There is not a lot to be bullish about with today’s CPI figures. Energy climbed as we wrote it would yesterday. A 5.6% month-to-month increase in Energy prices fueled a 0.6% month-to-month increase in Headline CPI and a 3.7% increase in year-over-year Headline CPI (we estimated 3.6%). Core CPI came in at 0.3% month-to-month and 4.3% year-over-year. We would love for the Fed to hold rates steady and to step on the accelerator as it pertains to QT – make an effort to get the Fed’s balance sheet down to pre-COVID levels. Should the Fed choose to not accelerate QT, then it should lift the Fed Funds rate higher on September 20th. The fiscal side could cure this issue overnight by radically reducing fiscal spending while decreasing tax rates, which would drive private sector production and wealth while reducing the fiscal debt outstanding ($32.94 Trillion as of 09-11-23).
- The “Food at Home” category continued to get more expensive as did the “Food Away from Home” category for which price increases accelerated month-to-month. The latter category likely due to restaurants having to pay higher wages. Anecdotally, this afternoon I spoke with a manager at a local grocery chain of 77 stores. The manager said he can’t keep his young employees more than a few weeks before they quit (thank their Gen X parents). This implies that Food Retail wages will increase for some time.
- Shelter continued to climb with a 0.3% month-to-month increase and a 7.3% year-over-year increase. The Fed 100% created the housing bubble and I’ve seen hot air leave Joe Biden’s mouth faster than I’ve seen it leave the housing market.