CPI Report

Hey everyone and thanks for jumping back Into the macroverse today we're going to Talk about the most recent CPI report if You guys like the content make sure you Subscribe to the channel give the video A thumbs up and check out intothe Cryptoverse premium at intothe Cryptoverse decom I know you might often See sort of the headline numbers come Out but I do want to at least break Things down by category look at the Numbers look at the momentum to see if There is any in what direction and and We'll just take it from there so first We'd like to start off with with Headline CPI now headline CPI as you can See late last year uh started really to To move down considerably right really Starting in in June but then it leveled Off a little bit until September and Then it really started to drop quite a Lot but we said back then that it will Likely be a stochastic process right we Should not expect it to go down in a Linear fashion right it's a stochastic Process and we also know that getting That that last 1 to 2% is going to be You know a a more difficult task and That is showing that is the case right Now I mean CPI headline CPI found a Local bottom back in June at 3.09% and then it's moved all the way Back up to approximately 3.71% so headline CPI this month

Actually came in at around 3.7% now if You look at more digits you can see that It actually came in at 3.69% which was slightly lower than Where it was back in August at 3.71% but It's gone around to 3.7 so it's more or Less the same but again the point is to Say it is relatively sticky at this Point because they the FED has really Been unable to accomplish their Objective at this point or at least so Far of getting back down to that 2% 2% Goal and we know their you know one of Their mandates is of course price Stability the other one being maximum Employment so then the issue here is Well what will It ultimately take to get Inflation down to 2% well one of the Things that could help get inflation Down to 2% would be um something like Lower asset prices right and we've seen A lot of asset prices go down even the Stock market has had a sizable Correction in August or September in August and September and we talked about That correction and and now that it has Transpired those sorts of Corrections Can have you know you know imp imps on Inflation if people feel like they don't Have as much money they're going to be Less likely to spend that money and Therefore demand might go slightly down Therefore prices aren't going to go up As quickly so there is an argument here

To be said that Corrections by the S&P 500 can also lead to disinflation that Doesn't mean that it's going to become Deflation but it can lead to Disinflation and the other thing that Can lead to um you know lower inflation Would be of course a recession right A Recession where the unemployment rate is Going up and and people are are are Worried about you know making sure that They can pay their bills for you know Until they can find another job and then That can lead to sort of inflation going Down one of the things you'll note is That in all you know all these Historical periods of high inflation a Recession was eventually induced Eventually right now that doesn't mean That it has to occur but it is still a Scenario that I think is worthwhile to Consider right normally when you get Inverted yokers when you get inflation Pretty high a recession can be a Byproduct of the federal the federal Reserve's response to bring inflation Back down right the higher for longer Right higher interest rates trying to Stay at those interest rates for longer Periods of time than than maybe people Are really wanting them to do so and so Because of that that can all of course Lead to to the disinflationary process So lower asset prices recessions often Times they go hand inand but you can

Have lower asset prices without Recessions as 2022 showed us um and We've also we also saw asset prices go Down in December of 2018 we saw them go Down in you know late 2015 early 2016 You don't always have a recession just Because asset prices go down 1987 wasn't A recession and and the S&P had a Considerable drop so when you look at This we can see the disinflationary Process started back in June of 2022 and While it was going down almost Essentially monotonically for a while That process has has become a bit a bit Stickier and you can see that inflation Hasn't really moved down in any Considerable way since the summer of 2023 right just a few months ago but Again it has moved up slightly now if You look at a monthly change of this What you'll see and and we'll just sort Of zoom into this local area here is That the monthly change was 0.27% back in July then 48% back in August then this last month it's Actually down so hopefully we are going To continue to see the disinflationary Process take shape right that is what we Would hopefully see think we all would Like we'd all prefer to get back to a Period a long period of economic Expansion but you know it's really hard To do that as long as you have a Fed Just sort of constantly talking about

Higher for longer and and whatnot so I Think at this point what we should watch Is does this does the disinflationary Process continue and can they get us Back down to 2% now if they induce a Recession so be it right there are a lot Of indicators that suggest that could Happen but that would just lead to Opportunities so I don't really think it Should be something that is that is Feared um what I also like to do is Break down the CPI report by category Okay so if you were to look at inflation Year-over-year percent per or per Category this is what you get and I'd Like to zoom in sort of the the recent Trends and and highlight each individual One right so this is headline inflation Right was moving down pretty steadily For a while and then it started to go Back up recently these last two months Were more or less the same and hopefully It's going to curve back over and Continue to go down but some of these Sort of some of the categories have have Moved in a favorable direction to the Downside While others have moved back up So food and beverages continues to go Down you can see that the contribution Or the the inflation of food and Beverages in it back in August was 4.22% this P this most recent report has It at 3.73% which is the lowest that's been

