The Labor Department’s latest inflation report was certainly not the news that everyone was hoping for, and that many were expecting. According to the report, the core consumer price index, which excludes energy and food, rose 6.3% in August from a year earlier, up from 5.9% in both June and July. That was the real shock of the report, and the Dow plummeted by more than 1,100 points at one point on Tuesday.
Crucially, this is the last report released before the Fed meets on September 20 and 21, which only increases the chances of another 75-basis point increase to the federal funds rate. M&A has already been affected by the rise of interest rates this year, so another jump (along with a recessionary environment that could get worse as a result) would likely strike down more than a few deals. We’ll be interested to hear how buying and lending strategies change in D.C. this week.
But sustained high inflation also does not bode well for the operations (or the investment appeal for that matter) of senior care properties across the country as food costs and wages remain at elevated levels. That means every filled unit will have less of an impact on the bottom line, putting more pressure on operators to increase occupancy even more. And 10-12% rent increases can’t continue forever. The good news is that occupancy has been rising across the industry, but we hope it is enough heading into Winter. We’ll see you at NIC.
