Useful framing that inflation landing where forecasts expected is itself reassuring compared with 2022. Core rising three months in a row, even with energy driving most of it, is worth watching closely.
The reassurance is that we have a reliable understanding of the forces driving inflation. That was something the "experts" conspicuously did not have in 2022.
The caveat on that is that the key driver of inflation--energy prices--is contingent on something which is inherently unpredictable: war.
If Ukraine hits the right Russian refinery with the right drone package in the right spot at the right time, diesel prices break through the $210/bbl ceiling currently being evinced. If the Houthis do the same thing in Saudi Arabia we get a similar result. If Iran decides to spray drones and missiles across the Persian Gulf we get at least that result.
We won't know if those things will happen until they do.
We understand how inflation is unfolding right now. We need to be mindful of the limitation on our understanding of how inflation will unfold in the future.
Christmas could very well prove to be where the oilpocalypse hits hardest.
A good many retailers live and die on their Christmas shopping results. If inflation is causing people to reduce spending—and there is good reason to conclude that is what happened in September—then the September data is not a good open for the Christmas shopping season.
With benchmark crude prices having risen 20%+ on the month so far, we are not seeing any signals that energy price inflation is quite done, although there does seem to be a ceiling on diesel at least for the moment.
A surge in energy price inflation in the period just ahead of Christmas would almost certainly damage retail sales in the busiest part of the year for retail.
Useful framing that inflation landing where forecasts expected is itself reassuring compared with 2022. Core rising three months in a row, even with energy driving most of it, is worth watching closely.
The reassurance is that we have a reliable understanding of the forces driving inflation. That was something the "experts" conspicuously did not have in 2022.
The caveat on that is that the key driver of inflation--energy prices--is contingent on something which is inherently unpredictable: war.
If Ukraine hits the right Russian refinery with the right drone package in the right spot at the right time, diesel prices break through the $210/bbl ceiling currently being evinced. If the Houthis do the same thing in Saudi Arabia we get a similar result. If Iran decides to spray drones and missiles across the Persian Gulf we get at least that result.
We won't know if those things will happen until they do.
We understand how inflation is unfolding right now. We need to be mindful of the limitation on our understanding of how inflation will unfold in the future.
“People spent less in September. Less spending slows inflation but it also slows economic growth.”
So now we need to watch the data on Holiday shopping. Are people just saving up for Christmas? We’ll see.
Christmas could very well prove to be where the oilpocalypse hits hardest.
A good many retailers live and die on their Christmas shopping results. If inflation is causing people to reduce spending—and there is good reason to conclude that is what happened in September—then the September data is not a good open for the Christmas shopping season.
With benchmark crude prices having risen 20%+ on the month so far, we are not seeing any signals that energy price inflation is quite done, although there does seem to be a ceiling on diesel at least for the moment.
A surge in energy price inflation in the period just ahead of Christmas would almost certainly damage retail sales in the busiest part of the year for retail.