Falling gas prices made May one of the tamest months for inflation since late last year, if forecasters are correct.
A Bureau of Labor Statistics report due Wednesday on the Consumer Price Index, a widely watched measure of the cost of living, is likely to show that prices rose 0.1% in May, down from a 0.3% increase in April and the smallest increase since October, according to a survey of economists by Dow Jones Newswires and the Wall Street Journal. That would mean prices rose 3.4% over the year, the same year-over-year rate as April.
Much of the relief for consumers came at the gas pump. Average nationwide prices for unleaded gas fell around 18 cents per gallon to $3.61 during May, according to Gasbuddy data, driving a large portion of the expected decrease, several economists said.
“Energy prices likely fell in May on a seasonally adjusted basis owing to a decline in gasoline prices,” wrote Bank of America Securities economists. “This likely was a relief for consumers after gas prices had increased in April and March. With crude prices moving lower, gas prices are likely to continue to decline in the near term which should put downward pressure on headline CPI.”
The Federal Open Market Committee (FOMC) began its two-day June meeting Tuesday.
The policy-making committee isn’t expected to change rates from their current 5.25% – 5.5%. Still, the meeting will include the release of some widely anticipated information in its Summary of Economic Projections, which includes a range of forecasts and assessments of the economy.
That document will include the “dot plot,” a projection of where Federal Reserve officials believe interest rates are headed. Officials use the dot plot to be transparent about individual members’ ideas on the most likely path ahead for policy, however, some have raised questions about the usefulness of the graphic.
While the FOMC in March targeted three interest rate cuts this year, most economists foresee the Fed lowering those projections to only two cuts in 2024.
While the Fed generally holds eight meetings a year, it releases its SEP following only four of those meetings. The Fed will release its decision and SEP at 2 p.m., with Federal Reserve Chair Jerome Powell holding a press conference at 2:30 p.m.
-Terry Lane
Small business optimism hit its highest levels of the year in May, but uncertainty also increased in the monthly survey from the National Federation of Independent Business.
The NFIB Small Business Optimism Index increased almost a full point to hit 90.5, better than the more modest gains economists surveyed by the Wall Street Journal and Dow Jones Newswire had forecasted.
“For 29 consecutive months, small business owners have expressed historically low optimism and their views about future business conditions are at the worst levels seen in 50 years,” said NFIB Chief Economist Bill Dunkelberg.
Inflation remained the top problem for small businesses, though the 28% of owners raising prices in May was steady when compared with the prior month, and retail businesses were most likely to report price hikes. Meanwhile, the uncertainty index reached its highest levels since 2020, showing more owners answered “don’t know” or “uncertain” to survey questions.
The percentage of owners who plan to hire also peaked for this year, but the May results also showed a downward tick in the number of business owners raising or planning to raise wages. More owners also reported raising their capital investments, part of a six-month trend of higher small business spending.
-Terry Lane
Tags :
Economic News, Gas
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