Weekly Update 05/15/2026: Inflation Accelerates
- Existing home sales sluggish
- Consumer and producer prices climb
- Jobless claims remain subdued
- Qnity reports super charged quarter
Economic Data
This week was full of important statistics, which investors will use to determine the direction of the economy in the weeks and months to come. We will break down the data and our insights day by day.
Monday--Existing home sales: Sales of previously owned homes barely rose in April, edging up only 0.2% to a 4.02 annualized rate, according to the National Association of Realtors. That was slightly lower than the median estimate in a Bloomberg survey of economists of a 4.05 million annualized rate. The median sales price rose 0.9% from a year earlier to $417,700, a record for the month. The inventory of previously owned homes rose to 1.47 million, which is the most for any April since 2019. Prospective buyers must face not only rising prices but also a mortgage rate that remains stubbornly high. The number of contract cancellations is elevated, suggesting that consumers remain pressured. The bottom line is that the spring selling season is not starting off as positively as hoped.
Tuesday—Consumer price index: The Bureau of Labor Statistics (BLS) reported that the CPI rose 3.8% in April from a year earlier, the most since 2023. Gas prices rose 28% over the past two months, reflecting how the Middle East war is impacting the day-to-day lives of Americans. Airfares, which are affected by rising jet fuel costs, rose 2.8% from a month earlier. Hotel prices climbed by 2.8%, the most since 2024. Core CPI, which excludes food and energy, increased 0.4% from a month earlier and 2.8% from a year earlier. Both figures were a bit warmer than consensus expectations. The 2025 government shutdown, the longest in history, helped boost the core figure due to a statistical quirk. Because there was no data from October of last year, the six month sampling procedure was affected, forcing the agency to assume unchanged figures from that period. When those units were priced again in April, they captured a year of increases rather than six months’ worth, making the monthly change in rents look about twice as large as normal. Regardless of that oddity, consumers are pulling back on other purchases to pay for gasoline. If more discretionary or even mandatory expenditures become affected, it will become a larger problem for growth. “Inflation, which we thought was under control, is reaccelerating, and that’s a real problem,” said Gus Faucher, chief economist at PNC Financial Services Group. “The longer inflation remains elevated, the more stress that’s going to place on consumers.”
Wednesday—Producer price index: The BLS reported that the PPI for total final demand rose 1.4% in April, versus a revised 0.7% monthly advance in March. In keeping with the inflationary trend, that was the largest monthly increase since March 2022. That monthly advance translated into a gain of a jaw-dropping 6% year-over-year, which compares to the revised 4.3% rate logged in March. That is the highest annual increase since December 2022. A core measure of wholesale inflation that excludes the more volatile food and energy categories increased 5.2% from April 2025—the largest advance in more than three years. All these figures far exceeded the consensus in a survey of economists by Bloomberg. Good prices saw the energy category rise 7.8% while services costs rose 1.2%, the most in four years. Transportation and warehousing services jumped 5%, driven by higher prices paid by truckers. Specifically, truck transportation of freight soared 8.1%, the highest figure since 2009. Airfares and healthcare costs were two other service related categories which rose last month. Wholesale prices feed into final prices, so it is only a matter of time before consumers feel a bigger pinch, especially since inflation-adjusted wages are falling. Consumer sentiment already stands at record lows according to the latest University of Michigan survey.
Thursday—Retail sales & Initial unemployment claims: The Commerce Department released a report showing the value of retail purchases rose 0.5% last month, after a revised 1.6% gain in March. Nine out of 13 categories posted increases including sales at online merchants and sporting goods stores. Not unexpectedly, receipts at gas stations rose 2.8%, reflecting the burst in energy prices due to the Iran conflict. Notably, the data is not adjusted for inflation, meaning an increase could simply reflect higher prices rather than more sales volumes. Nevertheless, higher-than-usual tax refunds and the wealth effect from higher stock prices have mitigated the pressure of higher prices for consumers. This was an interesting observation from one analyst: “The powerful equity market rally is supporting spending on the upper leg of the K-shaped expansion, more than offsetting any pullback from those on the lower leg who are struggling with higher fuel, transportation, and food costs,” Sal Guatieri, senior economist at BMO Capital Markets, said in a note. A good deal of how much longer spending can be maintained will be determined by the labor market.
Initial jobless claims rose to 211,000 in the week ended May 9 according to a Labor Department release. That was up from the prior week’s 199,000 claims and modestly above the consensus of 205,000 claims in a survey of economists by Bloomberg. A year ago in the comparable week, claims reached 226,000, and this was the 13th consecutive week below year-ago levels. This suggests that layoffs remain contained outside of certain layoff announcements from high profile employers, especially in the tech industry.
The Fed
Next week, the market will be focused on the minutes from the April 29 meeting of the Federal Open Market Committee (FOMC) meeting. That was the last meeting with Jerome Powell as the Chairman. The minutes will hopefully give the market further insight into the thinking of the members, especially in light of the fact that so many dissenting opinions were voiced. This week, the Senate confirmed Kevin Warsh as the next Fed chair in a 54-45 vote held on Wednesday. He becomes the 11th Fed chair of the modern banking era. Warsh will take the place of Stephen Miran on the board, who was appointed in September 2025 to fill the few months left on the unexpired term of Adriana Kugler, who resigned unexpectedly in August of last year. Powell will stay on at the Fed, just not as chair. He has two years left in his term as governor and said last month at he will remain at least until litigation proceedings against him are complete. The last time a Fed chair returned to the board was nearly 80 years ago. Much of his motivation has to do with protecting central bank independence, which is absolutely crucial to sound monetary policy. Subordinating decisions about setting rates and policy to political influence has historically been a tried-and-tested formula for failure and economic collapse. While a cleaner break at the end of a chair’s term is more aesthetically pleasing, it is superseded by the higher purpose of defending and maintaining bank independence.
The next FOMC meeting is scheduled for June 16-17. The futures market is currently expecting a 4% chance of a rate cut, which sets up an interesting dynamic considering that President Trump has made no secret of his desire for lower rates. With the latest consumer and producer readings, that wish looks like a long shot given present information. In fact, future months have already begun pricing in the possibility of rate hikes. Bill Dudley, former president of the Federal Reserve Bank of New York, recently argued in an opinion piece that there are no good reasons for lowering rates right now given that inflationary pressures are not subsiding, the hope that AI productivity gains will curb inflation is not backed by empirical evidence and reducing the Fed balance sheet creates a timing mismatch if used to offset lower interest rates. We will be quite interested to read the minutes of that June meeting, which will not be released until three weeks later as per custom. Stay tuned.
Company Events
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