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Following up on a note we published yesterday from the MACRO team on inflation we are publishing a chart that takes a broader look at consumer inflation trends.  It was pointed out to us yesterday that a fairly unique set of circumstances is leading to this bout of protein inflation – nothing cures high prices like high prices especially in commodity land.  This is certainly true in some respects, but the consumer inflation pinch is coming from multiple sources. 

Hedgeye’s MACRO GURU, Darius Dale, created an index that tracks food, fuel and utility inflation for the median consumer.  It’s a weighted average of the YoY and MoM percentage change in the monthly averages of the CRB Foodstuff Index (CRB FOOD Index), the American Automobile Association’s Daily National Average Gasoline Price Index (3AGSREG Index) and the iBoxx Electricity Price Index (IUTPELC Index). The weights are based on their respective shares of PCE (i.e. 12.45%, 6.39% and 8.28%, respectively).

Holding current prices flat, this index should accelerate towards +13-15% YoY by year’s end. On a MoM basis, the YTD pattern is tracking very similar to early 2008 and early 2011. While the “pinch” on consumer’s wallet isn’t as sharp in magnitude as it was in those periods, we’d argue that the consumer/economy may be in a similarly precarious position now. 

Can the U.S. Consumer Handle the Pinch? - z.  dd

Howard Penney

Managing Director

Matt Hedrick

Associate

Fred Masotta

Analyst