Consumer prices slowed last month thanks to a sizable drag from automobile prices. The April Consumer Price Index (CPI) increased 0.3% month over month (m\/m) and 3.4% year over year (y\/y), slower than the estimated 0.4%, which would have been unchanged from March. Similarly, core figures, which exclude food and energy, rose 0.3% m\/m and 3.6% y\/y, in-line with estimates and down from March\u2019s 0.4% increase. While inflation is slowing, it remains a far cry from the Fed\u2019s target of 2%, which is consistent with m\/m increases of just 0.166%. So far, every inflation print for the first four months of this year has been significantly higher than that rate.<\/p>\n\n\n\n Past performance is not indicative of future results<\/p>\n\n\n\n April inflation existed in most categories last month, while goods and commodities provided some relief. Leading the charge higher, however, were the gasoline, apparel, and transportation services segments, which saw charges rise 2.8%, 1.2% and 0.9% m\/m. Increasing at more tempered degrees were the medical care commodities, shelter, medical care services and food at dining establishments with stickers up 0.4%, 0.4%, 0.4% and 0.3%. On the other hand, deflationary pressures were present in used automobiles, energy services (heating and electric), new automobiles and food at markets with prices declining 1.4%, 0.7%, 0.4% and 0.2%. <\/p>\n\n\n\n Even as overall inflation increased, it wasn\u2019t propelled by demand, with retail sales decelerating to a full stop last month. Retail sales posted a doughnut, missed projections of 0.4% m\/m and decelerated from a sharp gain of 0.6% in March. Transactions excluding automobiles did gain 0.2%, however, but when excluding automobiles and gasoline, sales declined 0.1% during the period. The control group, which serves as significant inputs to the consumption aspect of gross domestic product, declined 0.3% during the period.<\/p>\n\n\n\n Past performance is not indicative of future results<\/p>\n\n\n\n Shopping categories were mixed last month in terms of consumer momentum, with seven out of thirteen components experiencing declines. The laggards were driven by ecommerce, sporting goods retailers, automobile dealerships, health stores and furniture showrooms with transactions declining 1.2%, 0.9%, 0.8%, 0.6% and 0.5% m\/m. General merchandise shops and miscellaneous establishments also experienced contractions but of lesser magnitudes during the period: 0.4% and 0.3%. Offsetting the weakness were gasoline stations, clothing shops, electronics destinations, food markets, building materials suppliers, and restaurants\/bars with sales rising 3.1%, 1.6%, 1.5%, 0.8%, 0.5% and 0.2%.<\/p>\n\n\n\n Recent earnings reports continue to depict declines in consumer shopping, at least for clothing, but on a positive note, business spending for technology appears to be increasing. The following highlights illustrate these points:<\/p>\n\n\n\n Markets are soaring as today\u2019s weak economic data bolster the case for rate cuts and pushes the S&P 500 and Nasdaq Composite indices to fresh all-time highs. Yields and the dollar are tumbling in unison, providing further support to risk assets. All major US equity benchmarks are higher with the Nasdaq Composite, Russell 2000, S&P 500 and Dow Jones Industrial benchmarks trading up 0.9%, 0.8%, 0.7% and 0.5%. Sectoral breadth is positive with nine out of eleven segments higher on the session being led by technology, real estate and utilities, which are loftier by 1.6%, 1.5% and 1.4%. Energy and consumer discretionary are down 0.3% and 0.1%, meanwhile, a result of plunging oil prices and worries about household finances. Oil prices are lower due to economic slowdown concerns and the International Energy Agency lowering its 2024 demand forecast by 140,000 barrels per day (bpd) to 1.1 million bpd. WTI crude is responding by selling off; it\u2019s down 0.4%, or $0.32, to $78.05 per barrel. Copper and gold are higher, however, a result of strengthening manufacturing prospects on the back of lighter interest rates while investors demand the safe-haven commodity in case of either a recession or geopolitical escalations. Yields are plunging on demand fears and an incrementally shorter journey across the monetary policy bridge with the 2- and 10-year Treasury maturities changing hands at 4.75% and 4.36%, 7 and 8 basis points (bps) lighter on the session. The greenback is suffering for the same reasons with its index at 104.44, lower by 57 bps as it depreciates relative to all of its major counterparts, including the euro, pound sterling, franc, yen, yuan and Aussie and Canadian dollars.<\/p>\n\n\n\n Today\u2019s data illustrate persistent inflation even as retail sales remain unchanged, a threat to the current economic expansion. Indeed, GDP growth has slowed sharply from a 3.4% fourth-quarter clip to 1.6% in the first quarter of this year. April\u2019s data, meanwhile, is some of the most important when forecasting second-quarter economic performance, which signals potential turbulence ahead. In past months, consumers have taken breaks in certain periods only to return strongly during subsequent times. Consumer erraticism and the consistent recovery following periods of sluggishness should not be taken for granted. A failure for the consumer to show up at the cash register in May and\/or June may produce the first negative GDP print since the second quarter of 2022. As for equities, valuations are stretched at 21 times forward estimates, and should the consumer be exhausted for real this time, earnings projections would need to come down alongside stock prices.<\/p>\n\n\n\n![\"Consumer](\"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/05\/CPI-5-15-24.jpg\")
<\/figure>\n\n\n\nApril Inflation Was Widespread<\/strong><\/h2>\n\n\n\n
Consumers Hit the Brakes Hard<\/strong><\/h2>\n\n\n\n
![\"Retail](\"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/05\/Retail-Sales-5-15-24.jpg\")
<\/figure>\n\n\n\nApparel Retailers Struggle, But Fresh Food Sales Climb<\/strong><\/h2>\n\n\n\n
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Rate Cut Expectations Ignite Market Rally<\/strong><\/h2>\n\n\n\n
Today\u2019s Data: A Troublesome Combination<\/strong><\/h2>\n\n\n\n