Utility Rates and Health Insurance Show Rapid Inflation Is Alive and Kicking
Government data says consensus underestimates Q2 2025 growth of consumer-related revenues
Rapid inflation persists, especially in terms of electric and gas utility rates and the health insurance premiums paid by individuals.
Consumers dislike today’s still elevated prices. Though early July's consumer sentiment index edged up from June 2025's 60.7 points to 61.8 points, the latter was still under December 2024’s 74.0 points, never mind the consumer sentiment index's 97.3-point average for the 12-months prior to COVID's March 2020 arrival. Surveyed consumers average annual expected rate of CPI inflation was 2.6% during the 12-months-ended February 2020. By contrast, the expected rates of inflation were 4.4% for early July 2025, which was preceded by a 3.9% average for the 12-months-ended June 2025.
In addition to inflation concerns, early July 2025’s 61.8-point consumer sentiment index was less than the 93.4 points of July 2017 (at the comparably measured point in Trump’s first term) partly because of much reduced home affordability and above-average concerns regarding job security and upward mobility.
Tariffs weigh on consumer sentiment. Trump’s emphasis on tariffs distracts from the administration’s very long-term positive changes in economic policy. I doubt if tariffs will prove to be Trump’s best pitch. Worse yet, higher tariffs offer no immediate relief from the higher cost of living now weighing on household budgets.
Gas & electric rate hikes shock consumers …
For some, double-digit percent growth by utility rates has become commonplace. The regulatory-driven pursuit of green energy has proven to be very costly for many consumers. In all likelihood, if New York adheres to existing green energy regulations, Kathleen Hochul will not continue as governor of New York after the next gubernatorial election.
For the entire US, June’s CPI reported a 14.2% yearly jump for the price of piped natural gas that was far above accompanying increases of 2.7% for the CPI and 2.9% for the core CPI.
Since June 2019, or the six years ended June 2025, the price of natural gas advanced by 7.5% annualized, on average. In stark contrast, the price of natural gas fell by -1.0% annualized, on average, during the contiguous six years ended June 2019.
For purposes of comparison, the CPI grew by 3.9% annualized, on average, during the six years ended June 2025, which was much faster than the 1.6% annualized rise of the six years ended June 2019. Moreover, the core CPI climbed higher by 3.8% annualized, on average, during the six years ended June 2025 and that too was faster than its 2.0% annualized increase of the six years ended June 2019.
Neither has electricity been a bargain for consumers. June’s CPI showed a still rapid 5.8% annual increase for electricity’s price. The latter eclipsed its 5.5% average annualized advance of the six years ended June 2025, where both far outpaced the 0.7% average annualized rate of electric power price inflation for the six years ended June 2019.
Filings for double-digit percent health insurance premium hikes are here, there, and everywhere …
June’s CPI report claims that health insurance premiums rose by 3.4% yearly. However, the category’s 5.3% annualized increase since December 2024 better captures what should be a notable acceleration of health insurance premiums going forward. I strongly sense that June’s 3.4% yearly rise by health insurance premiums is too to begin with. Given still historically low readings on US consumer sentiment notwithstanding a historically low US jobless rate, the CPI probably understates the actual rate of consumer price inflation that Americans now contend with.
Anthem Blue Cross and Blue Shield recently requested a 12.3% rate increase from the New York State Department of Financial Services for 2026’s premium charged for Medicare supplement health insurance. Anthem Blue Cross and Blue Shield ascribed the proposed premium hike to rising medical costs and the growing use of medical goods and services.
S&P 500’s health-care group shows rapid revenue growth failing to yield any increase by profits …
The financial results of health insurance companies have been strained by higher claims costs. Consider the following comparison. For Q2 2025, the S&P 500’s expected 4.4% annual increase by revenues is likely to support a 5.6% increase by after-tax profits.
By contrast, contained within the overall estimates for Q2 2025’s S&P 500 revenues and earnings are a much faster than overall estimate of growth for S&P 500 revenues of 8.0% for health care revenues and a much slower than overall estimate for S&P 500 earnings of 0.0% for health care profits. Healthcare most definitely has a cost problem in view of how a relatively large 8.0% yearly increase by revenues is incapable of supplying any growth in terms of corporate earnings.
