July 4th Meals and Inflation

Inflation Expectations Ease Amidst Policy Debates

Let's begin with some positive news: Inflation showed signs of moderation recently. The latest data from the University of Michigan's survey revealed that one year inflation expectations in the United States were revised down to 3% from 3.3% in June. Similarly, the five-year outlook also held steady at 3%, down from a preliminary estimate of 3.1%.

Federal Reserve Bank of Chicago President Austan Goolsbee weighed in on the matter, suggesting that if current trends continue, policymakers should consider lowering interest rates to support the economy. Speaking on Bloomberg TV, Goolsbee emphasized that maintaining current interest rates while inflation naturally recedes could unintentionally tighten monetary policy.

Consumers Still See Rising Costs

Despite these optimistic indicators, we consumers are still feeling the impact of inflation in our daily lives. As Americans prepare for the upcoming July 4th holiday celebrations, the American Farm Bureau's survey highlighted a notable increase in the cost of Independence Day meals. The survey reported that the cost of holiday staples like hamburgers, baked beans, and potato salad has surged by 5% compared to last year, reaching a record high for 2024.For budgeting, ground beef, pork chops, and chicken breast account for 50% of the total cookout cost.

Here's a cost comparison breakdown from the survey.

• 1 package of hamburger buns, $2.41 (+7%)
• 1 pound of cheese, $3.57 (+1%)

• 2 pounds of ground beef, $12.77 (+11%)

• 13-ounce package of chocolate chip cookies, $3.99 (+2%)

• ½ gallon of ice cream, $5.65 (+7%)

• 2 pints of strawberries, $4.61 (+1%)

• 16 ounces of potato chips, $4.90 (+8%)

• 2 pounds of chicken breasts, $7.83 (-4%)

• 3 pounds of pork chops, $15.49 (+8%)

• 32 ounces of pork and beans, $2.49 (+2%)

• 2 ½ quarts of lemonade, $4.19 (+12%)

• 2 ½ pounds of homemade potato salad, $3.32 (-4%)

Grill masters beware! Adding to the concern, propane prices have seen dramatic increases over the past year. Prices are up by 59.4% compared to last year, with a notable 24.5% increase in the past month alone.

Looking Ahead: Federal Reserve Policy Considerations

As inflation dynamics continue to evolve, all eyes will be on the Federal Reserve's next moves. The Fed faces a delicate balancing act of fostering economic recovery while keeping inflation under control. The recent remarks by Chicago Fed President Goolsbee underscore a cautious optimism towards achieving the Fed's target inflation rate of 2%.

With these developments in mind, market watchers and consumers alike will be closely monitoring how inflation trends influence the Federal Reserve's interest rate decisions throughout the remainder of 2024.

Stay tuned as we continue to track the latest developments and their potential impacts on the economy and everyday life.

Conclusion

Inflation remains a pivotal economic indicator affecting both policy decisions and consumer behaviors. While recent data suggests a slight easing in inflation expectations, the real-world impact on consumer prices, particularly during the holidays, serves as a reminder of ongoing economic challenges.

We will continue to monitor these developments to understand the broader implications for monetary policy and household finances.

Note that US stock markets will close early at 1 PM on Wednesday, July 3 and will remain closed on Thursday, July 4 in observance on the Independence Day holiday.

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What are your plans for July 4th? Do you think you'll spend more or less than a year ago?

Andy Wang , Managing Partner, Runnymede Capital Management, Inc.