Rate Increase, Joe Popping Pills

I’ll lead again with my new focus: rate increases.  Where are we?

Last week:

• July 27, 92%: 2.25%-2.50% +0.75% increase
• Nov 2, 50%: 3.25%-3.50% +1.75% increase

This week:

• July 27: 71%: 2.25%-2.50% +0.75% increase
• Nov 2: 44%: 3.25%-3.50% +1.75% increase

Source

Not much change.  The prospects for a rate increase are similar to last week, but slightly less certain (44% vs 50% for November 2, and 71% vs 92% on July 27th).  The markets are still projecting an 0.75% increase by July 27th, and a 1.75% increase by Nov 2.  That’s two percentage points in three meetings.

There were a bunch of economic reports this week including my favorite, producer price index by commodity all commodities (PPIACO), which came in at 23.36% y/y – with the Nov 1976 high being 23.44%.  The inflation-deadened consumer price index (CPI) came in at 9.1% (expected 8.8%, with previous high: 14.6% in March 1980).  Industrial production (INDPRO) came in at -0.2% m/m, and 4.16% y/y.  Retail sales (RSXFS) was up 1.0% m/m, and 7.7% y/y.  Added up, it is monster base inflation, weak manufacturing, and with positive retail-sales – positive, if you ignore the product costs which are increasing at a rate (23%) around triple the sales increase (7.7%).

Wolf has a good breakdown of “where the inflation is” here (click to read).

The inflation isn’t spread evenly.  Hot areas include food/fuel/supplies, non-store retailers, food and beveridge, food services, gasoline stations, and miscellaneous store retailers… roughly speaking.

The Commodity Research Bureau (CRB) continues to tumble (source), making yet another new low this week.  That’s recessionary.

Here’s a chart from the Energy Information Administration (EIA), inspired by another column by Wolf Richter (click to read).  His column talks about recent gasoline demand destruction due to absurdly high gasoline prices (up 63%), and a modest increase in electric vehicle (EV) sales – up 66% from last year, to a total sales market share this year of a modest 5.6%, while internal combustion engine (ICE) vehicle sales fell by 21% – but EV as a percentage of vehicles-on-the-road are a tiny fraction of total autos.