AIER’s Everyday Price Index Sees First Decline in 2024

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In June 2024, the AIER Everyday Price Index (EPI) declined 0.17 percent to 290.4. This was the first decline in the index since December 2024 and the fourth in twelve months, the last coming in December 2023. 

AIER Everyday Price Index vs. US Consumer Price Index (NSA, 1987 = 100)

(Source: Bloomberg Finance, LP)

In June 2024, the largest monthly price increases among EPI constituents occurred in tobacco and smoking products, recreational reading materials, and housing fuels and utilities, with the largest price declines in the motor fuel, satellite and live-streaming TV services, and motor fuel categories. Among the twenty-four index constituents, thirteen rose in price, two were unchanged, and nine fell. 

On July 11, 2024, the US Bureau of Labor Statistics (BLS) released Consumer Price Index (CPI) data for June 2024. The month-to-month headline CPI number declined by 0.1 percent, exceeding survey expectations of an 0.1 percent gain. The core month-to-month CPI number increased by 0.1 percent, less than the 0.2 percent gain that was projected. 

Within the month-over-month headline CPI in June, the gasoline index fell by 3.8 percent. This follows a 3.6 percent decline in May which significantly offset the increase in shelter costs. The overall energy index dropped by 2.0 percent for the second consecutive month. Food prices saw a modest rise of 0.2 percent, with food away from home increasing by 0.4 percent and food at home by 0.1 percent. The core inflation index saw increases in shelter, motor vehicle insurance, household furnishings, medical care, and personal care, while airline fares, used cars and trucks, and communication prices fell.

The food index experienced a 0.2 percent increase that was driven by an 0.5 percent rise in the “other food at home” category and notable increases in butter and margarine (2.4 percent), dairy products (0.6 percent), and meats, poultry, fish, and eggs (0.2 percent) in June 2024. Fruits and vegetables dropped by 0.5 percent, as did cereals and bakery products (down 0.1 percent). Gasoline prices fell by 3.8 percent and electricity costs fell by 0.7 percent, but natural gas prices rose by 2.4 percent. Shelter prices rose by 0.2 percent with minimal increases in rent and owners’ equivalent rent. Medical care costs rose by 0.2 percent, motor vehicle insurance by 0.9 percent, and household furnishings by 0.5 percent, while falling prices were observed in airline fares (down 5.0 percent), used cars and trucks (down 1.5 percent), and new vehicles (down 0.2 percent).

June 2024 US CPI headline & core month-over-month (2014 – present)

(Source: Bloomberg Finance, LP)

In year-over-year data, headline CPI rose 3.0 percent, less than the expected 3.1 percent. Year-over-year core CPI rose 3.3 percent, which was also less than the survey prediction of 3.4 percent.

June 2024 US CPI headline & core year-over-year (2014 – present)

(Source: Bloomberg Finance, LP)

On the year-over-year side, the food at home index increased by 1.1 percent, with meats, poultry, fish, and eggs rising by 2.6 percent and other food at home by 1.6 percent. Nonalcoholic beverages saw a 1.5 percent rise, as did cereals and bakery products (0.5 percent). In contrast, the fruits and vegetables index decreased by 0.5 percent, and dairy and related products declined by 0.1 percent. The food away from home index surged by 4.1 percent, with limited service meals increasing by 4.3 percent and full service meals by 3.9 percent.

The energy index saw a 1.0 percent rise from June 2023 to June 2024 despite a 2.5 percent drop in gasoline prices. Electricity and natural gas costs increased by 4.4 and 3.7 percent respectively, while fuel oil went up by 0.8 percent. The 3.3 percent year-over-year increase in core CPI was driven largely by a 5.2 percent rise in shelter costs (which contributed to nearly 70 percent of the total core inflation rise) as well as notable increases in other categories; among them: motor vehicle insurance (19.5 percent), medical care (3.3 percent), personal care (3.2 percent), and recreation (1.3 percent).

In June, US inflation slowed to its lowest rate since 2021 primarily due to a significant deceleration in housing costs. Similar to the favorable May CPI report the June data bolsters the likelihood of rate cuts, potentially beginning in September. Policymakers will have the opportunity to indicate this potential shift during their July meetings, especially given the recent rise in unemployment for three consecutive months. In recent testimony, Powell emphasized that any policy adjustments would be data-driven and refrained from committing to specific timing for rate cuts.

Following the CPI report Treasury yields fell, with market participants largely anticipating rate cuts in September and December. The odds of a November rate cut slightly increased as well, with forecasts that the Fed Funds rate will be 60 basis points lower by December 2024. All told, the June 2024 CPI data is likely to push the Federal Reserve closer to shifting toward an accommodative stance.