Discover and read the best of Twitter Threads about #Disinflation

Most recents (17)

#ES close almost 4,149 resistance, $RSP $IWM improvements are key bullish achievements, but I doubt would be confirmed by rising #bonds.
Bit of a daily rotation into #cyclicals say that would be hard.
Key today - #retailsales
Quote from Sunday:
2. "I'm ooking for a meaningful undershoot on Tuesday, especially in core #retailsales turning even slightly negative".
Look at China's uneven recovery (18% vs 21% expected retail sales YoY), and compare then to situations when fiscal and monetary policy work in opposite ways.
3. Looking at the relative $XLY direction, I'm afraid #discretionaries are starting to lose their leading shine.
It's rather $XLC $XLV $XLU that are either leading or improving while $XLK deteriorates under the surface (also in terms of #NDX market breadth) just like $XLY.
Read 5 tweets
Time to update this chart.

With everything going lately this may be the single most important chart to look at.

What do the latest numbers tell us?

A thread.


I made the quoted tweet on Feb 2 which was before Jan employment report, #CPI , #PPI and #PCE when most were still talking about great Dec numbers.

In the meantime most indicators showed higher #inflation numbers but, as I noted beforehand, that is only seasonality.

2/16 ImageImage
As I suspected, some took advantage of these seasonality numbers and revisions of SA data (#CPI) to wrongly point to #inflation picking up.

And even worse, the #Fed embraced this false narrative and hiked 25 last week despite the ongoing banking crisis.

Read 16 tweets
@LynAldenContact suggests Taylor Rule implies 10.2% FFR citing @stlouisfed FRED (#Fed).

Is 10.2% really what Taylor rule suggests the FFR should be currently at?

A thread.

Taylor Rule:

FFR = R* + 0.5 (GDP est - potential GDP) + 0.5 (inflation est - 2)

R* - natural interest rate (estimates vary from 2-2.5%); IOW FFR which is neither expansive nor restrictive

#Fed's Dec projections:

GDP est - 0.5%

Potential GDP - 1.8%

Inflation est - 3.1%

Assuming higher bound of the R* estimates, and #Fed's Dec SEP projections Taylor rule implies:

FFR = 2.4%

This is about 220 bps BELOW the current FFR!

And almost 800 bps BELOW that 10.2% @LynAldenContact quoted.

Read 17 tweets
At first glance, Nov #CPI was somewhat better-than-expected report (headline MoM slightly lower than expectations -0.1% vs 0%) and mostly in line (YoY headline, as well as MoM&YoY core).

But in the details #inflation is much weaker than gets recognized.

A thread.

Unadjusted headline #CPI is down for the 2nd M in a row with -0.31% which is the lowest print since Apr 2020 (-0.67%).

In the last 8 yrs there were only 2M with materially lower prints (Apr 2020 and Jan 2015 -0.47%)!

2/17 Image
Unadjusted headline in Dec 2022 (-0.31%) is the 6th lowest in 8 yrs but 3 of these prints were almost identical (Dec 2018 -0.32%, Nov 2018 -0.33% and Dec 2015 -0.34%).

In Apr 2020 the economy was on forced lockdown, and in 2015/late 2018 #deflation was a problem.

Read 17 tweets
Nov #CPI was the 2nd better-than-expected report in a row.

The last time that happened was, prepare yourself, in Oct 2018!

It didn't even happen during the lockdowns in 2020 making this report all the more significant.

Let's delve deeper.

A thread.

On an unadjusted basis headline #CPI was down -0.1% MoM, the lowest MoM reading since April 2020!

Back then the economy was on forced lockdown and this is only second to that lowest 2 readings (Mar-Apr 2020) in the recent history.

3M moving average of headline #CPI (MoM unadjusted) is 0.17% which is 2.1% annualized, well BELOW the #Fed's #inflation target.

I already explained this but for the ones that are reading this for the first time, yes, you read that right - 2.1% #CPI is way below the target

Read 16 tweets
Amid the election today it is easy to forget we get the Oct #CPI Thursday.

#CPI is the most important economic report this week.

So where will the Oct figure print?

A thread.

