Here are some top stories on the economy
Consumer price index shows inflation is still receding. Fed rate cut looks all but certain.
PCE inflation gauge set for mild July increase.
Social Security’s COLA seen as shrinking in 2025 to 2.6%
Latest Updates
5 days ago
By
Jeffry Bartash
The latest snapshots of wholesale and consumer prices not only suggest U.S. inflation is still easing, but they set up another mild increase in the Federal Reserve's favorite price gauge.
The Fed determines whether to raise or lower interest rates depending on the rate of inflation measured by the so-call PCE index. The PCE is seen as the most accurate barometer of inflation.
Wall Street economists predict the PCE index is likely to slow 0.2% increases in both the headline and core rates when the July report is issued in two weeks.
The yearly rate of PCE inflation stood at 2.5% in June, not far from the Fed's goal of 2% annual inflation. The core rate rose at a 2.6% pace in the 12 months ended in June.
The Fed won't wait for inflation to fall to 2% before it cuts rates, and the yearly PCE rates could get stuck around 2.5% until the end of the year.
How come? The current 12-month rate includes the months of October to December 2023, when the PCE inflation index posted a series of weak readings.
Inflation as measured by the PCE would have to outright decline in the next five months to reduce the yearly rate of change in price increases. But it's quite rare for monthly inflation indexes to show a decline.
5 days ago
By
Robert Schroeder
Vice President Kamala Harris and President Joe Biden touted progress in the fight against inflation after Wednesday's consumer-price index report and previewed campaign-trail arguments for later this week.
"Large corporations are sitting on record profits and not doing enough to lower prices," Biden said in a statement. Harris, who is preparing to take on former President Donald Trump in the November election, is scheduled to give an economic policy speech on Friday in North Carolina. Her campaign said in a statement: "She will lower costs by taking on greedy corporations that are overcharging consumers, ban hidden fees, and cap unfair rent increases and prescription drug costs."
As MarketWatch's Jeffry Bartash reports, inflation has cooled considerably over the past year, but there are still a few hot spots, such as the cost of shelter.
Trump is scheduled to give a speech on the economy in North Carolina on Wednesday afternoon. In a statement, his campaign said the U.S. "cannot afford another four years of Kamala's failed economic policies."
5 days ago
By
Venessa Wong
The price of child care continues to rise faster than overall prices even as inflation cools. The price index for daycare and preschool was up 5.1% in July compared with the same month a year earlier. Child-care costs also rose 5.6% in 2023.
In contrast, the overall consumer-price index increased 2.9% in the 12 months ending in July, and 4.1% overall in 2023.
The rising cost of child care has been a growing source of financial stress for parents with young children, with the Labor Department describing the expense as “untenable for families.” In a November 2023 survey of parents by the caregiving platform Care.com, respondents on average said they spent 24% of their income on child care.
The average cost of care for two children is now greater than the average rent in all 50 states, and greater than the average mortgage payment in 45 states, according to a May report by the nonprofit Child Care Aware of America. The group recommends increased government funding for the child-care system so that states can provide more families with subsidies and boost income for the child-care workforce.
“Child care has been under-resourced for decades, contributing to the current inadequate supply of high-quality programs and a situation where too many families are priced out of the system,” the report said.
5 days ago
By
Aarthi Swaminathan
A sharp rebound in the cost of housing in July was a “disappointing” detail, but not a big worry, said Paul Ashworth, the chief North America economist for Capital Economics.
“After the more modest gains in June and the sharp slowdown in the all tenant rent index measure of housing inflation, we had expected the weaker June gains to become the new norm,” Ashworth wrote in a note to clients.
But the report is still “mildly encouraging,” as it adds support for a 25-basis-point rate cut by the Federal Reserve in September, he added.
Ralph McLaughlin, a senior economist at Realtor.com, agreed.
“While shelter inflation is on a disinflationary path, it is a highly lagged input into CPI so its contributions don’t reflect the current slowdown we’re seeing in the housing market,” McLaughlin said in a statement.
“Today’s data has reassured markets that they will get a rate cut in September and December,” he added.
Realtor.com expects the 30-year mortgage rate to fall to 6.3% by the end of the year. The 30-year rate was averaging 6.52% as of Monday morning, per Mortgage News Daily.
Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.
5 days ago
By
Jeffry Bartash
The battle against high inflation is not entirely over, but it's getting closer to the end game.
