One of the largest components of CPI / PPI that we can track is oil / gasoline.
Sept->Oct saw prices drop 5-6%. PPI energy was -6.5%.
While we do not have exact numbers in advance, tracking Brent Crude or WTI are good proxies of what to expect one month ahead of the data release (as we already have half of November's data). And it is DOWN. We have dropped about 12% from October so far. There is a decent chance the PPI print for energy in the next report is almost doubly as bad as this most recent report. Gas prices alone are down around 7.5% from October.
What does that mean?
We have a +.4% MoM rise last November rolling off the YoY average. And October was -.5% MoM.
November's print is likely to be in the -.5% to -1.0% range, IMO. That means YoY PPI (+1.3% in October) falls to +.9% if November prints a 0 and could fall to 0 if November prints -.9%.
The CPI print is likely to be a bit higher considering the discordance between the monthly readings last month but if PPI leads CPI it is also trending down… if October CPI was 0, I could see a -.2 to -.5% drop in CPI for November data. That would put annualized CPI @ +2.7% to +3.0%.
IF energy can stay down, we are IMO likely to see YoY CPI drop below 2% in February or March, we have a+.5% and +.4% print from last Jan / Feb rolling off at that point which would probably do the trick. If the expected drop in shelter prices materializes as well, we are going to see sustained negative momentum into the rest of 2024…. with YoY prints dropping below 2% by Q2 next year that likely gives the Fed the leeway it needs in public perception to begin rate cuts in March or April.
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