Two important inflation reports were released this week. Both indicated that overall pricing pressures have retreated from peaks in 2022. But both also confirmed that inflation remains above the Fed's target of 2.0% and both indicated that progress to that level may be hard to achieve. Let's first take a deeper dive into the Consumer Price Index. According to the latest CPI report, the overall inflation rate in March of 3.5% was higher than the prior month's rate of 3.2%. That bit of bad news was compounded by a steady reading in the core CPI rate, which excludes the impact of food and energy and rose at an annual pace of 3.8% over the past year. What's propping up core CPI? Two main factors: Transportation Services (+10.7% yoy) and Shelter (5.7%). These elements of the index have prices that don't typically fall sharply. Energy prices are also starting to tick higher. The other inflation report was the Producer Price Index. PPI measures pricing trends farther up the supply chain, at the manufacturing level. Here, we see a modest decline in the rate of inflation on a monthly basis. For example, the core final demand PPI rate for March was 0.2%, compared to 0.6% in February and 0.4% in January. How worrisome is all of this? We have noted for months that progress will be slow for inflation returning to the 2.0% level. And nothing was terribly alarming about either of the reports. Energy prices remain relatively subdued, and prices at the PPI Intermediate demand level -- farther up the value chain -- continue to outright decline. We think the June 2022 CPI rate was the peak reading for the index this cycle, as the housing market cools, supplies of new vehicles are replenished, and the price of oil stays below $90 per barrel. The Fed has lifted the feds fund rate from 0.0% to above 5.25% over the past 18 months, and the rate hikes appear to be reducing inflationary pressures. We look for the U.S. central bank to be lowering rates in 2H24 and 1H25 as their concern shifts more toward economic growth.

GE Aerospace is a global aerospace propulsion, services, and systems leader with an installed base of approximately 44,000 commercial and 26,000 military aircraft engines.

Stock markets were down on Wednesday morning following hotter-than-expected CPI data. Headline CPI rose 0.4% in March, matching the increase in February and above expectations for a slight decline. This latest reading brings annual CPI to 3.5%, up from 3.2% last month. Core CPI also rose 0.4%, which matched February's increase and also was ahead of estimates. Annual core CPI now stands at 3.8%, unchanged from February. The shelter and energy components rose in March and contributed over half of the increase in CPI. Food prices inched up 0.1%, while energy rose a more-modest 1.1%, down from the 2.3% increase last month. New vehicle prices declined 0.2%, a sharper decline than the 0.1% decrease last month. Shelter costs advanced 0.4%, matching the increase in February. The Dow was down 1.3%, the S&P 500 fell 1.1% and the Nasdaq lost 1.0%. Crude oil traded above $85 per barrel and gold fell $7 to $2355 per ounce.

GE Aerospace is the global leader in designing, manufacturing, and servicing large aircraft engines, along with partner Safran in their CFM joint venture. With its massive global installed base of nearly 70,000 commercial and military engines, GE Aerospace earns most of its profits on recurring service revenue of that equipment, which operates for decades. GE Aerospace is the remaining core business of the company formed in 1892 with historical ties to American inventor Thomas Edison; that company became a storied conglomerate with peak revenue of $130 billion in 2000. GE spun off its appliance, finance, healthcare, and wind and power businesses between 2016 and 2024.