This is purely and solely a momentum driven market for stocks. The disinflation trend is fully intact
While Jay Powell and crew are the center of attention this week, for obvious reasons, what was most striking were the comments from a former senior Fed official: Jim Bullard, former President of the St. Louis Fed . He recently said at a National Association of Business Economists conference in Washington just a few weeks back,That is a direct quote — and he added this little ditty:
Meanwhile, if we can strip out the shelter components, which we know have nothing to do with the prices anybody is paying for anything, inflation already is running at +1.8% YoY, compared with +5.0% a year ago; and the core ex-shelter is at +2.2% from +3.7%. For all the hand-wringing over the PPI last week, the headline is running at the oh-so-scary year-over-year rate of +1.6% from +4.7% this time last year, and the core is right at +2.0% on the nose and less than half the +4.
The downward revisions we have been seeing in payrolls, production, and retail sales have been huge! January’s industrial production was revised to -0.5% from -0.1%, retail sales for January were taken down to -1.1% from -0.
When you look at what the aggregate supply curve is doing , it is expanding at a +3.3% annual rate, so even if you buy into the Atlanta Fed number, aggregate demand is running well below aggregate supply. So, yes indeed, we hit a bump in the CPI and PPI data these past two months, but there is not a construct in theory or practice when supply growth is front-running demand growth by this much that is inflationary.
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