The Week in Review: December 16, 2024
Sticky Inflation
The monthly numbers are out, and while the rate of inflation is well off the 2022 peak, price hikes remain uncomfortably high.
The U.S. Bureau of Labor Statistics reported that the Consumer Price Index (CPI) and the core CPI, which excludes food and energy, both rose 0.3% in November. The CPI is up 2.7% versus a year ago.
The core CPI held at 3.3% in November. And that illustrates a problem. Inflation has gotten stuck at a still-elevated level. The annual core CPI has been running at 3.3% for 4 of the last 6 months (Fig 1).
A more detailed review highlights what’s driving inflation (Fig 2). Supply chains have righted themselves, and the sharp rise in inflation for consumer goods has been replaced by deflation (falling prices).
It’s a different story for services. Historically, services such as rent, health insurance, and auto repair have risen at a faster rate than consumer goods.
At 4.5% annually last month, services remain high but are in a gradual downward trend.
Why do investors care? The slowdown in inflation has encouraged the Federal Reserve to reduce interest rates. This week, the Fed is widely expected to cut the fed funds rate by another 25 basis points (bp, 1bp = 0.01%).
If so, it will mark a total of 100 bp since September.
Market Summary
TWO FOR THE ROAD
Last year, products coming from China made up 14% of all imported goods, the lowest share in nearly two decades. Mexico (15.4%) became the largest source of U.S. imports, with Canada (13.6%) not far behind. - The Week, December 6, 2024
The combined revenue of the four biggest U.S. tech companies hit a record $1.6 trillion over the last 12 months. That’s larger than the GDP of all but 15 countries. - Week in Charts, November 4, 2024
Please do not hesitate to contact me with any questions or concerns. I hope you have a wonderful week!
Bill Stordahl, CFP®
Managing Director
Stordahl Capital Management
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