September CPI report is out and the Fed’s worst nightmare is coming true. Overall CPI rose 0.4% in September vs. 0.1% in August while the core CPI rose 0.6% in September, as it did in August. Overall CPI YoY rose 8.2% in September vs. 8.3% in August. Core CPI YoY rose 6.6% in September vs. 6.3% in August, the largest 12-month increase since August 1982.
Increases in the shelter, food, and medical care indexes were the largest contributors of the increase. The shelter index rose 6.6 percent YoY, accounting for over 40 percent of the total increase in core CPI. The indexes for shelter, medical care, motor vehicle insurance, new vehicles, household furnishings rose in September while those for used cars and trucks, apparel, and communication declined. The energy index fell 2.1 percent in September as the gasoline index declined, but the natural gas and electricity indexes increased.
Overall, the September CPI numbers are not pretty. CPI in all categories except energy and commodities are still rising. With the planned OPEC oil supply cuts, the energy index probably will go up in the next few months. In other words, there appears to be little relief of upward pressure for consumer prices. Chances are the Fed is going to raise the Fed fund rate by another 0.75% in early November. Interestingly, the stock market actually rallied today after tanking initially. Regardless, I believe there’s more tightening to come. For now, I will keep my cash in 3 to 6 month treasury bills instead of longer term bonds. Most likely there would be opportunities next year for investors to build a treasury bond portfolio with a decent (5+%) yield that we haven’t seen for 10+ years.
Agreed.
Wage inflation keeps spilling into prices.
Fast had earnings this morning. They make /distribute industrial components
- "We did not take any broad pricing actions in the third quarter of 2022, and price levels in the market remained stable"
- Spot prices in the marketplace for many inputs, particularly fuel, transportation services, and steel, began to decline during the period. They have a long supply chain so those cost decreases will really only change in future hence why margins suffered
Basically even though some commodity input costs are coming down it will take many quarters for it to make its way to end consumer. Manufacturers margins where squuezed last few quarters and they are in no hurry to cut prices.