Disinflation Report

Earlier today, the Bureau of Labor Statistics reported its Consumer Price Index for May and the deflationary impact of the economic lockdown was evident. Headline CPI fell by 0.1% last month for a year-over-year rate of just 0.1%. Analysts had expected no monthly change and a year-over-year rate of 0.3%. At the core level, without food and energy, the monthly slip was also 0.1% for a year-over-year rate of 1.2%. April’s twelve-month pace was 1.4% and was only expected to fall to 1.3%. Adjusted for inflation, Real Average Hourly rose 6.5% on a year-over-year basis and that’s down from April’s 7.6% pace. The convoluted composition of the work force has skewed these aggregated compensation statistics to some degree.

Even earlier today, the Mortgage Bankers Association reported that new Mortgage Applications rose by 9.3% for the week ending June 5th, after a 3.9% the week before. Later today, the FOMC will wrap up this week’s meeting and Chairman Powell will conduct his post-meeting press conference this afternoon. No rate changes are expected, but investors will still want to be reassured that the Fed is willing to provide further support as needed. Will yield curve control be a topic?

In early trading, Treasury prices are still rising and the Ten-Year’s yield is back down to around 80 basis points. Equities are poised to resume their rally while crude oil has slipped a bit to around $38.50. Gold is up about $6 to $1,721.