In prior months my estimates were ahead of both consensus and the Cleveland #Fed.

They also turned out to be more optimistic than the actual numbers.

Non #CPI/#PCE indicators are showing a clear #disinflation, even MoM rent #deflation:

Rents make 32% of the #CPI (about 40% of the core #CPI) and are therefore the crucial component.

Even if we seasonally adjust them, rents are showing clear declines, the largest in at least 5 yrs:

Read 8 tweets
There have been lots of talks around easing rent #inflation and how lagging the Shelter #CPI really is.

Its 12M (or longer) lag makes it difficult to use in assessing current/future #inflation.

So what can the #Fed do?

Let's take a look at some other measures.

A thread.

Lots of recent comments by the #Fed have been about "sticky" and "high" #inflation.

But #inflation is neither sticky nor high as evidenced by the headline #CPI in the last 3M (unadjusted).


Then the #Fed tries to spin it by saying core #inflation is "sticky" and "high".

If we exclude the shelter component (unadjusted), core #CPI is quite low and in a downtrend.

Now obvious Q is what if it reverses its course just like it did in 2021 and heads up again?

Read 14 tweets
The #Fed #pivot talk has intensified lately.

Sth possibly breaking in the #UK, European financial system ( $CS, $DB...), #RBA pivoting by hiking less than expected, higher financial risk in the #US...

Should the #Fed #pivot and why?

Let's demystify all this.

A thread.

Those that follow me know I've been calling the #Fed to #pivot for quite a while.

Ever since mid-May it's been clear to me the #US #economy is in a #recession which should prompt the #Fed to #pivot in Sep.

And every important economic indicator warranted the #Fed #pivot.

But the #Fed decided to turn the blind eye to the #economy in an effort to try to regain some of the credibility they lost last yr by "transitory" talk.

So instead of amending things, they have made another policy error.

Here is more about this:

Read 25 tweets
What really causes inflation? 🧵

[a thread for normies - like me]
2/ The problem with #inflation is that it's a very personal experience.

As I always say, the wallet is the most sensitive organ in the body, so my inflation might not be your inflation.

In fact, my inflation could be seen as #disinflation by you... (more on that later)
3/ Price inflation and monetary inflation have different definitions:

* For many.- #inflation is the increased prices paid for goods & services.

** To others.- it's a decline in the purchasing power of your #money.

*** In layman's terms.- Too much money chasing too few goods.
Read 25 tweets
75 is a done deal but a weird one.

On one hand we have negative growth and #disinflation.

On the other we have the #Fed talking as hawkish as ever with the mkt expecting it to go 75 on Wed.

What will the #Fed do, and why, in Nov and beyond?

A thread.

Let me start by saying, regardless of the mkt expecting it, hiking 75 next week is a mistake.

Actually any hike is a mistake.

How can I say this when many have said (including the #Fed lately) that hikes need to be more aggressive in order to "kill" the #inflation?

Many still seem to neglect the fact that monetary policy works with a lag.

It takes time for the #Fed rate change to be absorbed through the system (transmission mechanism).

How long does it take?

Estimates range anywhere from 6M to 1.5 yrs.


Read 17 tweets
Tuesday Sep 13 we get the most important economic indicator Aug #CPI that will determine the Fed's action in 2 weeks from now.

In many ways this report is more about core than headline with many fearing core #inflation to persist.

So where will #CPI print at?

A thread.

My estimates:

Headline: -0.4% vs -0.0% prior
Core: +0.1% vs +0.3% prior

Headline: +7.8% vs +8.5% prior
Core: +5.9% vs +5.9% prior

This is lower than both consensus estimates and Cleveland Fed Nowcast (see table).

2/9 Image
My Aug #CPI estimates are 0.3 pp lower MoM and YoY on both headline and core than consensus.

The Fed's estimates are the most aggressive expecting monthly gains on both headline and core.

