Joe Wiesenthal, Jared Dillian, White House discussed on CoinDesk Podcast Network


Now, in the days leading to last month's print, the market started to get a signal that inflation would be coming in hot. The White House started spitting a full 48 hours before the inflation numbers actually came out. Talking about lagging data and how gasoline was already coming down. This time we didn't get any such spin. Jared dillian writes, a reminder that last time The White House got the CPI print ahead of time and warned us it was going to be high. No warning yet. Does that mean it's going to be low? Well, that is indeed sort of what we got. At 8 30 a.m. on the dot in all caps Joe wiesenthal from Bloomberg tweets, breaking its cool, 0% headline inflation, core rises just 0.3% S&P futures shoot higher. Headline had been expected to rise 0.2% month over month, economists have been looking for a 0.5% core gain. So let's break this down. The headline year over year inflation was 8.5% versus the 8.7% that was expected and 9.1% last month. Core CPI was 5.9% year over year. However, the month over month numbers were even more encouraging. Month over month, headline data was actually flat. In fact, if you don't round, it was actually a little under zero. This is after a 1.3% increase in June. Core was up 0.3%, which was down from a 0.7 percent gain in June. This is the first downside surprise relative to Bloomberg consensus since August of last year. The decrease was driven as expected by gasoline. Gas was down 7.7% in July, but other areas were surprisingly down as well. Utilities were down 3.6 from the prior month, airfare down 7.8% from the prior month, which is its biggest decrease in almost a year, hotels and used cars were also down. Now on the flip side food is still really expensive up 10.9% over a year, and shelter costs continue to rise up 0.5% on the month and 5.7% from last year. In spite of that, however, markets were pumped. S and P futures were up two plus percent. Bitcoin also followed and was up about 2% instantly. Joe wiesenthal again pointed out that this was actually the fourth month in a row of a decline in the year over year core inflation rate. So, as you might expect, there was a lot of peak inflation confirmed type of conversations. Now, one common theme that I did want to point out is that there are a lot of people tweeting some version of, we're stupid to celebrate 8.5% inflation. My feeling on this is sort of, come on, man. People are smart enough to get that markets reacting positively to this isn't because they think 8.5% inflation is good. But because of the direction it seems to be headed. Put differently, there's no path to whatever we think a healthy, normal inflation level is, without going through all the other numbers in between. It's just Triton doesn't really add much to the conversation to be like, yeah, but 8%, 7%, 6% inflation is still bad. We know, but that's not the point. The point at least for the moment is the trendline. That said, there are better concerns than that sort of concern trolling about 8.5% still being bad. First we had the rational still have a long way to go type takes. Claudia Sam wrote about time we got a downside surprise on inflation. Take a deep breath and know we still have a wild ride ahead, sadly. That said I'm thrilled to have the first CPI day in a long time where I don't feel like puking all day. Second, there are many arguments that shelter isn't really well reflected. Charlie biello points to average monthly rent data from apartment list that suggests rent is up 12.4% year over year, and the case shiller U.S. national home price index, which suggests that home prices are up 19.7 percent year over year. Third, there remain big concerns about stagflation. Clinton era treasury secretary Larry summers has been all over TV, talking about why he worries that a slowdown in headline inflation will lead the fed to believe that their policies are working and that their job is done. Speaking with Bloomberg last week, somers said quote, I'm afraid if we have some good news on noncore inflation, that combined with signs of an economic slowdown will lead the fed to think things are under control. We're going to have a situation like we had in the 70s, where we've perpetuated inflation by not doing enough to contain it. We have by any reasonable measure core inflation somewhere and plus or -5%. It's more than when Richard Nixon implemented price controls. This is not acceptable by any dimension. I don't think the fed has the wire right now. Without significantly raising real interest rates, which are adjusted for some measure of inflation, then we are just setting the stage for stagflation. Paul krugman sort of agreed, saying the good news we are about to get on near term inflation is not proof that the strategy has ever worked and alas. It offers no justification for an easier pivot to money. Now part of this stagflation argument is about productivity. The Labor Department figures released on Tuesday showed that productivity, which is a measure of non farm business employee output per hour, had fallen at 4.6% annualized in the last quarter after falling at a 7.4% pace in the first quarter of the year. These are the weakest back to back results since 1947, and the largest year on year drop in output on record.

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