This past week, we received the latest inflation reports – the Producer Price Index (PPI) and Consumer Price Index (CPI). And, unfortunately, neither were very good and both indicate that inflation is still running hot on the wholesale and consumer levels.
So, in today’s Market 360, let’s review the details of the PPI and CPI readings for September and the culprits responsible for the acceleration in inflation. And then I’ll share a new way to make money in this inflationary environment.
Let’s dive in.
Producer Price Index
On Wednesday, the Bureau of Labor Statistics released the September PPI numbers. And well folks, they were disappointing.
The PPI recorded a 0.5% gain in September, down from the 0.7% increase in August. Year-over-year, PPI rose 2.2%, compared to a 2% year-over-year increase in August. Now, this was higher than analysts’ consensus estimate for a 0.3% increase, and it marks the third-straight monthly rise in the PPI.
Consumer Price Index
On Thursday, the Bureau of Labor Statistics announced the September numbers for the CPI. And the numbers were problematic as well.
Headline inflation rose 0.4% in September and was up 3.7% year-over-year. That compares to a 0.6% rise in August. Core CPI, which excludes food and energy, increased 0.3% in September and was up 4.1% year-over-year. That compares to a 4.3% annual rise in August. So, core inflation showed a slight year-over-year improvement and was in line with economists’ expectations for a 4.1% annual increase.
Also interesting to note, the CPI didn’t really show higher wage costs. They were up 0.2% in September, and they’re up 4.2% in the past year. That’s actually a deceleration from previous months.
The Problem Lies With Shelter Costs and Energy Prices
If you dig deeper into the details of the CPI and PPI reports, there are two main factors that have once again distorted the overall data: shelter costs and energy prices.
For the CPI, shelter costs jumped 0.6% in September and accounted for more than half of the increase in CPI last month. Energy costs also rose 1.5% due to a 2.1% increase in gasoline prices and an 8.5% surge in fuel oil prices. For PPI, wholesale gasoline prices jumped 5.4% and energy prices overall increased 3.3% in September.
The reality is that much of the recent inflation is tied to higher housing and energy prices. So, while many of the other inflation components have improved, housing and energy inflation continue to keep overall inflation elevated, and that will keep the Federal Reserve on its toes.
Now, while the Fed will certainly take the latest CPI and PPI inflation data into consideration, its favorite inflation indicator remains the Personal Consumption Expenditures (PCE) index. The PCE (which excludes less shelter costs than the CPI) only rose 0.1% on a headline and core basis in August. If the PCE continues to cool, then the Federal Reserve will be more inclined to finally end its rate hike cycle.
Unfortunately, the latest inflation data means that the Fed is unlikely to cut key interest rates in December, as I’d initially anticipated. I still don’t expect them to raise key interest rates any further this year, but I don’t expect them to start cutting rates until next year. Personally, I hope they do cut rates next year or we could easily fall into a recession.
A New Way to Profit in an Inflationary Environment
Clearly, inflation remains an issue, but that doesn’t mean there still aren’t ways to profit in the current environment.
In fact, I believe I found a game-changing investment strategy that will help investors navigate and profit in times of inflation and market uncertainty… and it all has to do with the New Intelligence.
The New Intelligence uses a secret to analyze 120 variables throughout the investment world – everything from the CPI to the yield curve… and more than a BILLION data points in-between – to answer one simple question: “What will the share price be 21 days from now?”
And the New Intelligence is a new way to potentially triple your portfolio over 12 months, by taking the same analysis that’s helped me find so many 10,000% gains and combining it with a proprietary system to give yourself a huge advantage.
If you missed the event, that’s okay! You can catch a replay here now.