Wednesday, April 12th, 2023
Pre-market futures got what they wanted from Consumer Price Index (CPI) numbers for March this morning, and have tacked notably higher in the seconds directly following the report’s release: +0.1% CPI headline month over month was lower than the +0.2% expected and the +0.4% reported for February. (This metric had peaked at 40-year highs in June of last year at +1.3%). Stripping out volatile food and gas prices, this number reached +0.4% — in line with expectations, down from +0.5% for February.
Headline CPI year over year — aka the “Inflation Rate” — tumbled 100 basis points (bps) from the previous month: +5.0% from +6.0%. This again was lower than expected, though consensus estimates were pretty close: +5.1%. This now makes nine straight months of a lower Inflation Rate from 40-year highs in June of last year, which was +9.1%. The month-over-month drop in this metric is also by far the steepest we’ve seen in this decline.
Core CPI year over year was the only print in this report that moved the opposite direction from February results: +5.6% from +5.5% previously. This was also expected, as we see some near-term resistance to inflation coming down. This breaks a six-month streak of core CPI coming down year over year, from an October 2022 high of +6.6%. Does this mean we’ve struck a resistance level beneath food and energy prices, which core prints strip out? Too soon to tell. In fact, core CPI might be seen as lagging headline CPI historically, but they tend to tack the same way over time.
The market has been sitting on its hands for the most part all week, waiting for results from this particular report. Now that it’s here, the moves were palpable: The Dow went from +60 points to +200 almost immediately, the S&P 500 went from +5 points to +30, and the Nasdaq from flat to +120 points. Pre-markets have held steady at these levels since I’ve begun typing this article; we imagine, before analysts dig deeper into the numbers, that we may hold in this range through the opening bell.
Aside from core CPI year over year, all of these figures do what the rest of the economic metrics so far reported this week have done: give credence to the idea that the Fed’s interest rate policy is showing strong results, albeit delayed, and that further tightening on the Fed funds rate may not be warranted. Even last week’s Jobless Claims (which report again tomorrow morning) showed labor statistics are not quite as robust as earlier thought (although Friday’s BLS numbers were as healthy ass we might have expected). Not to say today’s CPI report was definitive in this regard, but we still have three weeks of economic prints before the next Fed meeting.
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