Daily update
Daily update
- Yesterday’s US consumer price data does not mean inflation is over, but it does signal that the transitory inflation of 2021 is over. The 2021 surge in durable goods demand normalized, and the resulting collapse in durable goods price inflation was stunningly fast. The commodity wave of inflation is fading, and that leaves the profit margin expansion in focus.
- Durable goods are now in deflation—this is increasingly important in 2023, as durable goods will have a higher weighting in the calculation of consumer price inflation. The fantasy price of owners’ equivalent rent is the main driver of core inflation, and that means that the cost of living reality for most US households is lower than consumer price inflation suggests—hinting that consumer may be less damaged by inflation this year.
- China’s import and export data both fell in December (the forecast ranges for these numbers make the consensus data effectively meaningless, but a decline was expected). Slowing global demand for goods and zero-COVID policies will have had an impact.
- UK industrial production and GDP data were alright at the end of the year, but in both cases earlier data was revised lower. US Michigan consumer sentiment is due—the gap between Republican and Democrat sentiment remains huge.
