Inflation Watch A mid-month focus on inflation via Traditional Indexes, Commodity Prices, and Labor Costs
Inflation—Another Small Miss
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The latest CPI numbers missed market expectations. The problem is not with the actual CPI numbers, but merely the fact that market expectations are still a tad too high. More disconcerting is the cool trend in housing inflation.
Inflation Slightly Lower Than Expected
The non-seasonally adjusted CPI fell 0.5% from October to November, lower than expected.
No Big Change — Inflation Remains Moderate
The non-seasonally adjusted CPI was essentially flat in October, in line with market expectations.
Inflation Turned Higher In August
The non-seasonally adjusted CPI jumped 0.6% in August, matching the market consensus.
Evidence of Near Term Commodity Inflation Building
A month and a half ago we became concerned with rising commodity prices, which has been especially obvious over one and three month time horizons. Those trends continued in March, with several of the commodity indices now showing double digit price increases from three months ago.
Start Of A New Bond Bear Market Or Not, There Is No Need To Rush
Whether it’s the start of a new bond bear market or not, there’s no need to rush... and why shorting bonds may not be the best idea, even during a bond bear market.
Reported Inflation Should Be Muted In 2012
For 2012, the reported CPI is expected to slip down to the +2% area (although items like lunches, transportation, parking and food may continue rising at close to a 10% rate).
Falling Commodity Prices Tamping Down Inflation Pressures
Through November, the CPI is now up 3.4% from year ago levels, while the PPI is up 5.7%.
Very Little Price Pressure At Present
It is very difficult to find signs of accelerating inflation in today’s markets.
Inflation Pressures Waning
While our 2011 year end inflation projections are still well above the 2010 year end levels, it seems that both the CPI and PPI may have already peaked for the year.
Six Month Readings Look More Favorable Than Twelve Month Readings
In all of the primary inflation measures monitored in our Inflation Watch publication, the six month rates of change moved lower in July. For the most part, the twelve month readings have continued to rise. This action is likely pointing to diminishing inflation pressures for the months ahead.
Jumped The Gun With Boost To PPI Estimate
The July reports showed that both PPI and CPI edged downward in June from May readings.
Inflation Pressures Continuing To Heat Up...Boosted Year End Projections
CPI rose 0.5% in May (before seasonal adjustments), down from April’s +0.6% monthly increase.
Despite Falling Commodity Prices, Inflation Still Expected To Accelerate In 2011
Latest PPI month/month increase was +1.2%, however the latest report is a measure of inflation from mid March through mid April and does not include the impact of the plunge in commodity prices.
Inflation Pressures Becoming More Evident
All three PPI measures have their six month rates of change well above the 12 month rates, so the trend points toward even higher inflation ahead.
Inflation Pressures Becoming More Evident
All three PPI measures have their 6 month rates of change well above the 12 month rates, so the trend points toward even higher inflation ahead.
Look Out For Rising Inflation This Year
Given global economic recovery, and Fed action meant to stimulate the U.S. economy, we expect that inflation fires will heat up significantly in 2011.
Inflation Acceleration In 2011
By keeping interest rates at extreme lows and printing money, the Fed is trying to reflate, convincing consumers to spend, not save and investors to buy riskier assets.
Inflation Acceleration In 2011
Commodities are on fire, and it’s not just because of the weaker dollar. Commodity prices are signaling significant pass-through inflation pressures building.
Commodity Diffusion Index Signaling Inflation Pressures Building
Commodity Diffusion Index pointing toward higher inflation. While weak dollar has helped push commodity prices higher, a Diffusion Index converted to a strong currency like the Swiss Franc also is at very high inflationary levels.
Inflation Acceleration Likely In 2011
Commodity Diffusion Index pointing toward higher inflation.
Mild Inflation, But No Deflation In 2010
We are maintaining our 2010 CPI estimate of +1.2%. (Core CPI +0.9%.)
Mild Inflation, But No Deflation In 2010
It may feel like a deflationary environment, but the CPI is not likely to end 2010 with a twelve month deflationary reading.
Year End Twelve Month CPI Deflation Reading Unlikely
Looking ahead to 2011, we are keeping a close eye on Housing, Food and Wages, which all could be bottoming out.
Inflation Tame
Looking ahead to 2011, we are keeping a close eye on Housing, Food and Wages, which all could be bottoming out.
CPI Tame For Now, 2011?
Gently rising CPI inflation at present can be best characterized as normal business cycle inflation.
Mild CPI Inflation Expected In 2010
The greatest danger in late 2010 and 2011 is monetary debasement inflation, not demand based inflation.
Mild CPI Inflation Expected In 2010
The greatest danger in late 2010 and 2011 is monetary debasement inflation, not demand based inflation.
Mild CPI Inflation Expected In 2010
Mild CPI Inflation Expected In 2010 (+3.2%); Higher PPI Inflation (+6.0%)
Weak Dollar Could Continue To Contribute To Higher Commodity Prices
U.S. commodity prices are again trending higher, like they did in 2002, as the U.S. economy recovered. The weak U.S. dollar helped, and recent rally might not last.
Leuthold Commodity Diffusion Index Remains Negative
Like they did in 2002, as the U.S. economy recovered, U.S. commodity prices are again trending higher.
Commodity Diffusion Index Now Signaling Rising Inflation
Commodity Diffusion Index hit 75%, an indication of rising inflation pressures. Moves above 70% in this inflation gauge have served as a pretty good sell signal for stocks.
Mild Inflation Next Twelve Months
This transition from deflation to mild inflation will be a “numbers game” as late 2009 readings are compared against late 2008’s strong deflationary readings, driving the twelve month rate up.
Mild Inflation Next Twelve Months
By year end 2009, we expect the twelve month PPI to be back up in mildly inflationary territory.
Mild Deflation Short Term… Mild Inflation Next Twelve Months
This transition from deflation to mild inflation will be a “numbers game,” as 2009 readings are compared against 2008’s second half deflation, driving current twelve month readings up
Mild Deflation Short Term… Mild Inflation Next Twelve Months
The greatest danger in late 2010 and 2011 is monetary debasement inflation, not demand based inflation. Trillion dollar deficits (or higher) may be acceptable shorter term (2009), but unless our government and politicians provide strong evidence of fiscal responsibility, the dollar’s respectability could be undermined, with foreign lenders and investors going elsewhere.