INFLATION: the 12-month CPI decreased from 9.1% to 8.5% for July 2022. Energy prices were up 33% and that is worldwide. Excluding energy, food, and Used Cars, inflation was 5.9%. The Federal Reserve sets interest rates based on the PCE which is 5.3%.
INFLATION’s major causes are: higher Energy and to a lesser extent Food. As a bar gets closer to the LEFT, it will fall off as new monthly data becomes available. The black hatched bar is the month that has recently fallen off and has been replaced by the most recent month’s data, that being July 2022. Higher interest rates will NOT solve these isolated sources of inflation.
GAS PRICES are an international item that affects all. Putin invades Ukraine on 2.24.22, Gas prices were up 19% for ONE month alone: March 2022.
The March 2022 spike will continue to be included in the annual CPI calculation for the
next 9 months. It is the gift that will keep on giving. For June gas prices are up 17% over
May. Gas prices for August are materially down from July and this will favorably change will be picked up in the August CPI which will be released on 9.13.22.
July 2021 data (red) was replaced by July 2022 (green). When red is larger than green, then inflation for that item will improve. When green is larger, then inflation is WORSE.
NEXT month will have new data for August 2022, therefore August 2021 data will drop off. August 2021 is the RED bar. The green bar is the average of the prior 6 months (Feb ‘22-July ‘22). When green is larger, then inflation is worse. Next month will NOT have good news for the Core component.
The red bars are the MONTHLY average of Aug ‘21-Jan ‘22 while the green bars are the average of Feb ‘22-July ‘22. When green is larger, then inflation is worse. A monthly 0.4% is about a 5.0% annual rate.
As we move forward in 2022, as the impacts of COVID subside, the economy will come into focus. Below are the publication dates of the CPI, PPI, and Net New Jobs. These items will be key factors during the Federal Reserve’s meetings which are also listed below.