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- Thursday's Scoop: Cooling🌤️
Thursday's Scoop: Cooling🌤️
Pepsi keep inflating & Delta cuts back flight volumes
Scoops Team
July 11, 2024
Hey friends - almost Friday. You’re doing great.
Insiders, look out for the Weekly Scoop tomorrow.
Here’s what you need to know today to inform your work, spending, and investments…
🌎 Big picture
The cost of living finally got cheaper in June.
Fewer people got laid off last week.
New York apartment prices keep climbing.
How are you feeling about the economy? |
💼 Work trends
Unemployment Rate: 4.1%
Still near historic lows
Layoffs are still pretty low, even after creeping up earlier in the summer. The Labor Department reported that initial jobless claims fell last week to 222,000, slightly above pre-pandemic levels. Job numbers can be a little volatile in the summer around the holiday. There are also some temporary summer shutdowns in industries like automakers. Overall, layoffs have been low but steadily rising. Unemployment has increased to a 2.5-year high but still remains historically low.
👜 Cost of living trends
Inflation Rate: +3.0% (YoY), -0.1% (MoM)
Policymakers aim for 2% YoY inflation. (June CPI)
The cost of living finally got cheaper last month. The Bureau of Labor Statistics’ Consumer Price Index showed that the cost of living decreased by -0.1% in June after not increasing at all in May. Overall, things are only 3% more expensive than a year ago - the smallest year-over-year inflation rate in more than three years. Falling energy prices were a significant contributor, with gasoline getting 3.8% cheaper over the month. Food prices, however, rose by the most in five months, driven by climbing costs for dairy-related products and higher prices at restaurants.
When stripping out more volatile food and energy costs, the so-called core CPI rose only 0.1%, the smallest increase since August 2021. The slower rise in rent and home prices has started to show up in these government statistics that tend to run on a lag. Airfares also helped bring down inflation, with ticket prices down 5% in June after falling 3.6% in May. Prices aren’t likely to return to pre-pandemic levels, but any inflation slowdown will allow wages to catch up. Average hourly earnings rose by 0.3% in June and 0.4% in May. With inflation looking more under control, the Federal Reserve may also soon ease up its policies aimed at slowing spending and begin lowering the cost of borrowing.
🤓 Inside Scoop: Why does everyone care about the CPI?
The Consumer Price Index (CPI) is one of the main ways economists track inflation. Inflation is the rate at which things get more expensive. The CPI looks at a set basket of stuff your average consumer spends money on and tracks how much it costs each month. The rate of change is inflation.
One important thing to know: inflation is often quoted as an annual number, like "inflation rose 3.2% in October." In periods where inflation is changing rapidly, monitoring monthly rates of change may be more informative than the annual rates. If prices rose by 0.6% in one month and 0.4% in the next, inflation declined, regardless of the change over the prior twelve months. The annual number helps us remember the pain we've experienced, but monthly numbers help us understand what's happening today.
Prices rarely go down. It's normal for things to get more expensive. You'll never be able to buy a Coke for a quarter again, but that's okay. Low inflation (~1-2% per year, 0.0-0.2% per month) is standard and almost unnoticeable. High inflation, like following the pandemic, with prices of essential goods going up nearly 7-10% per year, is a problem. It's unmanageable, especially if our incomes aren't rising in tandem. Low inflation, where incomes keep up or outpace rising living costs, is the goal for economic policy, not zero or negative inflation.
🏠 Housing trends
30yr Mortgage Rate: 7.0%
That’s down from 7.1% a year ago. (MBA)
Median Home Price: $419,300
That’s up from $397K a year ago. (Existing homes - NAR)
America’s most expensive apartment market became more competitive than ever in June. According to Douglas Elliman Real Estate and Miller Samuel, a record 24% of Manhattan leases were signed after bidding wars. New York apartments were listed for an average of just 24 days before being snapped up, and renters paid 1.4% above listing prices on average. Despite the intense competition, median rents remain below last year’s record highs, rising slightly to $4,300 in Manhattan, $3,695 in Brooklyn, and $3,250 in Queens. With demand peaking in July and August, there’s potential for prices to rise even higher, possibly reaching new record highs.
📈 Investment trends
The Market: ⬇️ -0.9%
S&P 500: 5,584.54
1Mo: +4% | 1Yr: +26% | 5Yr: +85%
The market pulled back from its record high on Thursday as investors digested the latest inflation report and the first set of second-quarter corporate financial updates. Prices are falling, which is good for people but bad for profits. There’s even more confidence now that the Federal Reserve will begin lowering the cost of borrowing from its restrictive highs in September.
🏭 Companies worth watching
👍👎 APPROVAL RATINGS
Join the board at America’s biggest companies. Vote and judge their decisions. (+2 pts)
 Intuit | AI Overhaul Intuit plans to lay off 1,800 people, or 10% of its workforce, and replace them with more engineers and staff focused on artificial intelligence roles. The maker of TurboTax and QuickBooks plans to accelerate AI investment and expand to new markets, such as Canada, the UK, and Australia.
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 Walmart | Efficiency Revolution America's largest grocer is modernizing its operations to boost efficiency and profits, launching five automated distribution centers nationwide. Walmart aims to automate two-thirds of its stores by 2026 to enhance its fresh food supply chain and meet the growing demand for online grocery orders.
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 Costco | Fee Hike Costco is increasing its annual membership fees by roughly 8% in the US and Canada for the first time in seven years. The warehouse club relies on these membership fees to keep prices low but held off on fee increases while inflation stretched customers' budgets.
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💭 Broader perspectives… (+2 pts)
Are you planning more travel? |
 Delta Air Lines | Profit Turbulence Delta Airlines' profit fell 29% in the second quarter due to an excess supply of seats, leading to discounted fares, despite record revenue and high travel demand. The airline plans to reduce flight capacity while pushing premium services and more profitable international routes.
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 PepsiCo | Pricing Problems PepsiCo continued growing its overall revenue last quarter by inflating prices enough to compensate for selling less stuff as inflation-weary consumers cut back on spending. The snacks-and-soda giant plans to improve revenue by marketing new value packs and more expensive, healthier snack options.
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🛠️ Recommended resources (+2pts)
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