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Dr Copper’s Breakout Message, Services Inflation & TikTok-Gate

The metals rally – especially in copper – came alongside indicators of ongoing inflation.  Meanwhile confidence continues to collapse. Deservedly so. But one dividend: the truth continues to emerge, as ancient frauds (vaxes against infection/transmission of respiratory viruses just can’t work) are revealed for all to see. 

The User's Profile davefairtex March 17, 2024
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30 Year Mortgage Rate (MORTGAGE30US); 6.74%, -12bp w/w.
10 Year Treasury Rate (DGS10); 4.31%, +22bp w/w. Big increase.
Fed Balance Sheet (WALCL); 7542.0B, +3.1B, (+0.04% w/w); QT flat.
Total Bank Credit (TOTBKCR); 17468.7B, +19.8B, (+0.11% w/w), credit expansion.
Strategic Petroleum Reserve (WCSSTUS1); 362K, +596, (+0.16% w/w), refills slowing.
Producer Prices (PPIACO); +1.64% m/m, (prior +0.57% m/m), inflation.
CPI All Urban (CPIAUCSL); +0.44% m/m, (prior +0.30% m/m), inflation.
Retail Sales (RSAFS); +0.57% m/m, (prior -1.06% m/m), near the highs; expansion.
Industrial Production (INDPRO); +0.10% m/m, (prior -0.46% m/m); flat, off the highs.

There were four major reports this week: the CPI (Tuesday), PPI + Retail Sales (Thursday), and Industrial Production (Friday). CPI showed inflation – the Fed-and-MSM-baffling (worker-shortage-induced) “services inflation.” PPI inflation is also starting to pick up once again, while retail sales remain strong.  Industrial production is flat, but down from the highs.  More buying, higher prices, more expensive labor, but flat production.

Beneath the Skin of CPI Inflation, February: Inflation Saga far from Over, Core CPI & Core Services in Ominous 6-Month Trend (source – wolfstreet);

Great details from Wolf.   Cherry-picking, month-over-month changes, and multiplying by 12 to annualize.  Try to avoid heart failure for some of these items:
+movies/concerts/clubs: 4.5%
+airline fares: 3.6%
+delivery services: 2.2%
+pet services: 1.0%
+motor vehicle insurance: 0.9%
+motor vehicle repair: 0.8%

What on earth could be causing this persistent “services inflation”?  It is the usual suspects. What on earth would cause costs in these areas (that demand healthy, non-brain-fogged in-person labor) to continually scream higher?

If you are in MSM, or you’re a “normie” analyst, you probably don’t understand the cause of the worker shortage – you might imagine the Fed will cut rates “any day now” because “models.”  Sadly for you, you’d be continually losing money on your trades given this assumption.  Below, notice how “climbing disability” in the labor force has roughly moved alongside (%change y/y) CPI Services inflation.  It’s almost as if more disabled workers leads to services inflation.  Inflation is off the highs – but it remains above 5% annualized, and in the last two months, it is starting to come back – although the bounce is not yet visible in this chart.

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Top Comment

Thank You Dave for always such a strong varied wrap up of the week! Your recap is pretty much the only “news” I am taking...
Anonymous Author by bird-lover
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