Clearly, the biggest world news is the conflict in Israel and Gaza. This week we are holding off discussing the effects on the markets as it is too difficult to comment as there is just so much pain and human loss to sort through.
Inflation refuses to die
With Halloween (and horror flick) season upon us, economists are staring at a scary sight indeed: Inflation is refusing to die, no matter what is thrown at it.
The U.S. Labour Department released the Consumer Price Index (CPI) report on Thursday, and the headline was that overall inflation was up 3.7% and core inflation was up 4.1%. Those numbers were slightly higher than expected.
U.S. Labour Department CPI report highlights
Here’s a few takeaways:
- CPI was up 0.4% from August to September.
- Core CPI was up 0.3% from August to September.
- Shelter costs rose 7.2% year-over-year and represent more than half of the total CPI inflation raise.
- Real hourly earnings are up 0.5% from a year ago.
We think the good news in regard to inflation is that our medium- and long-term expectations are still pretty firmly anchored, as revealed by the U.S. Federal Reserve Bank of New York’s consumer expectation survey on Tuesday.
Consumer expectations (referred to as “inflation vibes” by columnists flexing how trendy they are) often get lost in the month-to-month report of inflation percentages, but it may be the most important indicator we have. It’s not that the average person really understands where inflation is trending, or is able to make accurate predictions. Instead, what the consumer expectations survey tells us is how people feel about the future, and whether they are likely to demand higher wages, collectively normalize the idea of quickly increasing costs, and so on.
This month’s survey shows that Americans expect inflation to be at 3% in three years, and that it would be down to 2.8% in five years. That’s higher than economists would like, but it in no way resembles the runaway inflation expectations of the past.
As long as Americans believe inflation will come down, and they have faith in the power of the U.S. Federal Reserve to execute its mission, then the vibes should continue to trend in the right direction.
Are Pepsi earnings a sugar high?
Pepsi (PEP/NASDAQ) released an interesting earnings report on Tuesday. (All numbers in this section are in U.S. currency.) The raw numbers: earnings per share came in at $2.25 (versus $2.15 predicted), and revenue was $23.45 billion (versus $23.39 predicted). Shares were up nearly 2% on Tuesday after earnings were announced.
Kyle Prevost
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