Prices Climb At Fastest Pace Since 1982… But It Could Have Been Worse

Prices Climb At Fastest Pace Since 1982… But It Could Have Been Worse

Having surged faster than expected in 7 of the last 8 months, all eyes are on this morning’s Consumer Price Index as this is the last big release ahead of next Wednesday’s Federal Reserve decision, where Deutsche Bank economists (among many others) are expecting they’ll double the pace of tapering. Chair Powell himself reinforced those expectations in recent testimony, stopping just shy of unilaterally announcing the faster taper. Crucially, he noted this CPI print and the evolution of the virus were potential roadblocks to a faster taper next week.

And sure enough, CPI printed +6.8% YoY – right as expected and the fastest rate of increase since 1982…

Core CPI – stripping out everything you spend money on every day – rose at 4.9% YoY – its highest level since 1991…

In another blow for team transitory, the drivers of inflation were increasingly broad-based, rather than just in a few categories affected by the pandemic. Under the hood, everything rose in price…

The shelter index increased 0.5 percent over the month, as the indexes for rent and owners’ equivalent rent both rose 0.4 percent; these increases were the same as in October. Nov Shelter inflation rose 3.84% Y/Y, up from 3.38% in October and Nov Rent inflation jumped 3.05% Y/Y, up from 2.70% in October. The index for lodging away from home rose 2.9 percent in November after rising 1.4 percent in October.

Vehicle indexes also continued to rise in November. The index for used cars and trucks rose 2.5 percent over the month, the same  increase as in October. The index for new vehicles rose 1.1 percent in November after a 1.4-percent increase in October.

The index for household furnishings and operations increased in November, rising 0.8 percent, the same increase as in October. The apparel index rose 1.3 percent in November after being unchanged in October. The index for airline fares turned up in November, rising 4.7 percent after declining in recent months.

Fed funds futures were fully pricing in a rate hike by the June meeting, alongside more than 70% chance of one by the May meeting (and almost 3 full rate-hikes priced-in by the end of 2022), but notably 2Y Yields dropped on the CPI print as it missed the +7.0% whisper level…

And rate-hike odds in the STIRs also dropped modestly…

Perhaps even more notably, the rate of acceleration of CPI is extreme to say the least – the 12m rise from +1.1% to +6.8% is the fastest acceleration since the early 1950s…

It may have been the death knell for team transitory, with Chair Powell taking pains to retire the term in his recent testimony before Congress.

Finally, we note that, despite The White House proudly crowing about wage growth, real-wages shrank for the 8th straight month in November…and with it, Americans’ standard of living dwindles.

Source: Bloomberg

Get back to work Mr.Powell.

Tyler Durden
Fri, 12/10/2021 – 08:40

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