Goodbye Inflation? CPI Misses Across The Board | ZeroHedge

Goodbye Inflation? CPI Misses Across The Board | ZeroHedge

From: zerohedge

Goodbye Inflation? CPI Misses Across The Board | ZeroHedge

The first of this week’s big event risks has finall arrived, and while the world and his pet rabbit is focused on the number’s potential for ‘dovishness’, bear in mind that expectations are for a 0.3% MoM rise and 7.3% YoY rise (which while ‘slowing’ remains extremely high by any standards). The banks’s CPI forecasts were all in sync:

7.2% – Barclays 7.2% – Credit Suisse 7.2% – Goldman Sachs 7.2% – Bloomberg Econ 7.2% – Citigroup 7.2% – Morgan Stanley 7.2% – Wells Fargo 7.3% – HSBC 7.3% – JP Morgan Chase 7.3% – UBS 7.3% – Bank of America 7.4% – SocGen

… which is precisely why the headline CPI printed cooler than all of the major expected, rising just 0.1% MoM, with the YoY rise falling to +7.1%, which was the lowest since Dec 2021…

and the biggest monthly drop (-0.63ppt) in the YOY print (from 7.7% to 7.1%) since 2020…

Core CPI was expected to rise 0.3% MoM also (+6.1% YoY), and like the headline it came in cooler than expected at +0.2% MoM and +6.0% YoY…

Under the hood, energy costs and used cars were the biggest drivers of the cooling…

Services inflation YoY rose modestly as Goods inflation YoY dropped again…

Energy and Goods actually fell in price MoM…

More details from the report, first on food and energy…

The food index increased 0.5 percent in November following a 0.6-percent increase in October. The food at home index also rose 0.5 percent in November. Four of the six major grocery store food group indexes increased over the month. The food away from home index rose 0.5 percent in November, after increasing 0.9 percent in each of the previous 3 months. The index for limited service meals increased 0.6 percent over the month and the index for full service meals increased 0.4 percent.  The energy index fell 1.6 percent in November after rising 1.8 percent in October. The gasoline index declined 2.0 percent over the month, following a 4.0-percent increase in October. The index for natural gas continued to decline over the month, falling 3.5 percent after decreasing 4.6 percent in October. The electricity index decreased 0.2 percent in November.

… and then everything else, starting with the shelter index which was the dominant factor in the monthly increase in the index for all items less food and energy:

The index for all items less food and energy rose 0.2 percent in November, its smallest increase since August 2021. The shelter index continued to increase, rising 0.6 percent over the month. The rent index rose 0.8 percent over the month, and the owners’ equivalent rent index rose 0.7 percent. The index for lodging away from home decreased 0.7 percent in November, after rising 4.9 percent in October.

Other components were a mix of increases and declines. Among the indexes that rose in November were:

The index for communication which increased 1.0 percent over the month after decreasing 0.1 percent in October. The index for recreation rose 0.5 percent in November, following a 0.7-percent increase in the previous month. The motor vehicle insurance index increased 0.9 percent in November, the personal care index rose 0.7 percent The education index rose 0.3 percent over the month.

And on the other side:

The medical care index fell 0.5 percent in November, as it did in October. The index for hospital and related services decreased 0.3 percent over the month, and the index for prescription drugs declined 0.2 percent. The index for physicians’ services was unchanged in November. 

Other indexes which declined over the month include:

The index for used cars and trucks fell 2.9 percent in November, the fifth consecutive decline in that index. The index for airline fares fell 3.0 percent over the month, following a 1.1-percent decrease in October. The index for household furnishings and operations was unchanged in November, as was the index for new vehicles.

Of the above, it is interesting that apparel prices increased in November. As a reminder, Goldman noted that with the inventory-to-sales ratio for apparel stores is now above its December 2019 level, the more normal availability of apparel items this year is consistent with increased promotional activity, and online price data from Adobe shows a 15.5% decline in apparel prices over the course of November on a not-seasonally-adjusted basis. Expect a sharp drop in apparel prices next month.

Perhaps most notably, if we exclude shelter – on a sequential basis – we now have deflation, which of course we can’t do especially since both shelter and rent inflation are still rising at a rapid pace of 7.12% and 7.91% respectively, but about to roll over hard.

The punchline: if one excludes food (+0.5% M/M) and shelter (+0.7% M/M), it’s hard to find any inflation (and in fact, we may well have disinflation):

Food +0.5% M/M, vs 0.6% prior Shelter +0.7%, vs 0.6% prior


Used Cars -2.9% vs -2.4% prior New cars 0.0%, vs +0.4% prior Energy -1.6% vs +1.8% prior Gasoline -2.0% Fuel oil +1.7%, vs +19.8% prior Apparel 0.2% vs -0.7% prior Medical care 0.2% vs 0.0% prior

And given the violent rollover in M2, we suspect inflation will continue sliding…

Bear in mind that last month’s (11/10/22) YoY headline CPI print came in soft @ 7.7% (vs 7.8% expected and 8.2% prior), and with traders short into the event, the S&P exploded +554bps (sharpest rally since April of 2020).

Additionally, the S&P’s realized volatility into today’s CPI print is the highest since 2009…

Ahead of today’s print, both JPM and Goldman presented their market move forecasts, and indicatively a 7.1% print means the following for the S&P:

JPMorgan: S&P gains +2%-3% Goldman: S&P gains +4%-5%

Finally, we note that real wages for Americans fell for the 20th straight month…

But hey, gas prices are down since the June peak, and ‘strong as hell’ economy, right?


Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

RISK DISCLAIMER AND DISCLOSURE - -The risk of loss in trading foreign exchange markets (FOREX), futures, Crypto, options and stocks can be substantial. You should therefore carefully consider whether such trading is suitable for you given your financial condition. Currency Central does not control and cannot vouch for the accuracy or completeness of any information or advice you may receive from any other person not employed by Currency Central regarding trading or your account. The factual information contained herein is believed to be reliable but may not be comprehensive and may not be appropriate for your financial condition we make warranties of accuracy or timeliness.  Trading in the FOREX, Crypto, or other financial markets involves substantial risk and is not for all investors and should only be done with risk capital that you can afford to lose and which if lost, would not change or adversely affect your lifestyle. The high degree of leverage that is often possible in trading of financial instruments may work for you as well as against you.  Managed accounts can be subject to substantial fees and charges and may exceed the minimum available from other sources.

This brief statement cannot disclose all of the risks and other significant aspects of trading in financial instruments.  Therefore, you should carefully review your account documents and the disclosures provided to you to determine whether such trading is appropriate for you in light of your particular financial condition. There are also risks associated with utilizing an internet-based deal execution system software application, and computerized trading and money management tools including, but not limited to, the failure of the hardware and software. 

PAST PERFORMANCE DOES NOT NECESSARILY GUARANTEE FUTURE RESULTS, nor does it guarantee against loss. Currency Central recommends that before making a decision you collect additional information and opinions from independent sources.

Currency Central Holdings, Inc. is our holding company, and does not provide financial advice of any kind, including investment advice, tax advice, financial planning, or brokerage services. If you are considering investing you should consult with your registered financial advisor.  Software is offered ‘as is’ there are no indications of how the software may or may not perform in the future.

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Copyright © 2022 Inc

NFA ID: 0543401 Inc

%d bloggers like this: