Economics

June CPI inflation report preview

Published

6 months ago

August 5, 2024

Business Finance News

An Aldi supermarket in Alhambra, California, on June 27, 2024.

Eric Thayer | Bloomberg | Getty Images

A widely anticipated inflation report on Thursday may solidify expectations for the Federal Reserve to cut interest rates in coming months.

The consumer price index, or CPI, report for June is due out at 8:30 a.m. ET. Recent economic releases have suggested that inflation and economic growth are both cooling, including last week’s report that unemployment in June ticked up to 4.1%.

Thursday’s report comes after Federal Reserve Chair Jerome Powell delivered two days of testimony on Capitol Hill this week. The central bank chief did not indicate when exactly rate cuts will begin. However, Powell did say the Fed sees the risks to the economy as more in balance between inflation and recession and that the central did not need to wait until inflation hit the 2% level to cut rates.

Fed Chair Powell: This is no longer an overheated economy

What to watch for

Economists surveyed by Dow Jones are looking for CPI to rise 0.1% month over month, and 3.1% year over year. The core CPI, which strips out more volatile food and energy prices, is expected to rise 0.2% from May and 3.4% since June last year.

In May, CPI was unchanged month over month and up 3.3% on an annual basis.

Focusing on the trends of unemployment and inflation could bolster the case for rate cuts, said Matt Brenner, managing vice president, investments and product management at MissionSquare Retirement.

“The level on inflation is still elevated relative to the Fed’s [2%] target. The level on unemployment is still very low historically at 4.1%. But the trend in both is that unemployment is gradually starting to pick up and that inflation continues its downward trajectory,” said Brenner.

“For some time the Fed has been more focused on levels, and now it seems that they may be starting to tilt more towards a focus on trend. And if that’s the case, then the chances of a rate cut go up,” Brenner added.

The price changes in the components that make up the CPI index will also be a focus on Thursday, especially if the number comes in different from expectations. Shelter and medical care services could be key areas to watch, said Wilmington Trust Chief Investment Officer Tony Roth.

Both shelter and medical services are also key parts of the personal consumption expenditures index, the Fed’s preferred inflation measure, rather than CPI.

“We’ve seen medical services [be] pretty tame, and that’s important because medical services makes up a much bigger portion of the PCE, which is the more important of the two inflation prints,” Roth said.

Market effect

The CPI report comes as markets are on the upswing.

Stocks and bonds have both rallied in July as traders grow more confident in a rate cut sometime this year. The S&P 500 crossed 5,600 for the first time on Wednesday.

The stock market has rallied in July, with the S&P 500 hitting another record high on Wednesday.

Fed funds futures pricing shows traders are expecting the Fed to hold rates steady at its meeting later this month, and then cut in September, according to the CME FedWatch Tool. A month ago, the chances of another pause in September were close to a toss-up, according to the same tool, which uses 30-day fed funds futures to come up with implied probabilities.

The expected hold in July could keep Thursday’s CPI report from being a big market mover, Bank of America rates strategist Meghan Swiber said in a note to clients Wednesday.

“Cooling activity and limitations on near-term cut pricing should confine market response in either direction,” Swiber said.

However, Wilmington Trust’s Roth said stocks could rally if the inflation reading is cooler than expected because some investors have not shaken their fears from earlier this year, when inflation briefly ran hotter.

“I don’t think that the market has fully appreciated the weakness in the economy, or the fact that inflation is clearly in the rear view mirror,” Roth said.

— CNBC’s Michael Bloom contributed reporting.

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Business Transaction Recording For Financial Success

In the world of financial management, accurate transaction recording is much more than a routine task—it is the foundation of fiscal integrity, operational transparency, and informed decision-making. By maintaining meticulous records, businesses ensure their financial ecosystem remains robust and reliable. This article explores the essential practices for precise transaction recording and its critical role in driving business success.

The Importance of Detailed Transaction Recording
At the heart of accurate financial management is detailed transaction recording. Each transaction must include not only the monetary amount but also its nature, the parties involved, and the exact date and time. This level of detail creates a comprehensive audit trail that supports financial analysis, regulatory compliance, and future decision-making. Proper documentation also ensures that stakeholders have a clear and trustworthy view of an organization’s financial health.

Establishing a Robust Chart of Accounts
A well-organized chart of accounts is fundamental to accurate transaction recording. This structured framework categorizes financial activities into meaningful groups, enabling businesses to track income, expenses, assets, and liabilities consistently. Regularly reviewing and updating the chart of accounts ensures it stays relevant as the business evolves, allowing for meaningful comparisons and trend analysis over time.

