Weekly Update 06/11/2026: Inflation Continues to Run Hot
- Oracle reports robust sales
- Apple re-introduces Siri assistant
- JNJ makes acquisition in oncology
Economic data
The Consumer Price Index (CPI) for May heated up to 4.2% according to the Labor Department, which was the fastest pace in three years and up from April’s 3.8% increase. Excluding food and energy, the so-called core CPI rose 2.9%. Both the headline and core figures were in line with expectations. The biggest culprit for the surge was the boom in energy prices, which accounted for over 60% of the rise in the index. According to AAA, the national average price of a gallon of gas rose to a four-year high of $4.56 in late May. Overall, energy prices rose 3.9% in the month, an acceleration from 3.8% in April.
While energy was the headline grabber, other areas were more modest. Food, housing and clothing categories rose, but at a slower pace. Prices for car insurance, prescription drugs and new vehicles all declined. The main concern for consumers, however, is that, for the second month in a row, inflation is outpacing year-over-year wage gains. According to a separate report from the Labor Department, inflation-adjusted hourly earnings fell 0.7% on the year in May after falling 0.3% in April. While the cost of gasoline is small relatively speaking for the average household, the relentless rise since the beginning of March is sure to restrict funds available for other necessities like rent and food.
On Thursday, the Producer Price Index (PPI) was released which showed a similar pattern of high inflation building in the wholesale channel. Prices rose 6.5% from a year earlier, the most since November 22, based on Bureau of Labor Statistics figures. The core measure rose 4.9% year-over-year, which was below the 5.4% consensus expectation in a Bloomberg survey of economists. As with consumer prices, energy spikes took center stage, rising 10.7% in May. Transportation and warehousing costs rose 2.6%. Food prices were up 0.6%, the most in three months. Particularly noticeable was the 28% bump in fertilizer prices from a year earlier. The CPI and PPI figures will feed into the Fed’s preferred inflation measure—the personal consumption expenditure index. That will be released by the Bureau of Economic Analysis on June 25. April’s core figure showed a 3.3% annual increase. Given these latest data points, expectations are going to be for an even higher number when results are released in two weeks.
The main takeaway from these inflation measures is that the Fed at its meeting next week, may conclude that interest rates are too low to contain pricing pressures. The current “official” stance of the Fed is an easing bias, meaning the next move they make is more likely to be an interest rate cut rather than an interest rate increase. That is what led so many Fed officials to dissent at their last meeting, arguing that such a predisposition was inappropriate considering the current state of affairs. While that is unlikely to lead to an outright increase in the benchmark federal funds rate this time around, it does set the stage for future hikes. According to the futures markets, there is a 30%+ chance of a Fed rate hike in September and December of this year. Historically, those are low figures meaning traders are leaning towards that direction but remain hesitant to fully commit funds to that outcome.
Company Events
SGK writes additional weekly commentary for clients of the firm detailing recent events and earnings of core equity holdings.
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Steigerwald, Gordon & Koch, Inc. [“SGK”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from SGK. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. SGK is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the SGK’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.sgkwealthadvisors.com. Please Note: SGK does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to SGK’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a SGK client, please contact SGK, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.