Inside the Inflation Numbers

Headlines discussing CPI and PPI trends are sometimes misleading. One must look below the surface to really understand what's happening with inflation. It's sometimes confusing.
 
We do our best to decipher what the latest data implies and how it will impact the probability of the Fed taking interest rate action. Inflation and interest rate levels are impacted by CPI and PPI data as these are the indicators that suggest inflationary trends. Inflation is a key factor that we examine as we invest portfolios. 

A recent article highlighted how important it is to look below the surface headlines to understand what really is happening with inflation in the economy.
 
Excerpts are provided below.

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“By the numbers: Both headline CPI and the core measure that excludes energy and food costs rose 0.4% on a monthly basis, another big gain after a streak of milder increases late last year, according to data out Tuesday.

• Over the last three months, core CPI rose an annualized 4.2%. In August, that number was 2.6%.

The intrigue: Key trends that had fueled disinflation last year retreated in February.

• Gasoline prices surged last month: After four consecutive months of declines, the energy index rose 2.3% — a main factor pushing up overall CPI. Of course, prices at the pump can whip around from month to month, but the increase is a reminder that commodity prices can go up as well as down.
• Tailwinds from normalizing supply chains helped cool prices for goods, though some economists questioned how much further that had to run. For the first time since May, goods prices excluding food and energy rose, though the increase was slight (0.1%).

What to watch: The services side of the economy remains especially troubling, including fast-rising insurance prices.

• Plus, shelter prices have long been expected to reflect the more benign increases shown in private-sector data — but they showed only slight signs of cooling. The index rose 0.4%, down from the 0.6% gain in January.
• That component alone is responsible for roughly two-thirds of the 12-month increase in core CPI.”

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Source: https://www.axios.com/2024/03/12/inflation-cpi-report-fed-officials-wall-street 

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