The first of this week's big event risks has finall arrived, and while the world and his pet rabbit is focused on the number's potential for 'dovishness', bear in mind that expectations are for a 0.3% MoM rise and 7.3% YoY rise (which while 'slowing' remains extremely high by any standards). The banks's CPI forecasts were all in sync:
... which is precisely why the headline CPI printed cooler than all of the major expected, rising just 0.1% MoM, with the YoY rise falling to +7.1%, which was the lowest since Dec 2021...
... and the biggest monthly drop (-0.63ppt) in the YOY print (from 7.7% to 7.1%) since 2020...
Core CPI was expected to rise 0.3% MoM also (+6.1% YoY), and like the headline it came in cooler than expected at +0.2% MoM and +6.0% YoY...
Under the hood, energy costs and used cars were the biggest drivers of the cooling...
Services inflation YoY rose modestly as Goods inflation YoY dropped again...
Energy and Goods actually fell in price MoM...
More details from the report, first on food and energy...
... and then everything else, starting with the shelter index which was the dominant factor in the monthly increase in the index for all items less food and energy:
Other components were a mix of increases and declines. Among the indexes that rose in November were:
And on the other side:
Other indexes which declined over the month include:
Of the above, it is interesting that apparel prices increased in November. As a reminder, Goldman noted that with the inventory-to-sales ratio for apparel stores is now above its December 2019 level, the more normal availability of apparel items this year is consistent with increased promotional activity, and online price data from Adobe shows a 15.5% decline in apparel prices over the course of November on a not-seasonally-adjusted basis. Expect a sharp drop in apparel prices next month.
Perhaps most notably, if we exclude shelter - on a sequential basis - we now have deflation, which of course we can't do especially since both shelter and rent inflation are still rising at a rapid pace of 7.12% and 7.91% respectively, but about to roll over hard.
The punchline: if one excludes food (+0.5% M/M) and shelter (+0.7% M/M), it's hard to find any inflation (and in fact, we may well have disinflation):
but...
And given the violent rollover in M2, we suspect inflation will continue sliding...
Bear in mind that last month's (11/10/22) YoY headline CPI print came in soft @ 7.7% (vs 7.8% expected and 8.2% prior), and with traders short into the event, the S&P exploded +554bps (sharpest rally since April of 2020).
Additionally, the S&P's realized volatility into today's CPI print is the highest since 2009...
Ahead of today's print, both JPM and Goldman presented their market move forecasts, and indicatively a 7.1% print means the following for the S&P:
Finally, we note that real wages for Americans fell for the 20th straight month...
Source: Bloomberg
But hey, gas prices are down since the June peak, and 'strong as hell' economy, right?
By Zerohedge.com
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