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Thursday, January 19, 2012

Quick Note On US CPI

The combination of December CPI (release) and ongoing commodity increases imply that overall consumer inflation is likely to shift up again. Gas prices are rising and while steep cuts in the more frivolous food categories can be seen in some grocery stores, the underlying trend is up now.

As of December, CPI-U was 3% YoY; CPI-W was 3.2% YoY. Food at home for the wealthier consumers was still up 6% YoY; food at home for the lower-income bracket was up 6.1%.

The ECB's program is likely to notch prices up world wide - there should be a pretty rapid dissemination around the world in commodity buying. If sexpectations about the Chinese money-hurling operation pan at at all, you can expect a strong surge of consumer inflation over the first half.

The ECB ops are truly massive, and they have a very fast follow-through. Prices will be unresponsive to demand shifts for months to come, and many companies are still recouping earlier inflation-inflicted losses. So be wary.

MOM, what do you see as inflationary about the ECB's bond purchases? Are you making the assumption that it's equivalent to our QE and expect a similiar result?
I continue to think that China is real lever on global inflation, as long as they continue to overstimulate we will have a strong bid on commodities.

dis - It's different than QE2.

The money they are dumping in the banks is going to fund a lot of repayments of loans. The excess seems to be going back on deposit, and in some cases going into safer, faster maturing sovereigns to exploit the spread.

But the money that pays back the loans is the money that's going to diffuse back into commodities. Some of that money is going back into Asian and ME hands. I think this one is very direct. Some will end up in equities, but I'm thinking most of it snaps into commodities early.

In part I think that because in December, it looked like money was short to commodities in certain Asian markets.
I used to have sexpectations about the Chinese, but I don't go to massage parlors anymore.

WV: misfuri. I think Miss Furi was a masseuse I used to see.
Is the next step hot money buying and holding physical
commodities instead of the paper equivalent ? When
that happens, stagflation will take off and the benefits
of Free Trade" will be called into question.
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