You know really since you know August of 2021 so you know more than two years ago Is is how long ago it was where the food And beverages inflation was this low That doesn't and again a common question I see is well you know prices of food Has gone up right so how is all this Stuff true you know a lot of people I Think misinterpret what these charts are Saying disinflation the disinflationary Process does not imply that prices are Going down right all it implies is that They're not going up as quickly as Before if if it goes up 10% price still Going up if it goes up 4% the price of It is still going up it's just not going Up as quickly for you to see prices drop You would have to see this go below zero Okay and and that is not something that Often happens you can see that for food And beverages on this chart we've seen It happen twice before it happened in 2016 and it also happened in in 2009 okay 2016 we had a recession scare Um we didn't actually get one but we Came you know somewhat close to one and Then you know of course this was coming Out of the uh you know the the financial Crisis way back over here in in 2009 so It is pro it is possible to see Deflation it's just not a very common Thing to see right you can see on this Chart going all the way back to you know The 1960s we've only seen food and

Beverages category go down you know Inflation or go into a deflationary Process that's only occurred these two Times okay so it doesn't mean that it Can't happen again it's just that when It goes down it doesn't mean that prices Are going down as long as the number is Still above zero so if it goes below Zero that would then mean it's in a Deflationary process meaning prices are Actually going down as long as it's Above zero prices are going up they Might just not be going up as quickly as They used to okay so and if you want to Look at like say a monthly change of This the monthly change has become a Little you know it has become a little Bit less desirable I mean like the Monthly change back in in March and and And May and and April or sorry in June Was almost negative 1% month over month Right now it's down to negative half a Percent okay so the issue is that it is Coming down right it is coming down but It's probably not coming down as quickly As the FED would like okay now up until This point again the FED has two Mandates price stability maximum Employment as long as the labor market Is strong then the FED is free to Continue to combat inflation the problem Becomes what you know what happens if if The the unemployment rate starts to go Up and inflation is still not back at

Their 2% goal what will they do they've Talked a big talk will they walk a big Walk and I don't know the answer to that Question I I you know a long time ago I Said I think you know the the the FED Funds rate will go to 5 a half% it has From this level I think they could hold It here for you know maybe hopefully Hopefully as long as possible because They risk if they pivot too soon they Risk just an inflationary um you know Sort of another round of inflation for The next couple of years so hopefully They don't pivot too soon hopefully they Do what they need to do to really get Them you know get inflation back to Their goals if we continue this we can Look at housing inflation housing Inflation is probably the one that lags The most you can see that it didn't even Top out until you know January at about 8.25% January 2023 remember food and Beverage inflation topped out in August Of 2022 too so housing inflation has had A lot more of a lag um it has been Moving down in 2023 if you look at a Monthly change it's kind of been all Over the place this most recent month it Only it only you know we only saw Inflation or sorry we only saw headline Inflation drop by about negative 1 Point Or. 142% prices are still going up right They're just not going up as much as They were so but at least it's moving in

The right direction right at least it's Moving in the right direction we'd like To see this continue to move down if we Look at for apparel actually a pretty Big drop down so that is a welcome site You can see that last month it was at 3.09% the month before that 3.17 the Month before that 3.08 right it's been Around 3 you know around 3% for a while And we haven't really seen a Considerable change there and I believe In Prior videos we sort of talked about The apparel category and how it hasn't Really made any progress in a long time Now it's actually made some progress It's dropped all the way down to 2.26% right after being at around 3% for More than half a year or around that Level now it's dropped down to almost 2% Look at the monthly change on this right This is a pretty big drop to go down Almost a full percent on a Month-over-month basis the last time That happened um you know was you know More about a year ago almost a year ago So that is a welcome site to see you Know to at least see that some of these Categories are going down more so than Maybe some of the other categories are So that's a good site a good thing if we Look at transportation that one actually Has been going up recently but the thing To note about transportation is that was One of the few categories that actually

Became deflationary back in the summer Right if you look in the summer Transportation inflation was actually at 4.6% meaning it was deflationary meaning Prices were actually going down okay so This is a category where prices were Actually going down is started to go Back up recently um but I don't really Think it's that concerning um you can See that you know the the transportation Sector can experience deflation a lot More often than the other than the other Categories that we're looking at in fact It it's not even that uncommon to see it It's happened many times throughout History and many times it did not even Occur it did not even coincide with a Recession so this one isn't as big of a Deal considering even I mean even though It's positive it's still only at around 2% so 2% if it can stay at that level Would be I think just fine as far as the Federal Reserve is concerned but I think The bigger thing is is what will this do In the coming months you know and at Least this most recent move by by this Category while it did go up it didn't go Up as much as it did the previous month It went up about 4% so hopefully it's Going to stabilize you know around that 2% level rather than go up too much and Make the fed's job even harder Medical Care is is one that has actually become Deflationary recently right and if you

