LOOKING AHEAD TO THE CPI REPORT

As a reminder this is what “He Who Sees No Bubbles” said recently…

“Elevated unemployment and stable inflation expectations should keep inflation subdued, and indeed, inflation could move lower from here.  “The Federal Reserve is committed to keeping inflation low and will be able to do so.”

-          December 7, 2009 - Fed Chairman Ben S. Bernanke in a speech to the Economic Club of Washington

The US Dollar has strengthened over the past few weeks and is strong again today.  Today’s PPI reading and Wednesday’s CPI could be the river card that reveals why?  We have been calling for inflation to return and that time is now. 

The consensus estimates for the seasonally-adjusted November CPI is 0.4% according to Bloomberg versus 0.3% in October.  Given the implied relative strength of gasoline and food prices in the November retail sales data, an upside surprise to consensus is a better than average possibility.

A consensus report would boost year-to-year CPI inflation from minus 0.2% in October to roughly a positive 1.9% in November.  The November CPI data will officially end the recent period of formal DEFLATION.

Inflation is moving lower?

Howard Penney

Managing Director

LOOKING AHEAD TO THE CPI REPORT      - USCPI