Morning Market Brief: Wednesday, May 11, 2023

Sub-5% CPI suggests US inflation is cooling ?

Based on the latest inflation data released by the US Bureau of Labor Statistics, the April consumer price index (CPI) was 4.9%, below economists’ estimates of 5%. The measure suggests that prices are cooling as the economy recalibrates to account for over a year of interest rate increases by the US Federal Reserve Board (Fed). ?

• The CPI has not been this low for two years. Shelter costs rose more slowly in April by 0.4% month-on-month. Shelter makes up 30% of the total basket of goods and services in the index.
• Energy prices fell 5.1% in April year-on-year following the 6.4% decline in March. Prices of fuel oil, gasoline, natural gas fell while electricity price increases slowed.
• Excluding energy, the cost of services rose 0.4% in April versus the previous month and 6.8% annually. Services-related inflation has been more persistent than commodities. It is a key metric that policymakers follow.?
• Grocery prices dipped by 0.2% on a monthly basis and for the second consecutive month. The decline will be welcomed by consumers. However, on an annual basis, food prices rose by 7.1%.??

Given the lack of major Canadian economic announcements this week, investors will likely pay close attention to market news south of the border. It appears that US inflation is heading toward more sustainable levels. However, Fed Chair Jerome Powell cautioned that the downward trajectory could be bumpy. With the CPI dipping below the 5% threshold, it is important to follow the Fed’s reaction and consider whether any adjustments to your investment strategy are warranted.

At?CIBC Private Wealth , we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.