Macro views

US Inflation Tracker

June 26, 2024 - 4 min read

The US Inflation Tracker captures the trends that provide context in today’s economy.

Are sticky prices finally cracking?

The focus has been squarely on supercore services, not only because it was ground zero for the warmer inflation data in Q1, but because they tend to be stickier prices. In other words, they’re inertial – if they are soft, they tend to remain so as they are driven by expectations – which continue to be well-anchored.

The Atlanta Fed’s Core Sticky CPI ex-Shelter dropped to -0.86% annualized, its lowest level since September 2020. Yes, this series can be volatile month to month, but nonetheless, if sticky prices are softening, they’ll likely continue to remain soft. The last mile on inflation is all about lagged items, which have plenty of cooling ahead. These lagged items are sometimes conflated with “sticky prices”. And we are finally seeing signs that these lagged effects are working their way into the present data.

Atlanta Fed’s Sticky ex-Shelter Consumer Price Index (12/31/10–5/31/24)

Source: Natixis Investment Managers Solutions, Bloomberg. Sticky prices are defined as those line items that exhibit price changes that occur less often, on average, than every 4.3 months. Sticky-price CPI includes many service-based categories such as medical services, education, and personal care services, as well as most of the housing categories.

Core CPI ex-Shelter: consistent with 2% PCE inflation

We’ve written repeatedly about shelter costs and their lagged effect relative to real-time prices. But the most recent core CPI really highlights this impact. Excluding the contribution of shelter to core CPI, that inflation metric has been running at between 2-2.4% for the last 9 months. Considering the historical spread between CPI and PCE (Personal Consumption Expenditures Price Index) – the latter being the Fed’s preferred metric – a 2.3% core CPI is roughly equivalent to a core PCE print of 2.0%. And ignoring the shelter component, core CPI actually saw deflation this past month.

Said differently, shelter was the main driver for core CPI – everything else in aggregate was modestly negative. We should certainly continue to expect bumps along the way, but the disinflationary trend looks set to kick into high gear once again with plenty of support still in the pipelines.

Core Consumer Price Inflation less Shelter (9/30/14–5/31/24)

This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. The views and opinions expressed are as of June 26, 2024, and may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

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