The Independent Market Observer

What Mattered This Week? Mixed News on Inflation

Posted by Brad McMillan, CFA®, CFP®

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This entry was posted on Aug 11, 2023 2:25:23 PM

and tagged Commentary

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Inflation-dOnce again, this week was all about inflation—and the data was more mixed this time. Most of the news was good, as core inflation continued to tick down, while the monthly figures were in line with expectations. But the year-on-year headline number rose for the first time in months. It didn’t rise by a lot, only 0.2 percent. Still, that wasn’t a drop. It also raises the possibility that inflation could be bouncing back. Spoiler alert: I don’t think so.

Digging into the Inflation Data

Last month’s uptick was mostly based on the 12-month comparison with last year’s data, not on what is happening right now. When you dig into the current data, pretty much everything continues to trend down. So, this uptick is likely to be short-lived.

More, when you look at what inflation we do have, it comes exclusively from the shelter component—from housing. This data, by design, is a lagging indicator, about 12 months slow. When you look at the current data, you see large drops ahead. This alone should keep pulling inflation down over the next several months.

Energy Prices Worth Watching

The big inflation risk right now comes from energy prices, and those are worth watching. But even if we do get a headwind from energy, the tailwinds from housing and other components should keep inflation down going forward.

Positive News Overall

In other words, the data this week continues to be positive overall. There are some things worth keeping an eye on. But then, there always are. My attention this weekend will be on my oldest nephew’s wedding, so I am glad not to have to think about economics.

Have a great weekend!

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