Founders: Goldman & JPMorgan's CPI Analysis
The Return of Goods Inflation
Good Morning
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Contents:
Overview
Goldman’s Analysis
JPM’s Analysis
Overview: The Party is Over
Inflation is expected to rise despite Core (mostly domestic services) inflation remaining stable as continued rising rents are offset somewhat by dropping car prices1. Headline CPI, which factors in energy and food costs, is now spiking again.
August CPI Consensus:
Core: 0.2% (4.3 year-over-year)Headline: 0.6% (3.6% year-over-year)
Rising goods is/are again the problem as warned by GoldFix and others over the last few months. To reiterate: The Fed was lucky to get goods inflation lower as the supply side of that equation was outside their control. Services inflation, which is largely domestic, was supposed to be easier to quell. But they cannot get that under control either.
Energy re-rallying will and has affected everything. it is safe to assume the party is over, and inflation is now basing between 3 and 4% overall, with Goods (Headline) as the wildcard once again now that Services has stabilized.
Translation: inflation has hit its lows given the current tightening regime, and the next drop in inflation, if it comes, will most likely be accompanied by a large selloff in stocks as it will be more deflationary like 1999 than dis-inflationary like it currently is.
The market is reaching a new equilibrium between inflation, unemployment and GDP. To get inflation much lower than it currently is and counter act the global collateral shortage gripping our supply chains, we risk a real crash in stocks and in employment now.
After this number comes in, look for even louder table pounding for the target to be raised from 2% to 3% and victory declared
If consensus is right, headline CPI will print at +0.61% vs just +0.17% previously, its largest monthly increase in 14 months (since June 2022) resulting in a 3.6% increase in annual inflation, up from 3.2%
Goldman’s Trading Desk: Above Consensus
