CPI Data Indicates No Return to Disinflationary Trend

Simon White, a macro strategist at Bloomberg, has provided an analysis of the current CPI data.

Increasing Gap Between CPI and PPI

The recent CPI data reveals that the difference between the Consumer Price Index (CPI) and the Producer Price Index (PPI) is growing, which serves as a measure of profit margins. After experiencing a rise and subsequent fall during the pandemic, it appears that these margins are once again on an upward trajectory.

Profits and Consumer Inflation

White suggests that profits are set to become a significant factor in persistent consumer inflation during this economic cycle.

Yields and Recessionary Risks

While yields are currently on a downward trend due to the re-emergence of recessionary risks, the primary upward trend remains unbroken. White predicts another opportunity for bond selling later in the summer.

Profit-Margin Proxy and PPI Data

The increase in the profit-margin proxy aligns with the information from the primary services component of the PPI data. However, White cautions against jumping to conclusions. He states that nothing moves in a straight line and it is premature to assert that the disinflationary trend has made a comeback.

Conclusion

Simon White's analysis provides a comprehensive overview of the current economic landscape, highlighting the increasing gap between CPI and PPI as an indicator of rising profit margins. However, it's important to remember that economic trends can change rapidly and unpredictably. Is it too soon to declare the return of the disinflationary trend? What are your thoughts on this matter?

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