3/9 Image
Read 9 tweets
Opposition is screaming about Inflation,but India under @narendramodi has curbed #Inflation,versus global peers

#VegetableInflation in India is minus 1.92% in May&Food inflation 5.01%

Globally,#FoodInflation up 39.7%, Cereal up 36.6%,Wheat price up 28% &Maize 89.3%

My thread👇
Globally #Inflation is rising because of co-ordinated fiscal stimulus,that has led to asset prices,zooming;For instance,annualized inflation in USA is 9.7%;2yrs back,US was in throes of #Disinflation

$6 trillion stimulus by #Biden has led to too much money chasing too few goods
For those wanting to know why the difference in #WPI&CPI,figures well,weights of items in CPI are based on average household expenditure,taken from consumer expenditure surveys

Weightage of Primary articles in #CPI is 55%+,with Food group alone having weight of 39.06%
Read 5 tweets
We saw a modest 0.1% gain in headline #CPI this morning, a slightly firmer 0.2% gain in core CPI, yet already this report is a story of “that was then, and this is now,” since the #coronavirus and #oil price shock are altering the #economic landscape.
Fascinatingly, the decline in inflation #breakevens implies a world that simply doesn’t believe #inflation is rising, and based on market pricing, instead believes it is falling quickly toward not only short-term, but even longer-term, #disinflation.
We think the disinflationary story told by #TIPS markets is probably overdone and note that even before the Saudi/Russian #oil production dispute, and before the coronavirus’ #economic impact, the fundamentals in the oil market were already displaying signs of deterioration. Image
Read 4 tweets
We learned last week that core #goods #prices continue to remain weak, and indeed over the longer run they’ve witnessed #disinflation.
Meanwhile, while #inflation could see some support alongside a pickup in #wage growth, we think this linkage is much weaker than many suggest: higher wages don’t create meaningfully higher inflation in this era, and corporate #CFOs are beginning to recognize it. Image
Indeed, we think #inflation is more likely to be driven a bit higher by the weaker #USD, and perhaps a higher monetary base (potential velocity gains) and not so much from #wage increases.
Read 3 tweets
#Equities #SP500 was rallying and the bulls are cheering. The excuse seems to be, that Powell has blinked. Remember 2007-09? Fed started lowering rates by September 07. Yet that did not prevent Financial markets to decline hard until March 2009 #HZupdates
The thing is, that when liquidity #crunch snowball gets rolling, some announcement from #Fed will not do the job. Down the line, Fed will need to scramble (QE or the like) to fight USD shortage. My LT #SP500 model remains like this. Major Bear market ABC-structure. #HZupdates
I will not reveal my EW-count for #SP500 here. That is reserved for subscribers and buyers of Weekly Update. Only say, that we have not seen an impulse wave since Sept high. I expect a MAJOR decline to set in rather soon, taking us to my bottom of wave A from LT-chart. #HZupdates
Read 17 tweets
Good morning to all 😀Interesting weeks/months ahead of us as my deflationary scenario plays out. Will have massive consequences for currencies, gold, equities etc. I keep my subscribers updated closely on Daily/Weekly updates. But for now - stay tuned for some #HZupdates 👍
"#Deflation" or "#Disinflation" have been my call for a long time. We are not out of Kondratiev's winter yet. We haven't seen the all events which unfold during K's winter. Still to come Pension Funds Crisis, Currency Crisis, Run from Paper Money ...and War #HZupdates
And "#Deflation" outlook is clear in the charts imo. I look primarily to #AUDUSD and #Copper for guidance. Observe this chart of #Copper. Major ABC pattern. Length of C can be set by the irregular pattern indicating low in Copper below 2008-levels = deflation in 2019 #HZupdates
Read 19 tweets
Hi all 😀It has been a good year! 2019 will be difficult for world economy. A lot of fall outs ahead from disinflationary environment. Get ready for last #HZupdates from the old year 👍
As I laid out at the beginning of 2018, we have seen a rally in #DXY. The USD rally is not over yet. I expect the rally to continuing into 2019 - reaching min. 107 before the rally is over, This will have deflationary consequences across various markets #HZupdates
#EURUSD topped early 2018 and has dropped to a low of 1.121 by Nov. But - this is not the end of this major Bear market for Euro. LT-target remains 0.91 likely to be reached by Q2/Q3 2019 #HZupdates
Read 16 tweets

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