The three-month annual rate of inflation based on the consumer price index slowed to 0.4% in July from 1.1% in the prior month and a recent high of 4.6% in the early spring.
The three-month annual rate reflects how much inflation would rise for the full year if it rose at the same rate as it did from May to July.
The last time the three-month rate was that low was in mid-2020, when the pandemic slammed the brakes on the U.S. economy and caused prices to decline.
The six-month annual rate of core inflation, meanwhile, slowed to 1.6% from 2.1% in June and 4.5% earlier in the year. That's the lowest level since 2021.
The six-month annual rate of inflation for both overall CPI and the core rate were also both below 3% in July for the first time since September 2020.
The core
5 days ago
By
Aarthi Swaminathan
The cost of housing in July accounted for 90% of the increase in consumer inflation, but private data has continued to indicate a broader slowdown in rents.
The index for rent rose 0.5% from a month earlier, and the index for owners’ equivalent rent rose 0.4%, according to the consumer-price index.
The sharp rebound in rental prices conflicts with private reports of an ongoing slowdown in rents.
Nationwide median asking rent across all types of bedrooms was down for the first time in four years, per a Redfin report on Tuesday. Median asking rent was $1,647 in July, down 0.2% from the previous month, the company said.
“Rent growth follows a seasonal pattern — prices tend to go up during the spring and summer and dip during the fall and winter,” Apartment List said in its August rent report. “Today we are nearing the end of that busy summer season, but this year’s trend is not bringing elevated rent growth.”
To be sure, rents are still rising in many parts of the U.S. Median asking rents rose 14% in Virginia Beach, Va., in July from the same month a year earlier, followed by Baltimore, Md., and Washington, D.C., where rents were up 13% and 12%, respectively, Redfin said.
But with the U.S. set to complete a record number of units in 2024, rent growth could slow even further. Real-estate developers are expected to complete construction on nearly 520,000 rental units by the end of the year, a 30% increase from 2022, according to a report by RentCafe.
5 days ago
By
Jessica Hall
The Social Security cost-of-living adjustment for 2025 could shrink in 2025 from this year’s 3.2% increase as the economy cools.
COLA could be 2.6% in 2025, according to Mary Johnson, an independent Social Security and Medicare analyst and former analyst with the Senior Citizens League. The new forecast compares to her forecast in July that called for a 2.7% increase.
The official announcement for 2025 COLA comes out in October. The average COLA over the last 20 years has been about 2.6%, according to the Senior Citizens League. COLA is not a raise, but an adjustment to help keep pace with inflation.
The Consumer Price Index report released Wednesday showed inflation is mild, but housing still remains a trouble spots for the economy. Social Security’s COLA is calculated based on the consumer-price index for urban workers, or the CPI-W.
5 days ago
By
Jeffry Bartash
The bulk of inflation in July was concentrated in housing - it accounted for 90% of the increase in the consumer price index.
Energy and food were on the tamer side. Energy prices were flat and the cost of food rose 0.2%.
Grocery prices barely rose, with most of the increase in food purchased outside the home.
The cost of new and used cars both declined to extend a recent trend. Dealers are offering more incentives to lure buyers, especially with interest rates so high.
Clothing prices also fell in July and medical care cost a bit less.
On the flip side, auto insurance rose sharply again.
5 days ago
By
Jeffry Bartash
After rising in June at the slowest rate since 2021, the cost of housing snapped back last month in a potentially worrisome sign.
Shelter costs rose 0.4% last month and accounted for 90% of the increase in the overall consumer price index. Rents rose an even faster 0.5%.
Shelter is the single biggest expense for most families and has been the biggest driver of inflation over the past few years. Economists and top Federal Reserve officials have been expecting prices to slow, but they are still somewhat sticky.
The cost shelter has risen 5.1% in the past year, down slightly from 5.2% in the prior month.
The increase in rents over the past year was unchanged at 5.1%.
Before the pandemic, the cost of shelter rose just a little above 3% a year.
5 days ago
By
Jeffry Bartash
Inflation has cooled considerably over the past year, but there are still a few hot spots. The biggest is the cost of shelter - rent and housing. It accounted for about 90% of the increase in the consumer price index in July.
Still, the report is unlikely to cause the Federal Reserve to veer off course from a widely expected reduction in interest rates in September.
The big question to investors is whether it will be a 1/4-point cut or a larger 1/2- point reduction. The July CPI probably doesn't settle the question.
For now betting markets suggest a smaller cut is more likely.