Editor's Note: This note was originally written yesterday by Hedgeye CEO Keith McCullough who captains our macro team. For more info on our institutional macro research email sales@hedgeye.com.
This was probably the capstone for the recent Reflation Trade (3 month macro move off the AUG lows) as headline accelerates for a 5th consecutive month, breaching the 3-handle to the upside and marking the fastest pace of wholesale price growth since Jan 2012.
- Good pricing leads the upside with Energy a primary driver = +4.5% m/M and +12.4% Y/Y
- Food = accelerating to a multi-year high at +3.5% Y/Y
- Comps get progressively more difficult from here across headline/energy/food
Don’t forget that this was A) NOV data and B) DEC has seen a meaningful correction in commodity prices.
The Fed will probably bite on this (and +3.3% headline GDP) hook, line, and sinker as the green light to be hawkish. Then, in Q1 of 2018, they’ll have to tone back to on-the-margin-dovish on Reflation’s Next Rollover against very difficult Q117 inflation compares.
KM