Look back throughout all of history here It hasn't we haven't really seen a Period where it's been deflationary but Medical care for the last 3 months has Actually been deflationary and if we go To a month over month change you can see That right it's been dropping pretty Consistently for a long time right about Half a percent a month the issue of Course not it's not really that big of An issue but if you're dropping half a Percent per month for for a long time Eventually you see a go deflationary and I don't think anyone here is going to be Complaining about medical costs going Down right I think that's actually Welcome site um so hopefully hopefully Medical Care category can actually stay Deflationary for a while uh I think I Think everyone will be happy about that If we look at Recreation that is the Category that I was looking at earlier That actually went up recently and you Know this is one that is still at Relatively high levels I mean as Recently as July it was at 4% Year-over-year now in August we saw it Drop down to 3 and a half% now it's back Up to 3.88% if you look at a monthly Change right this is up 32% over the Last month so that is not a welcome site Right it's not a welcome site I suspect That it will likely continue to go down As the months drag on but in the short

Term you know obviously this is not what We want to see we can go look at Education and communication this is sort Of what the chart looks like going all The way back that we have data for on Here and it also went up last month it Went from 1.04% up to about 1.07% so a pretty small move to the Upside but it's still in that range Where it's it's not really that big of a Deal I mean it's still only um it's Still only about 1% okay So other goods and services also went up It's back up to 6% year year now this One topped out back in November of 2022 But it also came pretty close to that Level again back in May of 2023 it was In a disinflationary trend here but this Recent month it's actually gone back up By about 0.25 5 6% so that's not really A welcome site so I think the issue when You look at all this stuff is that there Are categories that are going that that We're seeing a disinflationary process There's you know one or two categories Here and there that are actually in a Deflationary process where prices are Actually going down but a lot there's Still several that that actually in this Recent report we saw we saw them go up So the fed's job is clearly not over With um I still don't think they need to Raise again I'm not saying that they

Won't I I just I don't think they need To I I think that the more important Thing at this point is not continuing to Raise rates beyond the current levels The more important thing is just holding Them at these levels right and not Caving if the markets show weakness Right I mean if like if the S&P drops to 4,000 hopefully the FED continues to to Stick to their mandate and not just cut Rates because they want to come to the Rescue hopefully they can do what they Need to do to to get inflation back down To where it needs to be so that's Breaking it down by category and again Just sort of looking at it headline Inflation that's what it looks like so What we would like to avoid is see these Inflationary waves right we'd like to Avoid a period like the 1970s which is What poell has has talked about many Many times where we basically just kept Flipping from you know lower rates to Higher rates QE um trying to stimulate The economy versus trying to bring Inflation back down and they just they Couldn't get it right and it took the Better part of a decade to figure it out And then vulker came in and essentially Induced uced two recessions back to back And that actually squashed inflation and Then after that we enjoyed a a long Period of relatively low inflation so The Federal Reserve and Powell of course

Today want to avoid repeating the Mistakes of the 1970s and of course Would prefer to just see inflation come Back down to 2% and I think they will I Mean at this point I I still feel Convinced that they will continue on Until the job is done exactly how They've said many many times well also Take a moment to look at core inflation Core inflation has been a little bit More optimistic in its recent Trends uh Because while headline inflation has Sort of stalled out here at that 3 to 4% Level core inflation is still trending Down now the Counterpoint of course is That headline inflation already went Down at 3% core inflation while it has Been going down it's still over 4% right It's at 4.13% which is still well above the F Fed's mandate you can see that core Inflation actually topped out at 6.64% back in in you know September of Of 2022 so it's a welcome site to see That one continue to move down but if Headline inflation is any is any sort of Predictor as to what might happen with Core then it could be a sticky process To actually get it all the way down to That 2% Target um for now it seems to Have you know it seems like it's had Pretty good momentum if you look at Monthly changes of this you'll see that It's you know it's it's been negative

Off and on for a while but mostly Negative there's been an occasional move Moves back up to the upside but a lot of Disinflationary you know the Disinflationary process has continued it Hasn't gone down monotonically as you Can see but for the most part the core Core CPI has continued to drop and and Hopefully we'll continue to see that as The months go on and and and see this go Back down to the Target of approximately 2% if you guys like this content make Sure you subscribe to the channel give The video a thumbs up we do have into The cryptoverse premium at into the Cryptoverse at into the crypto ver.com We'll wrap it up there and I'll see you Guys next time bye