The June 2024 Consumer Price Index of All Urban Consumers (CPI-U) report indicates that inflation declined by 0.1% for the month, a slight drop from May’s flat print (+0.0%). These data were released at 8:30 am EST on Thursday, July 11, 2024, by the Bureau of Labor Statistics. Before seasonal adjustment, the year-over-year (Y-o-Y) inflation rate in the all-items index grew by 3.0%, which is also a drop from May’s 3.3% Y-o-Y CPI reading.
Increasing the chances of a rate cut in the months ahead, the headline and core CPIs came in below economists’ consensus estimates. The table below is courtesy of Investing.com. The left column represents June’s figures, while the right column represents forecasters’ expectations. As you can see, the monthly and Y-o-Y CPIs (marked in red) were weaker than expected.
Yet, while U.S. Federal Reserve Chairman Jerome Powell said on Jul. 10 that “I do have some confidence” that inflation will return to 2%, he cautioned, “I am not ready to say” rate cuts are necessary. “There is a path to getting back to full price stability while keeping the unemployment rate low,” Powell added. “We’re on it. We’re very focused on staying on that path.”
Furthermore, with the U.S. presidential election scheduled for November, he reiterated, “Our undertaking is to make decisions when and as they need to be made, based on the data, the incoming data, the evolving outlook, and the balance of risks, and not in consideration of other factors, and that would include political factors.”
Thus, while Powell has to weigh several variables, June’s weak CPI print should have him feeling more confident about the FOMC’s projections.
Global markets had a mixed response to the CPI slowdown, with American and European indices gyrating, while Treasury bonds and precious metals rallied and the U.S. dollar slumped. Rate cuts by the Fed could help turn the tide for the CAD, which has underperformed the USD in recent months.
June’s headline inflation deceleration was driven by lower gasoline prices (-3.8%), used cars and trucks (-1.5%), electricity (-0.7%), and transportation services (-0.5%). Core inflation (which excludes the impacts of food and energy), rose 0.1% in June, the weakest monthly reading since August 2021. The shelter index rose 0.2%, with rents up 0.3%. Both were also the smallest increases since August 2021.
Source: Bureau of Labor Statistics
Food Prices
The food index increased by 0.2% in June after rising 0.1% in May. Tomatoes fell by 3.3%, breakfast cereal by 2.0%, while pork chops were up 3.1% and eggs up 3.5%. Four of the six major grocery store food indexes showcased inflation, while two realized deflation.
- Cereals and bakery products (-0.1%)
- Meats, poultry, fish, and eggs (+0.2%)
- Dairy and related products (+0.6%)
- Fruits and vegetables (-0.5%)
- Nonalcoholic beverages (+0.1%)
- Other food at home (+0.5%)
In addition, the food away from home index jumped 0.4% in June matching the results from May. Consequently, restaurants continue to demonstrate resilient pricing power.
Energy Prices
The energy index dropped 2.0% in June, on par with the 2.0% drop in May. Gasoline, electricity, and fuel oil prices fell by 3.8%, 0.7%, and 2.4%, respectively, while natural gas prices rose by 2.4%
Core CPI June 2024
The June core CPI rose by 0.1% month-over-month, the lowest monthly print in 2024. On a Y-o-Y basis, the metric rose 3.3%. Below is an itemized breakdown of the main price fluctuations seen in the core CPI reading:
- Shelter index: (+0.2%) [May: +0.4%]
- Rent index: (+0.3%) [May: +0.4%]
- Owners’ equivalent rent: (+0.3%) [May: +0.4%]
- Motor vehicle insurance: (+0.9%) [May: -0.1%]
- Medical care services: (+0.2%) [May: +0.3%]
- Physician services: (+0.1%) [May: +0.0%]
- Hospital services: (+0.1%) [May: +0.5%]
- Airline fares: (-3.6%) [May: -5.0%]
Source: Bureau of Labor Statistics
Seasonally Unadjusted CPI Data for June 2024
Before seasonal adjustments, the CPI-U for June 2024 increased (+3.0%) Y-o-Y, rising to an index level of 314.175. Since these figures are unadjusted, they include regular seasonal price fluctuations that can create volatility in the results.
Source: Bureau of Labor Statistics
Gold and Silver Still Shining Bright
With the CPI slowdown suppressing Treasury yields and weakening the U.S. dollar, gold remains one of the best-performing assets in 2024. Similarly, silver has soared above $30 an ounce, reaching its highest level in more than a decade. Because precious metals futures contracts are priced in USD, a weaker greenback makes it more affordable for foreign investors to purchase the pair. As such, lower Treasury yields, a weaker dollar, and increased rate-cut enthusiasm create a profitable environment for precious metals enthusiasts.
However, the CPI release noted how gasoline prices declined by 3.6% and 3.8% in May and June. And with crude oil prices rising recently, they usually impact gasoline prices with a lag. As a result, the gasoline index should rise in July and temper some of the downward CPI momentum.
All in all, while 2024 winners like gold, silver, Bitcoin, and Ethereum should maintain their strength absent a recession, the same could be said for U.S. stocks. The S&P 500 and NASDAQ have also rallied sharply in 2024, but big tests loom over the next few weeks. With some of the index’s largest constituents — like Apple, Microsoft, and Meta Platforms — reporting earnings soon, investors expect upbeat results.
Are you thinking about diversifying into precious metals? Talk to your financial advisor about initiating a gold IRA account today, allowing you to invest in this red-hot asset on a tax-advantaged basis. Additionally, our complimentary CPI inflation calculator remains at your disposal, enabling you to assess inflation’s impact on your finances. Remember, seek the guidance of a financial advisor before making any investment decision.
Alex Demolitor is a Canadian financial writer hailing from Halifax, NS. Alex has a Bachelors Degree from King's College and passed the CFA Exam Level III. He specializes in fundamental analysis of the stock, bond, commodity, and FX markets. He also covers US & Canadian economic indicators.
