bottlenecking 7.3% month-overmonth. Airfares, home furnishings, and apparel also had significant upticks as travel and leisure activities experience higher demand across the nation.

• While the incoming inflation data are jarring, take it with a grain of salt. The impact of outright price declines during April and May of last year are causing incoming data to appear inflated when reported annually. However, independent of these “base effects,” month-over-month data are signaling rising pricing pressures in aggregate, which may lead to a period of sustained inflation higher than the sub-2% that had been customary in the past decade.

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