Don’t laugh. Inflation cannot stay high forever.
Inflation came in hot as fuck at an annual rate of 8.5%. However, if you strip out all the important stuff, food and energy, the core was up just 0.3% month to month which was less than the forecasted 0.5%. On this news, stocks are rallying.
“The news is positive, and people will be very happy to see the auto inflation bubble start to dissipate, but a 6.5% core inflation number is very hot, and the Fed is still going to be aggressive this year,” said Adam Crisafulli, founder of Vital Knowledge. “Perhaps if energy prices die down and other categories moderate for months the Fed policy guidance will begin to ease, but for now its status quo on tightening.”
Oil is up a staggering 5.5% and rates are coming down too, as mental ward patients bust loose from the sanitarium and buy stocks based on the idea that core inflation is all we need to be concerned with.
I won’t get too jaded or cynical, but I’m somehow skeptical of a rally based upon the notion that inflation has peaked when we have only just begun dealing with super elevated commodities.
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Okay but the auto bubble is not actually starting to dissipate…
I just ran some numbers on this at the end of March. You have to normalize the pricing data for the condition the vehicle is in. The best condition vehicles – your new or used with very few miles – pricing has plateaued but is in no way correcting. Lower quality vehicles are still in up trends albeit not as severe as at the beginning.
What’s probably happening in the CPI data is the market is just running out of the best quality stuff to buy and they’re using sales data rather than building some hypothetical purchases. Dealer lots are still virtually empty. I can still drive past GM vehicle storage facilities filled with cars that can’t be finished because of chip shortages.
This is shifting the makeup of what is being purchased. Worse off used vehicles are increasingly all that’s available. It’s going to make the prices look like they’re tapering off even though no individual vehicle you might purchase costs less.
On the hopes inflation has peaked? I’ve never witnessed anything so absurd. This what happens when central banks meddle in markets that should be free. This what happens when you’re not forced to absorb your losses on risk. Just, wow.
Gold for the win
Ah, the ole “green shoots” routine.