#CPI The headline today is of course core slipping back to 0.3% MoM and all items falling back to 7.7% YoY on basis effects. But let's have a look behind the headlines...
Core goods are now decisively DEflating - down -0.4% MoM - as global supply chains are reopening in earnest and demand is slackening. The only real stubborn price pressures remaining in core goods are in new vehicles and some related parts. The chips issue still the culprit.
But the BIG NEWS today is the prices of Services less Rent of Shelter falling -0.1% MoM in October. This is a huge change (e.g. last month +0.9%) in direction and a bellwether as the rent and OER data is lagging the housing market that has already turned negative.
We are now in an inflation environment being battered around by Ukraine-war-related (and OPEC+ manipulated) energy costs, the knock on impacts of the above on food costs, and OLD RENT DATA that no longer reflects the facts on the ground. (And, perhaps, a shortage of microchips).
The October CPI report should indicate to the Fed that the risk of policy overshooting has been materially increased. While 2022 saw Omicron delay reopening, and Ukraine throw a monkey-wrench into energy and food prices, the postpandemic reversion of prices has begun. #Transient
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