What to expect from upcoming inflation data
Economist Edward Yardeni weighs in, warning that consumers should expect the data to remain elevated.
Yardeni Research President Edward Yardeni discussed what he believes Americans should expect from upcoming inflation data, warning that "it’s going to be bad news again."
The markets veteran told "Sunday Morning Futures" during an exclusive interview that "lower-wage workers are the ones that are getting squeezed hardest" by the price hikes given "they have no choice, but to allocate most of their budgets" to essentials, including food, fuel and rent.
"Higher-wage workers are also getting squeezed with inflation, but they probably have more savings that they can dip into and can always cut out consumer discretionary items, which is what we’ve seen as what’s contributed to some of the recent weakness in the economy," Yardeni continued.
The economist provided the insight three days before investors will digest the Consumer Price Index and core CPI which is expected to rise to 8.8% from 8.6% in the prior read, as tracked by Trading Economics.
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Yardeni Research president Edward Yardeni weighs in on what to expect from the upcoming inflation data scheduled to be released on Wednesday. (istock)
Last month, it was revealed that inflation remained painfully high in May, with consumer prices hitting a new four-decade high that exacerbated a financial strain for millions of Americans.
The Labor Department said last month that the Consumer Price Index, a broad measure of the price for everyday goods, including gasoline, groceries and rents, rose 8.6% in May from a year ago. Prices jumped 1% in the one-month period from April. Those figures were both higher than the 8.3% headline figure and 0.7% monthly gain forecast by Refinitiv economists.
The data marked the fastest pace of inflation since December 1981.
Yardeni said Sunday that he believes the "headline inflation rating," which includes food and energy, will "be up something like 1.1%."
"And that’s going to be over an 8% inflation rate," he added.
"I do see some hope that with the recent weakness in commodity prices, that starting in July and August we’ll see more convincing signs of moderating inflation," Yardeni went on to note. "But that undoubtedly will be somewhat related to a slowing economy and [in] some areas a recessionary economy."
Rising prices are eating away the strong wage gains that American workers have seen in recent months: Real average hourly earnings decreased 0.6% in May from the previous month, as the inflation increase eroded the 0.3% total wage gain, according to the Labor Department. On an annual basis, real earnings actually dropped 3% in May.
Yardeni noted that since inflation is higher, "it’s sapping our purchasing power and in some ways, I think most of us feel as though there’s a recession in purchasing power, especially for lower-income workers, lower-wage workers."
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"We’ve seen substantial increases in wages, that’s the good news," he continued. "The bad news is when they [Americans] go shopping, they find that their purchasing power is basically zip. It’s been unchanged for the past year because prices have gone up so much."
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