Rising Prices, Falling Paychecks | S3 E149 | 06-10-26

Inflation moved higher again in May, and the latest Consumer Price Index (CPI) report shows prices are drifting further away from the Federal Reserve's 2% target.

In this episode of Markets with Megan, CIO Megan Horneman discusses the latest inflation data, including rising energy costs, sticky services inflation, higher food and travel prices, and why real wages have slipped back into negative territory. Megan also explains what this means for the Federal Reserve as a new Fed Chair prepares to take office next week.

📈 Topics covered:
• May CPI report breakdown
• Energy prices and inflation
• Services inflation remains sticky
• Food, travel, and apparel costs
• Real wages vs. inflation
• What this means for the Federal Reserve
• Key economic reports still ahead this week

Subscribe for regular updates on the economy, markets, inflation, interest rates, and what the latest economic data could mean for investors.

For a history, check out https://MarketsWithMegan.FM

#MarketsWithMegan #Inflation #CPI #FederalReserve #TheFed #EconomyNews #StockMarketNews #InvestingNews #InterestRates #ConsumerPrices #MarketUpdate #EconomicData #marketinsights

https://youtu.be/tXPUdo3FO0I

Disclaimer:  material was prepared by Verdence Capital Advisors, LLC (“VCA”). VCA believes the information and data in this document were obtained from sources considered reliable and correct and cannot guarantee either their accuracy or completeness. VCA has not independently verified third-party sourced information and data. Any projections, outlooks 
or assumptions should not be construed to be indicative of the actual events which will occur. These projections, market outlooks or estimates are subject to change without notice. This material is being provided for informational purposes only and is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice. Past performance is not a guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance 
that the future performance of any specific investment, investment strategy, or product or anynon-investment related content, made reference to directly or indirectly in these materials will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any 
discussion or information contained in this report serves as the receipt of, or as a substitute for, personalized investment advice from VCA. Due to various factors, including changing market conditions and/or applicable laws, the c...

Transcript

Welcome And Why Data Matters

Megan Horneman 0:00

We got the first big inflation report for the week. It is Wednesday, June the 10th, and this is Markets with Megan. If you like this podcast, you can subscribe to it. There's an alarm bell you can hit. Also share it with your friends, family, colleagues, anybody who wants to dig into some of that economic data we get, especially when it comes to the headlines that you read and what really is the underlying story here.

May CPI Report Sets The Tone

Megan Horneman 0:22

And let's start this with what we got today. It was the May reading on the consumer price index. So this tends to be very market-moving

Why Markets Are Down Today

Megan Horneman 0:30

event. We are seeing equity significantly weaker today. It's not all the uh inflation reports. Some of it has to do with increasing geopolitical tensions with Iran, as well as some profit taking ahead of the big SpaceX IPO that we'll receive later this week. But let's dig into these

Energy Drives Headline Inflation Higher

Megan Horneman 0:48

details. What we got and what you'll see from the headlines is that inflation's not that bad. It actually came in as expected. Well, it's it you can't say it's not that bad when it comes in as expected, but the as expected number is very

Services Inflation And Sticky Prices

Megan Horneman 1:01

high. So when you look at the headline level, this takes into consideration all of the energy prices that we've seen. Um, energy's up 24% on a year-ver-year basis, gasoline's up 40%, and fuel oil is up 59%. So that pushed the headline level to uh 4.2%. That's the highest we've seen since April of 2023. And the core level, um, that rose is rising 2.9% higher than it was last month when it was 2.8, and that's the highest since September of last year. So both of these are going in the opposite direction of the Fed's preferred inflation target, which is around 2%. When you look at the service sector, this is where we spend the majority of our money and where consumers are getting squeezed, and these can be sticky. When you look at service prices on a year-over-year basis, they're rising 3.5%. And when you take out that volatile energy component, that's rising 3.4%, which is also the highest since September of 25. The core reading, when you just look at the three-month moving average of that year-over-year level, it's ticking higher on a year-over-year basis. It's now 2.7%. So again, going in the wrong direction.

Food Travel Apparel And Real Wages

Megan Horneman 2:14

Some of the details in this, um, there was some surprise that the food increase was was muted. It was only up two tenths. But if you look at some of those things within that food component, so fruit and vegetables are up 6.1% on a year-very-year basis. Um, food just generally at home is up 2.7%, a little bit better than last month, but still 2.7%. This is stripping the the buying power. And what we saw was real uh weekly and hourly earnings in negative territory again for the month. Um, some of the other details, airline fares, this has everything to do with gasoline, they're up 26.7% on a year-over-year basis. And then apparel is something we've talked about as well because we do import a lot of uh those goods, that's up 4.8%. So this might not have been as bad as maybe the worst case scenario had expected, but when you are seeing inflation rising, 4% at the headline level, 2.9% at the core level, it is outpacing the gay, the the gains in wages.

Fed Implications And What Comes Next

Megan Horneman 3:16

This is this should be concerning for the Fed. And the new Fed chairman comes in next week. So we'll get some more kind of appetite on how long he wants to leave this running hot. Um, does he think that this is just a supply shock that will be over once this war is over? And unfortunately, it looks like that's intensifying again. That's all that we have today. We'll be back with the producer price index, which comes out tomorrow, and then we also have consumer sentiment towards the end of the week. If you want a history of our podcast, you go to marketswithmegan.fm. Thank you.