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Jim Bianco Profile picture
@biancoresearch
Sep 15, 2021 • 6 tweets • 3 min read • Read on X
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A thread about transitory vs persistent inflation and why persistent might be actually be winning.

This comes from @economics And it breaks down CPI by reopening and non-reopening components.
Of the 5.25% inflation rate in the last year, only 1.62% was reopening components.

1/6
Breaking it down for August we find that reopening CPI components (or transitory inflation) FELL by 0.22% while CPI non-reopening components (or persistent inflation) ROSE by 0.35%

2/6
Detailing this we find that CPI non-reopening (persistent) components are surging to its highest monthly level since at least 2016.

Restated, this series of persistent inflation is trending higher, and is 78% of overall CPI.

3/6
The CPI reopening components (transitory) fell by the most since the lockdown.

Restated, this series of transitory inflation is falling and is just 14% of overall CPI.

4/6
So, why are the CPI reopening components falling? Is the Delta variant hurting the economy and sapping demand?

Consider these two charts.

Airline ticket prices collapsed by 9% annualized in August. Why? Because demand is also collapsing as measured by the TSA?

5/6
In sum transitory components are falling and their demand is off as Delta is hurting economic activity.

Meanwhile persistent inflation components are surging higher and higher.

Is this why stocks turnaround today? Weakening demand and higher inflation squeezing margins?

6/6

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More from @biancoresearch

Jim Bianco Profile picture
Jun 2
1/12

Polymarket recession odds peaked at 65% on May 1st, the April ISM release date, suggesting Liberation Day and the 20% stock market correction did not damage the economy, as the "soft data" warned.

Subsequent April data confirmed this.

Will May see more of the same?

🧵 Image
2/12

The prevailing narrative in the market for months has been that the labor market is going to fall apart, forcing the Fed to cut rates.

This has not happened, and so far, the "soft" (survey) data have been wildly off in predicting the economy.
3/12

ISM Employment upticked in May from April. The first monthly "May" data point suggests the labor market is still not weakening. Image
Read 12 tweets
Jim Bianco Profile picture
May 30
1/9
Why The Fed Is Not Cutting Anytime Soon

The economy is rebounding strongly, and prices are rising.

It would be reckless to cut rates under these conditions.

The market knows this ... see this chart.

🧵 Image
2/9
Collapsing Imports are Positive For GDP

*US GOODS IMPORTS FALL 19.8% M/M, BIGGEST DROP ON RECORD

The amount of imported goods declined in April, as expected. April 2 was Liberation Day, and the rise in tariffs slowed imports. Image
3/9
Slowing imports halved the Trade Deficit in April, also as expected. Image
Read 9 tweets
Jim Bianco Profile picture
May 26
1/5
Inflation Update:

May 1st estimated inflation at 1.35%. 25 days later, they are 0.72% higher at 2.07%.

Tariffs?
--
Truflaton measures more goods than services. Goods inflation is lower than services inflation.

So, the rate of change is more important than the level. Image
2/5
Before, Truflation was the Billion Prices Project, which is now called PriceStats and is owned by State Street Bank. The creator is @albertocavallo

On Thursday, the Financial Times featured some of their work. It says the same thing as truflation.

ft.com/content/b27e76…

See the red line on the right. With increased tariffs (red line to the left), the prices of goods originating from China are increasing rapidly.

Also note that the Chinese-originated price rise (red line to the right) began around May 1st, the same time truflation started its upward march.Image
3/5
From the FT:

The Yale Budget Lab says the average US family would pay $2,800 more for the same basket of products purchased last year, should tariffs remain at their current level, with lower-income homes more exposed.

Chinese products being sold in the US have already seen marked increases in retail prices, according to analysis of high-frequency data from PriceStats by Alberto Cavallo of Harvard Business School.
Read 5 tweets
Jim Bianco Profile picture
May 24
1/12

Is the consumer paying higher prices due to tariffs?

We don't know for sure, and will not for months, but some numbers suggest they are.

This will surge inflation and keep the Fed on hold for a long while.

Wall Street does not get this.

🧵
2/12

Customs collects tariffs daily and sends most to the Treasury around the 22nd.

On Thursday (May 22), $16B flowed into the Treasury's account.

Tariff collections are now ~$29B ahead of last year's. On Liberation Day, they were ~$5B ahead of last year.

+$24B in 7 weeks. Image
3/12

The US has been importing about $325B to $340B of goods monthly.

According to the latest data, imports have surged in the last few months (through March) as importers rushed goods ahead of Liberation Day. Image
Read 13 tweets
Jim Bianco Profile picture
May 1
1/9
ISM was released this morning, marking the first monthly data point since Liberation Day.

It beat expectations and is not giving indications that manufacturers "froze" or "hit a wall" post Liberation Day.
--
*US APRIL ISM MANUFACTURING INDEX FALLS TO 48.7; EST. 47.9 Image
2/9
It is consistent with decent NON-TARIFF growth. Image
3/9
Why did bonds not like it (yields moved higher)?  Maybe prices paid (tariffs?) Image
Read 9 tweets
Jim Bianco Profile picture
Apr 30
1/6
Wall Street only cares about weak growth and wants cuts.

Main Street cares about higher prices.

The Fed is aligned with Main Street.
🧵
--
Polymarket betting is as good a gauge as any to measure the consensus opinion.

Now, 70% expect that a recession will occur in 2025. Image
2/6
So explain this ...

Why is there only a 9% chance of a cut next week? Image
3/6
ASSUMING NO CUT NEXT WEEK, the probability of a cut on June 19 is just 60%. Image
Read 6 tweets

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