US Inflation Surges Again, Dealing Fresh Blow To ‘Transitory’
Inflation surged far more than expected in the world's largest economy last month, hotly-anticipated data released on Tuesday showed.
Headline CPI rose 5.4% in June, the BLS said. That easily exceeded the 4.9% rise the market expected (figure below).
Core was similarly searing, printing 4.5% YoY, half a percentage point higher than anticipated and the largest YoY reading since 1991.
The headline annual read is the largest since August of 2008. Headline inflation has now logged seven consecu
I have discounted numbers until the fall- the numbers being released now have way too much noise. That said, inflation is the lesser of two evils for now. Imagine if prices were stagnant or worse yet falling. Bond market action suggests UST bonds are discounting an earlier Fed tightening- intermediates are getting hit harder than long bonds- a bear curve flattener. It all smells of a whipsaw for the Federal Reserve. About the time they belly up to the bar, start tapering and debating raising short rates is about the time we see the whole thing roll over. This should not be lost on Biden and the Congressional Democrats. A fairly large fiscal stimulus will innoculate them politically. Failure to pass a decently robust fiscal agenda will cost them bigly in 2022 and bring back talk of Trump in 2024.
Good comment. More inflation and more bear flatterning this morning continues to suggest that positioning is still having an outsize effect vs actual macro and regime shifts.
Agree with Ria. This summer is unique. Stimulus money, childcare tax credit, and all the things we couldn’t do last summer are happening. When does the sugar high wear off? If we get a prediction pool going, I’ll take major Black Friday followed by Cyber Monday crash.
Anecdotal evidence-This year, I bought new furniture, new TV, installed new wood flooring, upgraded my truck suspension, bought a cargo trailer, and went on a second honeymoon type trip. These are all one-time kind of spending. I’m still waiting for some backordered parts out of Germany. The couch took 3 months to arrive. This level of spending isn’t sustainable for me, and it isn’t for my friends either, who are all also having really great summers.
I’d be more concerned if the inflation print undershot the target at this point given the monetary policy since 3/2020…the FOMC being tested about FAIT is inevitable since they basically and brazenly invited it with the monetary bazooka and the jawboning…
I just have no idea what / if any the specific timeline for “transitory” is … I just assume it’s a working / potentially moving target as things progress or regress…
Anecdotal evidence – a couple weeks ago I stopped in my favorite Italian sub sandwich joint for lunch. The place is tiny but does a robust daytime carry-out business. The place is owned by an older Italian woman who takes the orders, works the register, and calls everyone “Honey” and “Sweetie”. She has a large hand-painted sign on the wall showing the list of subs and ingredients.
That day the sign was down. I asked about it, and she leaned forward in all seriousness and said that she has to have it re-painted because she had to raise her prices because the cost of everything was going up.
This hard-working sandwich maker is not about to have her large hand-painted sign re-painted with lower prices once this inflation spike “transits”. Those prices are not coming back down.
As I completed my purchase she looked over her glasses at me and in her simple analysis said, “It’s all politics.”
I give her a lot of credit