WSJ reports many requests for outsized Obamacare premium hikes …
The Wall Street Journal (WSJ) reports insurers are seeking hefty rate increases for 2026’s Affordable Care Act marketplace plans, also known as Obamacare. As inferred from a WSJ table, 15 plans have requested premium hikes of at least 10%, wherein six have petitioned for increases of more than 20%. annual
About 24 million people have Affordable Care Act plans. The requested jump in premiums for 2026 stems from higher health care costs and a reduction in federal subsidies for health care premiums. Higher health care premiums may compel individuals to seek jobs from employers offering health care insurance even if that means the individual has to accept a lower hourly wage.
According to the WSJ, KFF, a nonprofit health research firm, estimates the median increase for publicly announced requested premium hikes for 2026 approximates 15% and that would be the steepest increase since 2018.
Making matters worse for ACA programs is how membership in ACA programs is likely to drop substantially in 2026 because of (i) smaller subsidies and (ii) more restrictive enrollment requirements. Because healthier people are most likely to drop out of costlier ACA programs, those remaining in ACA programs will probably be less healthy individuals who have higher claims costs, on average. If insurers believe the forthcoming pool of ACA participants will be more likely to file claims, insurers have reason to file for bigger premium increases.
Q2 2025 earnings are up 14.1% for the “Mag 7” and 3.4% for the S&P 500’s remaining 493 member companies …
As compiled by FactSet, the consensus expects 5.6% year over year growth for the blended earnings of S&P 500 member companies. However, FactSet notes that second quarter earnings growth will be skewed higher by the 14.1% aggregate advance expected for the “Magnificent 7” companies, namely Amazon, Meta, Apple, Tesla, NVIDIA, Microsoft, and Alphabet (Google). The Q2 2025 earnings of the remaining 493 member companies is projected to grow by merely 3.4% annually according to the FactSet consensus.
The S&P 500 includes 11 broad corporate groups. Only three of the eleven groups are expected to post second quarter earnings growth in excess of the 5.6% expected for the entire S&P 500. They are communication services 29.9%, the 16.5% of information technology, and the 8.6% of the financials.
Not one of the remaining eight corporate groups is expected to achieve a year-over-year increase by second quarter earnings above 1.5%. Moreover, the median yearly earnings increase for the 11 groups is a meager 0.2%, which happens to match the projected uptick for the industrials category.
Four of the 11 groups are likely to incur year-over-year declines by second quarter earnings. They include the -25.4% of energy, the -5.3% of consumer discretionary, the -3.1% of materials, and the -3.0% of consumer staples.
Q2 2025’s revenue growth for S&P 500 to resemble current-dollar GDP growth …
The FactSet consensus has the second-quarter 2025 revenues of the S&P 500’s member companies growing by 4.4% year-on-year. By comparison, the Blue Chip consensus expects Q2 2025’s current-dollar GDP to rise by a nearly identical 4.5% yearly.
Six, or more than half, of the S&P 500’s 11 corporate groups may have achieved an annual increase for Q2 2025’s revenues that top 4.4%. They are the 12.4% of information technology, the 8.0% of health care, the 7.2% of communication services, the 5.4% of the financials, and the 4.6% of both utilities and real estate. (Note that the S&P 500’s real estate group excludes homebuilders and largely consists of REITs.)
S&P 500’s consumer-related revenue outlook for Q2 lags US government data on retail sales and consumer spending …
The laggards in terms of Q2 2025’s annual percent changes for the revenues of S&P 500 member companies include the price-driven -9.6% drop of energy, the +1.6% of materials, the +2.0% of consumer staples, and the +2.4% for both consumer discretionary and industrials.
Unlike the 2.0% to 2.5% yearly increase likely for Q2 2025’s combined estimate for the S&P 500 companies found under the headings of consumer staples and consumer discretionary, Q2 2025 showed yearly increases of 4.0% for retail sales and 4.8% for retail sales excluding gasoline station sales. Also, Blue Chip’s consensus estimated yearly increases for Q2 2025 of 2.82% for real consumer spending and 2.44% for the PCE price index imply a likely 5.3% yearly increase for current-dollar personal consumption expenditures (PCE).