AJ Bell press comment – 10 November 2022
Danni Hewson, AJ Bell financial analyst, comments on the latest US inflation figures:
“It seems slightly odd that an inflation rate of 7.7% is actually something to celebrate, but today’s US CPI number came in much cooler than had been anticipated and will create headlines that ‘peak inflation’ in the States might be well and truly behind us.
“There were significant falls in clothing prices, medical services and utility gas for homes and businesses.
“Though after the immediate relief there comes the reality that higher prices for things like food and shelter are stubbornly sticking around and another rise in the price to pay for fuel at the pumps will be a real kick to American motorists as well as a visible daily reminder of what’s going on with the economy.
“But the inflation juggernaut is decelerating. In fact, October’s increase came in at the slowest rate since the start of the year and that, coupled with a rise in jobless claims for the past week, is already giving markets a boost.
“Will the changing picture prevent a fifth consecutive 75 basis point hike in interest rates from the Fed next month? That’s the question that will be on all investors’ minds today. But October’s number is still uncomfortably hot, almost four times the target central bankers are aiming for, and they will most certainly want to see sustained easing of core inflation before they take their foot off the brake.
“Ease up too quickly and all the hard work, all the pain might have been for nothing. Whilst today’s bad jobs news will be viewed by markets as good news, employment is still startlingly high for a country expecting a serious growth slowdown and that means competition for workers will keep wages elevated for at least the short term.
“And if wages are resilient then consumer spend will also be resilient and no business is going to balk at passing on price increases if they can get away with it.
“Supply issues are gradually working through the system; changes have been made and chains remade. But with such geopolitical instability there are no guarantees.”
