Core CPI Highest Since 1992, Accelerating Rents, and Checking in on the Commodity Surge
June 14, 2021 | FIRESIDE CHARTS
Consumer prices are climbing in the U.S. as core CPI shoots to its highest level in nearly three decades. Higher costs are already taking a toll on consumers’ plans to spend on higher cost items such as cars and home appliances, and that may only grow more true as the era of discounted rent begins to come to a close. Will CPI spike even further as the rental market begins to normalize? The markets closed in the green Friday as equities continue to march higher—still lead largely by small caps. Chairman Powell’s assurances that the inflation we’re seeing is transitory has gone some length to calm investors; will that hold true following this week’s FOMC meeting? Meanwhile, some commodities look to have hit pause after their massive sprint upwards and lumber costs are coming back down to Earth after suffering their largest weekly drop on record. Is this yet more evidence that the inflation spike won’t last forever?
1. The pass-through from PPI to CPI has certainly begun:
Source: Statista, from 6/14/21
2. Price spikes are having an effect on purchasing plans for items like cars and appliances:
Source: Bloomberg, Morgan Stanley, from 6/14/21
3. 42% of CPI is the housing or shelter component which has been dramatically undercounted during Covid (rents down while housing prices soar):
Source: Statista, from 6/14/21
4…However, rents look to be in a rebound of their own which may drive CPI higher:
Source: The Daily Shot, from 6/14/21
5. Our trade balance continues to worsen:
Source: The Chart Store, from 6/14/21
6. The continuing pattern seems to be surge, stop, rest, repeat…
Source: The Chart Store, from 6/14/21
7. Unlike the last ten years, this year’s rally has been broad and led by small caps.
Source: The Chart Store, from 6/14/21
8. Despite the largest increase in CPI since 2008, yields pulled back last week. Was the Fed buying bonds to nip another rate increase in the bud?
Source: The Chart Store, from 6/14/21
9. Some commodities have stopped to digest their sprint upwards:
Source: Bloomberg, from 6/14/21
10. Lumber is following the classic parabola up, parabola down pattern…
Source: The Daily Shot, from 6/14/21
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.