Overview: Over the past week, investors remained focused on elevated levels of inflation. The most recent readings revealed additional sharp increases, and mortgage rates reached the highest levels since late 2018.
The Consumer Price Index (CPI) is a closely watched inflation indicator that looks at price changes for a broad range of goods and services. Core CPI excludes the volatile food and energy components and provides a clearer picture of the longer-term trend. In March, core CPI was 6.5% higher than a year ago, the highest level since 1982. Of note, airline fares jumped 11% from February and were 24% higher than a year ago. There are many reasons why the annual core inflation rate has jumped from the readings below 2% seen early in 2021, including a tight labor market, strong consumer demand for goods, and supply chain disruptions. Shortages for many items have caused enormous cost increases, such as used car prices, which are 35% higher than a year ago. Federal Reserve officials and economists are divided about how much the recent spike in inflation will subside as temporary factors caused by the pandemic and the conflict in Ukraine are resolved.
The Department of Labor releases the total number of new claims for unemployment insurance each week, and the latest reading was just 166,000, the lowest level since 1968. This compares with elevated figures in the millions seen in the spring of 2020 during the partial shutdown of the economy. Since companies generally are having a very difficult time hiring enough employees, they are reluctant to lay off workers.
Core CPI (annual % change)
European Central Bank meeting
Retail Sales report
Mortgage markets closing early in observance of Good Friday
Mortgage markets closed in observance of Good Friday
New Residential Construction report (also known as Housing Starts)
Existing-Home Sales report