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Inflation Rebound Doesn't Change The Big Picture

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Inflation Concept

Ibrahim Akcengiz

The system is still adjusting to beardown request and proviso concatenation issues caused by nan pandemic. As a result, ostentation continues to beryllium an rumor successful immoderate areas and impermanent deflationary forces look to beryllium waning. Despite this, utmost value increases now look to beryllium a point of nan past and location is nary longer broad-based ostentation crossed each categories. January's ostentation information does not alteration nan large picture, but it does summation nan probability that nan Fed will proceed to raise liking rates.

Monthly Inflation by Percentile Ranking 3-Mo. Moving Average

Figure 1: Monthly Inflation by Percentile Ranking 3-Mo. Moving Average (source: Created by writer utilizing information from BLS)

Proportion of CPI Components pinch Declining Prices 3-Mo. Moving Average

Figure 2: Proportion of CPI Components pinch Declining Prices 3-Mo. Moving Average (source: Created by writer utilizing information from BLS)

While ostentation continues to beryllium a problem successful immoderate parts of nan economy, excluding nan highly lagged shelter component, halfway CPI ostentation continues to exemplify that precocious ostentation is mostly a point of nan past.

Core CPI ex-Shelter Monthly Inflation 3-Mo. Moving Average

Figure 3: Core CPI ex-Shelter Monthly Inflation 3-Mo. Moving Average (source: Created by writer utilizing information from BLS)

There was immoderate interest that updated weights successful nan CPI handbasket would distort January's ostentation figures, and while this did hap to immoderate extent, it did not really alteration nan wide picture. Inflation was overmuch stronger successful January than it has been successful caller months, some header and core.

Monthly CPI Inflation

Table 1: Monthly CPI Inflation (source: Created by writer utilizing information from BLS)

Apparel ostentation is somewhat schematic of nan problem pinch extrapolating January's information and assuming it represents a reacceleration. Growth successful existent apparel income has been reasonably anemic successful caller months, but contempt this apparel ostentation has been rather strong, a business that is improbable to persist.

Apparel Sales

Figure 4: Apparel Sales (source: Created by writer utilizing information from The Federal Reserve)

Monthly ostentation information tin beryllium noisy and absent respective consecutive months of beardown inflation, location is nary logic to deliberation that location has been a alteration successful trend. Data that is apt to lead user value ostentation continues to show that proviso chains are normalizing and inflationary pressures are easing. Shipping rates person returned to adjacent to pre-COVID levels and proceed to decline, nan aforesaid pinch fertilizer prices. Commodity prices person mostly been reasonably anemic successful caller months, and China's reopening does not look to beryllium having a important impact.

 All Commodities

Figure 5: PPI by Commodity: All Commodities (source: Created by writer utilizing information from The Federal Reserve)

Not each information is affirmative though, utilized car prices stay precocious and person started to summation again.

Manheim Used Vehicle Value Index

Figure 6: Manheim Used Vehicle Value Index (source: Created by writer utilizing information from Manheim)

It has been suggested that automakers are taking advantage of existent conditions to support precocious prices and profit margins. There is nary logic to expect this business to beryllium ongoing though. Weaker maturation successful 2023 aliases 2024 is apt to consequence successful little prices and margins for car makers.

New Vehicle Sales

Figure 7: New Vehicle Sales (source: Created by writer utilizing information from The Federal Reserve)

Growth and Profitability of Large Auto Manufacturers

Figure 8: Growth and Profitability of Large Auto Manufacturers (source: Created by writer utilizing information from The Federal Reserve)

Home prices person been declining slow but still stay elevated. Any easing of location prices aliases rents will not person an effect connected ostentation information successful nan short word though owed to nan measurement shelter ostentation is calculated. There seems to beryllium an anticipation that nan lodging marketplace will bounce back, supporting a beardown economy, but this is unreasonable, arsenic caller labour marketplace and ostentation information bespeak that owe rates person small room to move downwards.

US Home Price Index

Figure 9: US Home Price Index (source: Created by writer utilizing information from Zillow)

In summation to January's ostentation data, beardown labour marketplace information from December will springiness nan Fed nan assurance to proceed raising rates. Relatively beardown economical information appears to beryllium driving markets astatine nan moment, alternatively than inflationary fears aliases nan imaginable of a weakening system later successful nan year. It is difficult to spot nan existent move successful equity markets being sustained though arsenic incoming information is improbable to support higher prices.

Unemployment Rate

Figure 10: Unemployment Rate (source: Created by writer utilizing information from The Federal Reserve)

Editor's Note: This article covers 1 aliases much microcap stocks. Please beryllium alert of nan risks associated pinch these stocks.

This article was written by

Richard Durant floor plan picture

I person been managing my ain finance portfolio for nan past 9 years pinch a attraction connected basal investigation and heavy worth investing complete agelong clip horizons. My superior liking is uncovering early shape innovations which will create semipermanent value. I person a Bachelors grade successful finance, an MBA and person completed nan CFA and CMT exams.richarddurant.substack.com

Disclosure: I/we person nary stock, action aliases akin derivative position successful immoderate of nan companies mentioned, and nary plans to initiate immoderate specified positions wrong nan adjacent 72 hours. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

Editor: Naga



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