The Wednesday Letter 181 – 16 August 2023

THIS WEEK: Inflation Laggards; Treasuries And Liquidity; Wild Fires; Trump and 14th Amendment; China Economy; S&P Sectors Update.

INFLATION LAGGARDS

Everywhere we look, things seem more expensive than a year or two years ago, and by more than 5% or 10%. Yet the official inflation figures now show core annual inflation to have fallen below 5%. At its peak in June 2022, official inflation was 9.1% and core inflation (inflation less food and energy) was 5.9%. In the last release for July CPI, annual inflation was 3.2% and core inflation was 4.7%. So, overall inflation has fallen by nearly two thirds since June 2022, from 9.1% to 3.2%. And core inflation has fallen by one fifth, from 5.9% to 4.7%. A big contributor to this disinflation has been a receding price of crude oil, from $123 per barrel (WTI) in June 2022 to $70 in June 2023.

If we look more closely at the latest CPI release, we see that energy inflation was up a negligible 0.1% month-on-month in July, despite oil risin…