We see the other shoe drop this morning on one of the most important domestic inflation metrics there is: the Consumer Price Index (CPI), the flip-side to the Producer Price Index (PPI) released yesterday before the opening bell. The CPI for November was unchanged from the previous month’s downwardly revised +0.2%, with an ex-food & energy number also at +0.2%. This is about as steady as these numbers come.
Year over year, both the headline and ex-food & energy figures also came in even at +2.2%, though this is down a tad on the headline from 2.5% in October. Still, very much in-line with very few outliers in consumer pricing last month, excepting gasoline prices, which fell 4.2%. Core reads show limited volatility, which will hopefully be at least a short-term salve on market activity, which has provided more volatility than most investors care to see.
Recall yesterday’s PPI numbers were a little hotter than expected, both on headline and core. Which, taken together, demonstrates that producers are actively trying to ratchet up pricing while consumers are showing a bit of resistance. It’s a sign of a healthy economy overall, supported by employment growth, 3%+ GDP and other measures we’ve seen lately.
What this also shows is that the inflation cycle looks to have peaked for now, with numbers cooling at healthy levels. There are plenty of reasons for this, not the least of which are steps of caution into the next year and beyond, with lots of question marks surrounding trade policy with China, among other things. Really, it’s a return to Goldilocks, at least for now: “not too hot, not too cold.”
This looks to be the attitude pre-market activity, as well: market futures are way up to start the day, with the Dow +340 points a half hour before regular trading opens. We also see emerging headlines regarding China revising its 2025 initiatives, as well as bail being granted to the Huawei CFO arrested on fraud charges. But we’d do well to not lose sight of these more resonant, concrete metrics surveying our economy — and right now, the PPI and CPI indicate smooth sailing.