What They Won’t Tell You: Inflation for the Middle Class Is Still Sky-High

I hate, hate, hate when they do this. The mainstream press spouts out enormous-font headlines like, “Inflation rose at a 4% annual rate in May, the lowest in 2 years.” Then they bury the dirty details that expose the widening wealth gap and the nation’s economic woes.

It is true (assuming you believe the Bureau of Labor Statistics, at least) that overall, the U.S. Consumer Price Index (CPI) is 4% higher than it was a year ago. That’s still double the Federal Reserve’s 2% CPI target, but we can overlook that for the moment.

Good and services generally being 4% more expensive than they were a year ago feels good because the CPI’s pace of acceleration has slowed down. In other words, the situation is bad but at least it’s not getting worse as rapidly as it did in the summer of 2022.

Of course, the stock market will use any excuse to push share prices higher, especially when it comes to tech stocks. If it’s a tech stock with an artificial intelligence (AI) angle, then the buying pressure will be even stronger.

Courtesy: CNBC

They’ll even trot out a chart to make the CPI increase’s deceleration seem like an all-clear to go on a shopping spree, including in your investment account. The solid, dark blue line is the one they want you to focus on – but then, the less visible dotted light-blue line tells a different story entirely.

That line represents core CPI, which excludes volatile food and energy prices. In May, core CPI rose 0.4% month-over-month and 5.3% year-over-year, proving that high prices are “sticky” in a number of essential categories.

The discrepancy between the overall CPI and the core CPI can be attributed, in large part, to the year-over-year easing of oil and natural gas prices. Thus, the prices of gasoline at the pump and your monthly electric bills have gone from “horrendous” to “somewhat less horrendous.”

At the same time, just because the pain at the pump isn’t quite as acute, this doesn’t mean automobile ownership is affordable in 2023. Year-over-year, the cost of motor vehicle repair has gone up 19.7%, and motor vehicle insurance has risen 17.1%.

Hence, they’re putting money back in your pocket only to take it away while you’re not looking. That’s not a problem for insurance companies, but it’s another hardship that America’s middle class is forced to bear.

Courtesy: CNBC

With possibly a couple of exceptions, every product/service category that saw a massive price increase involves necessities for middle-class Americans. Pet owners can’t forgo pet food; medical supplies certainly aren’t a luxury; and the price-jacking of baby food and formula is borderline criminal.

Yet, the stock market is breathing a sigh of relief because it’s focused on Wall Street, not Main Street. As long as none of this impacts corporate bottom lines, then it’s all good, right?

I expect the stock market to continue moving higher because, as the old saying goes, the market is a voting machine in the short term. The mainstream press controls the immediate narrative, so prepare for price inflation to hit large-cap stocks, too.

The “progress on core inflation has stalled out in recent months,” said Bankrate Chief Financial Analyst Greg McBride observed, but that’s not the market’s focus right now. All eyes are on the Federal Reserve and corporate earnings, and best-case scenarios are currently being priced into mega-cap stocks.

Still, I’ll keep searching for needles in the haystack as there are always pockets of value to be found somewhere. Gold and silver immediately come to mind, so be on the lookout for updates on rare opportunities in precious metals in the near future.