Consumers Prices Remained Flat in July, Annual CPI Dipped From 9.1% to 8.5%… The Labor Department reported that the inflation rate fell from a 41-year high last month. Core prices excluding food and energy remained steady at 5.9%.
What it means— Clearly, inflation is over, the Fed won’t raise rates again, investors can go back to chasing semiconductor stocks and meme names, and the 10-year Treasury is headed back to 2%. Or at least, that’s how it looked in the markets after the announcement. As Twitter commentator David Burge noted, it’s like losing a game 91-0 one month and then rebounding to lose just 85-0 the next month. It’s still not winning.
Too often investors focus on a single data point causing violent over reaction as in assuming July’s 0% monthly inflation means peak inflation is behind us. Economic measures of inflation are roughly the same as eight months ago significantly higher than normal for a post-crisis era.
Food prices jumped, as did shelter prices, which are the stickiest and trickiest parts of the measure. Food inflation fears have been focused on the loss of Ukraine’s produce. Focus is shifting to California’s extended drought in addition to labor, fuel and fertilizer costs reducing yields while costs rise.
We might drive a little less or buy different food, but we all must live somewhere. The “positive” inflation trend being hyped by financial media ignores bureaucratic data cleansing. As we have repeatedly reported, housing data is sticky and not yet fully reflected in the inflation data. Rent inflation is +25% and home prices are +16%. Bureau of Labor Statistics adjusted shelter inflation to 5.7%. If CPI has peaked, expect a long slow adjustment to the Fed’s 2% target.
There are signs that rents will cool by late fall, which would be welcome, but don’t forget that energy has been weaponized. We likely will see more inflationary pain, either real or manufactured, before this is over. Expect Fed officials to jawbone about keeping up the fight on inflation. If you have open profits from the last 45 days or so, consider protecting some of them.
Initial Jobless Claims Rise From 248,000 to 262,000… The previous number was revised lower, and the current total was expected.
What it means— The numbers remain in line with an economy that is still growing, albeit slower than before. There’s not a lot to do beyond watching this report to see if we get an early indicator of a slowdown in the jobs market between employment reports.
OPEC+ Sets Stage for Reducing Oil Output in September, Forecasts 1.24 million Barrel per Day Drop in Demand… The oil cartel estimates that it won’t need to add extra supply to the market and likely will need to curb production to match global demand, which is the exact opposite of what the U.S. and Western nations want the group to do.
What it means— Given that oil producers can sell all they can produce at just under $100 per barrel, it’s hard to see why they would want to oversupply the market and cut into their profit margin. There’s also the mirage that these producers have a bunch of spare capacity. The global slowdown, which is weighing on oil consumption, is the best thing that such producers could have hoped for. No one is running out of oil, yet. The problems will come either when Western nations try to cut off Russian oil or when the Russians end oil deliveries early.
Polish Scientific Institute Declares Domestic Cats to Be Invasive Species… On the face of it, might they be right? Biologist Wojciech Solarz at the Polish Academy of Sciences entered Felis catus into the database of invasive species because cats have a harmful effect on biodiversity, given the number of birds and mammals they kill. According to Solarz, cats meet all the requirements for the determination. However, Solarz took issue with some of his online haters, who apparently thought he was calling for feral or other cats to be euthanized.
Data supplied by HS Dent Research
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