US annual inflation rate fell for a third straight month to 3% in June 2024

The US stock market is likely to continue the bull run after a weaker-than-expected CPI report, boosted expectations of a Federal Reserve rate cut in September. In June 2024, the US annual inflation rate dropped to 3%, the lowest level since June 2023, after falling for three consecutive months to 3.3% in May and below estimates of 3.1%. The CPI surprisingly fell 0.1% from the previous month contrary to expectations of a 0.1% increase, after registering unchanged in May. An increase in shelter was more than offset by the 3.8% decline in the fuel index, which had dropped 3.6% in May.

“The June US CPI report will come as further welcome news to the FOMC, with the data showing a further easing of price pressures, and likely helping to provide further ‘confidence’ that inflation is indeed on track to return towards the 2% price target,” says Michael Brown Senior Research Strategist at Pepperstone.

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent on a seasonally adjusted basis, after being unchanged in May, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.0 percent before seasonal adjustment.

The US annual core consumer price inflation rate, which does not include volatile goods like food and energy, eased from 3.4% in the previous month to a three-year low of 3.3% in June 2024, below 3.4% projected by the market.

The index for all items less food and energy rose 0.1 percent in June, after rising 0.2 percent the preceding month. Indexes which increased in June include shelter, motor vehicle insurance, household furnishings and operations, medical care, and personal care. The indexes for airline fares, used cars and trucks, and communication were among those that decreased over the month.

The shelter index increased by 5.2% in June, down slightly from 5.4% in May. The shelter index accounted for more than two thirds of the 12-month increase in the all items less food and energy index.

The cost of auto insurance also decreased, rising to +19.5% from 20.3% in May. Core consumer prices increased by 0.1% month over month in June 2024, decelerating from a 0.2% gain in May and falling short of the market’s forecast of a 0.2% increase.

US core consumer prices, which exclude volatile items such as food and energy, rose by 0.1% from the previous month in June of 2024, moderating from the 0.2% increase in May and below market expectations of a 0.2% increase to mark the softest increase in core consumer prices since at least February 2021.

Prices slowed for shelter (0.2% vs 0.4% in May) and decreased for a second month for transportation services (-0.5% vs -0.5%) and new vehicles (-0.2% vs -0.5%), while swinging lower for used cars and trucks (-1.5% vs 0.6%).

Asides, the number of people claiming unemployment benefits in the US fell by 17,000 from the prior week to 222,000 on the period ending July 6th, reaching a new 5-week low, and below market expectations of 236,000. The claim count was considerably below the elevated levels from June but remained firmly above the averages from February to April.

In the meantime, the outstanding claim count fell by 4,000 to 1,852,000 on the week ending June 29th. The four-week moving average for initial claims, which reduces week-to-week volatility, dropped by 5,250 to 233,500. On a non-seasonally adjusted basis, claims increased by 1,666 to 241,045.