When it comes to inflation, I can say that it affects everyone a little differently. When I was a teenager in the 90s, this was not a term I understood. However, as this version of inflation was happening in circa 1995, we were seeing a different world than the early 90s and 80s. I remember $85 cent gasoline, I remember that Quick Star’s donuts still cost a dollar. Inflation didn’t concerned me when I was a kid.
So, why is inflation relevant? Let’s look at some figures.
Core CPI, which excludes volatile food and energy prices, rose just 0.16 percent for the month, the lowest reading in more than two years and a significant downside break.
There are a number of reasons why it was such a big deal, including:
- It was a downside surprise compared to the consensus estimate of 0.30%.
- On a year over year basis, 0.16% translates to 1.92% inflation on an annual basis. Whoa!
- It may give the Fed some flexibility with interest rates in the second half of 2023. This is not good news for you home buyers; great news for you stock market investors.
- June’s Producer Price Index, released the day after the June CPI report, rose less than expected, building on the optimism about inflation. (Greek. Basically, the FED is trying to speed up the train to get us where our station is faster.)
I don’t put too much stock on individual reports, so at this point, I’m looking for more information before drawing any conclusions about the economy, inflation, and interest rates. Generally speaking, let me take you into my time machine back to the mid-90s. We historically have seen an inflationary market followed by a recessionary turn. Now, don’t get nervous. If you have read previous blogs that I have written, you will notice that I was witness to the moments of inflation/recession transition. And, let me build some confidence, we will all be fine.
. The job market will improve; the price at the pump should reduce; and I will get a 2X4 for less than $4 dollars. Fear generally drives change. And the move from an inflationary market to any other type of environment is not less scary for people. Allow me to duplicate my daily joy and leave you with some positivity. This economic transition is a good thing. We should wish for it. The stabilization that will come from this economic cyclical turn will help everyone. We will look around and see that the grass is greener, the flowers smell better, and stuff will cost less. How do we ask for better. “Strawberry fields forever”….thank you John Lennon. Hang in there, the best is yet to come.
. Reach out to a us if you have questions and concerns.
Blessings!
Dan