Leveraging Modern Accounting Software
Advanced accounting software has revolutionized how businesses handle transaction recording. These tools automate repetitive tasks like data entry, synchronize transactions in real-time with bank feeds, and perform validation checks to minimize errors. Features such as cloud integration and customizable reports make these platforms invaluable for maintaining accurate, accessible, and up-to-date financial records.

The Power of Double-Entry Bookkeeping
Double-entry bookkeeping remains a cornerstone of precise transaction management. By ensuring every transaction affects at least two accounts, this system inherently checks for errors and maintains balance within the financial records. For example, recording both a debit and a credit ensures that discrepancies are caught early, providing a reliable framework for accurate reporting.

The Role of Timely Documentation
Prompt transaction recording is another critical factor in financial accuracy. Delays in documentation can lead to missing or incorrect entries, which may skew financial reports and complicate decision-making. A culture that prioritizes timely and accurate record-keeping ensures that a company always has real-time insights into its financial position, helping it adapt to changing conditions quickly.

Regular Reconciliation for Financial Integrity
Periodic reconciliations act as a vital checkpoint in transaction recording. Whether conducted daily, weekly, or monthly, these reviews compare recorded transactions with external records, such as bank statements, to identify discrepancies. Early detection of errors ensures that records remain accurate and that the company’s financial statements are trustworthy.

Conclusion
Mastering the art of accurate transaction recording is far more than a compliance requirement—it is a strategic necessity. By implementing detailed recording practices, leveraging advanced technology, and adhering to time-tested principles like double-entry bookkeeping, businesses can ensure financial transparency and operational efficiency. For finance professionals and business leaders, precise transaction recording is the bedrock of informed decision-making, stakeholder confidence, and long-term success.

With these strategies, businesses can build a reliable financial foundation that supports growth, resilience, and the ability to navigate an ever-changing economic landscape.

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Home insurance costs soar as climate events surge, Treasury Dept. says

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January 16, 2025

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Firefighters battle flames during the Eaton Fire in Pasadena, California, U.S., Jan. 7, 2025.

Mario Anzuoni | Reuters

Climate-related natural disasters are driving up insurance costs for homeowners in the most-affected regions, according to a Treasury Department report released Thursday.

In a voluminous study covering 2018-22 and including some data beyond that, the department found that there were 84 disasters costing $1 billion or more, excluding floods, and that they caused a combined $609 billion in damages. Floods are not covered under homeowner policies.

During the period, costs for policies across all categories rose 8.7% faster than the rate of inflation. However, the burden went largely to those living in areas most hit by climate-related events.

For consumers living in the 20% of zip codes with the highest expected annual losses, premiums averaged $2,321, or 82% more than those living in the 20% of lowest-risk zip codes.

“Homeowners insurance is becoming more costly and less accessible for consumers as the costs of climate-related events pose growing challenges to both homeowners and insurers alike,” said Nellie Liang, undersecretary of the Treasury for domestic finance.

The report comes as rescue workers continue to battle raging wildfires in the Los Angeles area. At least 25 people have been killed and 180,000 homeowners have been displaced.

Treasury Secretary Janet Yellen said the costs from the fires are still unknown, but noted that the report reflected an ongoing serious problem. During the period studied, there was nearly double the annual total of disasters declared for climate-related events as in the period of 1960-2010 combined.

“Moreover, this [wildfire disaster] does not stand alone as evidence of this impact, with other climate-related events leading to challenges for Americans in finding affordable insurance coverage – from severe storms in the Great Plans to hurricanes in the Southeast,” Yellen said in a statement. “This report identifies alarming trends of rising costs of insurance, all of which threaten the long-term prosperity of American families.”

Both homeowners and insurers in the most-affected areas were paying in other ways as well.

Nonrenewal rates in the highest-risk areas were about 80% higher than those in less-risky areas, while insurers paid average claims of $24,000 in higher-risk areas compared to $19,000 in lowest-risk regions.

In the Southeast, which includes states such as Florida and Louisiana that frequently are slammed by hurricanes, the claim frequency was 20% higher than the national average.

In the Southwest, which includes California, wildfires tore through 3.3 million acres during the time period, with five events causing more than $100 million in damages. The average loss claim was nearly $27,000, or nearly 50% higher than the national average. Nonrenewal rates for insurance were 23.5% higher than the national average.

The Treasury Department released its findings with just three days left in the current administration. Treasury officials said they hope the administration under President-elect Donald Trump uses the report as a springboard for action.

“We certainly are hopeful that our successors stay focused on this issue and continue to produce important research on this issue and think about important and creative ways to address it,” an official said.