Tuesday, April 12, 2022
This morning, the March print for the Consumer Price Index (CPI) came out, with headline figures both month over month and year over year coming in slightly ahead of what was expected: +1.2% from February to March — the highest jump since 2005 — and +8.5% from March 2021 to March 2022, a level we’ve not seen since the beginning of Ronald Reagan’s first presidential term, 1981.
When we look at the “core” numbers — stripping out volatile food and energy prices — we get a more granular picture of what’s going on. That +1.2% month-over-month read reduced to +0.3% when we subtract energy and food prices. By comparison, the high monthly print on core CPI was April of last year, +0.9%.
On the year-over-year core, we see +6.5% — slightly below the +6.6% expected but 10 basis points higher than the previous month. This again is the highest read we’ve seen in 40 years, though 200 basis points attributed directly to food and energy prices neatly explains where the pain of our current inflation is located.
Energy prices alone gained +11%, aggravated in a big way by the coordinated boycott of Russian oil and gas imports due to their war of aggression against Ukraine. But in the interest of transitioning out of fossil fuel energy as part of a domestic climate initiative, energy prices have climbed here at home, as well — which we can clearly see every time we visit a gas station to fill our tanks.
Food prices were up +8.8% year over year, which again consumers have duly noted of late: going to the supermarket or ordering meals from restaurants have clearly spiked, and part of this is also related to higher energy prices in bringing goods to market. We also see adjusted earnings for inflation dropping -2.7% year over year, wiping out positive wage growth impacts by that amount on average over the past year.
Yet the markets have skyrocketed on this news since the numbers have come out: where we saw +30 points on the Dow ahead of the release, +50 on the Nasdaq and +9 on the S&P, at this hour we’re +233 points on the Dow, +279 on the Nasdaq and +52 points on the S&P. The market is telling us it had gotten oversold ahead of the CPI figures, and perhaps there is some reason to believe we are peaking on inflation with these numbers.
It’s quite likely way too early to make such a distinction, but to the extent things like energy and food prices can shift downward with relative expediency, a large portion of these inflation figures may have the chance to evaporate in coming months. Hard goods, such as used cars -3.8% year over year, point to some demand depletion as inflation hits the consumer. As we see housing data in the coming weeks, with mortgage rates now averaging over 5%, we may see another big chunk of these inflation metrics tack downward somewhat.
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CPI Hits +8.5% Year Over Year, Markets Surge
Tuesday, April 12, 2022
This morning, the March print for the Consumer Price Index (CPI) came out, with headline figures both month over month and year over year coming in slightly ahead of what was expected: +1.2% from February to March — the highest jump since 2005 — and +8.5% from March 2021 to March 2022, a level we’ve not seen since the beginning of Ronald Reagan’s first presidential term, 1981.
When we look at the “core” numbers — stripping out volatile food and energy prices — we get a more granular picture of what’s going on. That +1.2% month-over-month read reduced to +0.3% when we subtract energy and food prices. By comparison, the high monthly print on core CPI was April of last year, +0.9%.
On the year-over-year core, we see +6.5% — slightly below the +6.6% expected but 10 basis points higher than the previous month. This again is the highest read we’ve seen in 40 years, though 200 basis points attributed directly to food and energy prices neatly explains where the pain of our current inflation is located.
Energy prices alone gained +11%, aggravated in a big way by the coordinated boycott of Russian oil and gas imports due to their war of aggression against Ukraine. But in the interest of transitioning out of fossil fuel energy as part of a domestic climate initiative, energy prices have climbed here at home, as well — which we can clearly see every time we visit a gas station to fill our tanks.
Food prices were up +8.8% year over year, which again consumers have duly noted of late: going to the supermarket or ordering meals from restaurants have clearly spiked, and part of this is also related to higher energy prices in bringing goods to market. We also see adjusted earnings for inflation dropping -2.7% year over year, wiping out positive wage growth impacts by that amount on average over the past year.
Yet the markets have skyrocketed on this news since the numbers have come out: where we saw +30 points on the Dow ahead of the release, +50 on the Nasdaq and +9 on the S&P, at this hour we’re +233 points on the Dow, +279 on the Nasdaq and +52 points on the S&P. The market is telling us it had gotten oversold ahead of the CPI figures, and perhaps there is some reason to believe we are peaking on inflation with these numbers.
It’s quite likely way too early to make such a distinction, but to the extent things like energy and food prices can shift downward with relative expediency, a large portion of these inflation figures may have the chance to evaporate in coming months. Hard goods, such as used cars -3.8% year over year, point to some demand depletion as inflation hits the consumer. As we see housing data in the coming weeks, with mortgage rates now averaging over 5%, we may see another big chunk of these inflation metrics tack downward somewhat.
Questions or comments about this article and/or its author? Click here>>