Retail Inflation Numbers Shock Wall Street

The monthly US retail inflation numbers came in higher than forecast, shocking the Wall Street and triggering a sharp sell-off.

The consumer price index rose 0.1 per cent in August, above economists’ expectations for a 0.1 per cent drop.

"The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in August on a seasonally adjusted basis after being unchanged in July, " the US Bureau of Labor Statistics said on Tuesday (13 September).

Over the last 12 months, the all items index increased 8.3 percent before seasonal adjustment, the Bureau said.

Notably, the rise in inflation numbers came as the declining energy prices in the US were offset by gains in the costs of rent and food.

Further, the core inflation - which doesn't include volatile items like energy and food - rose by 0.6 per cent for an annual increase of 6.3 per cent, compared with 5.9 per cent recorded for July.

US Food and Energy Inflation

The food index increased 11.4 percent over the last year, the largest 12-month increase since the period ending May 1979. In August, the food index increased 0.8 per cent.

Meanwhile, the energy index rose 23.8 percent over the past 12 months. The gasoline index increased 25.6 percent over the span, the Bureau said.

Index for all items less food and energy

The index for all items excluding food and energy rose 6.3 percent over the past 12 months, a larger increase than the 5.9-percent increase for the 12 months ending in July.

Other indexes with notable increases over the last year include household furnishings and operations (+9.9 per cent), medical care (+5.4 per cent), new vehicles (+10.1 per cent), and used cars and trucks (+7.8 per cent).

The index for transportation services increased 11.3 per cent over the last year, while the airline fares index rose 33.4 per cent during the period.

The apparel index rose 5.1 per cent and the shelter index increased 6.2 per cent over the past 12 months.

Wall Street in shock

The inflation figures came as a shock for the Wall Street. The benchmark S&P 500 stock index tumbled 4.3 per cent, its worst day since June 2020 with 99 per cent of its companies sliding in value.

Meanwhile, the Nasdaq Composite fell 5.2 per cent as technology companies seen as most exposed to higher rates bore the brunt of the selling, reports Financial Times.

Federal Reserve may go for full percentage point rate hike

The August inflation numbers have raised the odds that the US Federal Reserve will raise rates by a full percentage point this month.

However, most economists are reportedly forecasting another 0.75 percentage point rate rise, which would lift the fed funds rate to a new target range of 3 per cent to 3.25 per cent.

The inflation figures will further increase pressure on policymakers at the US central bank, who have promised to do everything in their power to curtail spiralling prices.

Their apparent determination to follow through on the pledge has sparked fears the economy is heading for a hard landing, FT reported.