watch BEFORE tomorrow's inflation report

hey so in anticipation of tomorrow 5 30

a.m when we get the CPI release and the

next day's PPI release producer prices

and consumer prices also at 5 30 a.m We

want to prepare for what could really

shock us and hurt us and that would be a

reanimation of inflation which we saw in

the United Kingdom we saw core inflation

go to new highs which is scary because

it wasn't just a going from a high down

and then up again it was actually a new

high that we had in the United Kingdom

you also just had Germany's inflation

figures come out which showed also a

recovery in inflation in other words

inflation surprising to the upside again

now some of this was expected but let me

just look at some of uh some of the

stories we're seeing around this okay

German inflation bucks downward Trend in

June and all of a sudden inflation Rises

for the first time in four months we

these are the things we're seeing again

German inflation Rose and Drew in June

in dream interrupting a steady decline

since the start of the year

German inflation increased by 6.8

percent uh on the year in June and that

year-over-year rebound is uh almost

exclusively due to base effects they're

saying basically this going away of Base

effects is actually leading inflation to

go up again now this is a problem

because we could see something like that

happen in the second half of the United

States as well where June over June

comparisons for the United States will

be a peak to hopefully low but then when

we get to next month in the July

inflation report we're not going to be

comparing to the highest level anymore

we're going to be comparing to a level

that's declining so what that means is

you could potentially actually start

seeing inflation trending up again

rather than simply straight down I I

know that sounds sort of remarkable

before we get into what to actually look

for tomorrow let me just give you a

little bit of a visual look of what that

might look like so maybe it'll make a

little bit more sense so what you're

going to do is just go to St Louis Fred

and type in CPI or something like that

and what you want is the actual CPI

number and that looks like this this is

the actual CPA number and what we'll do

is we'll reduce the time range to more

recently here

and we'll go to our Peak here in June uh

of 2022. this is when we had the peak

inflation rate and that CPI uh level was

294.728 that was June of 2022 and if we

look at the setup percentage basis just

so you could see that that is actually

the peak all we should have to do is go

to percent change from a year ago and

that should be the peak there it is June

at 8.93 that was like a 9.1 but it was

revised down

so now I know this is a little funky but

here's the reason why those numbers

matter and then we'll get into the

projections a quick reminder to check

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there soon when you have a chart that

kind of looks like this and let's say we

are right here where the green is when

we're comparing to uh on sort of a

straight line here when we're comparing

to that prior read we're going to get

the smaller read here than we would if

we were let's say next month we'll make

it actually purple here next month

comparing to this hole right here right

so in other words I know it sounds crazy

but when we're comparing to the highest

point of last year we're going to get

the smallest CPI report now

but because we get a small dip after

that you actually get the potential for

a higher CPI report next month which is

partially potentially why you've seen

some of these Rising inflation reads in

countries like Germany so when we zoom

in over here look at how on the St Louis

Fred website you actually have that

little drop right there going into July

it's pretty minor but that sort of Base

effect decline could actually amplify

our next month's read so keep that in

mind for CPI now let's actually look at

some projections and where they stand so

first CPI month over month in The Last

Read was point one expecting 0.3 CPI

core month over month expecting 0.3 the

last was 0.4 so basically 0.3.3 then CPI

year over year all the way down to 3.1

with core year over year coming down to

five percent from the prior of 5.3 prior

year over year was 4.0 now I want to

show you how those projections actually

play out uh in terms of well we'll see

how they actually play out tomorrow but

when we look at on these on a chart we

can see the distribution of expectations

here

so here you have 58 qualified economists

with 63 estimates this is for your core

month over month read and you can see

most of them expect CPI to come in

between this two and a half and three

and a half percent range over here with

a skew to about actually 2.9 so left

side here obviously any kind of read

above 0.4 in this core read would be

unexpected and probably lead to some

kind of Market shock whereas it's more

likely that we'll actually come in with

a 2 a 0.2 than than a 0.4 which is what

I'm hoping for I'm hoping we get a 0.2

in core that would be really good for

markets tomorrow and that's what I'm

expecting I'm actually expecting a miss

that we're going to come in with a 0.2

could be wrong but I do think that next

month will probably have in the next two

months we'll probably have more of a

scary core bump because of all the real

travel season data coming through for

July and August so to collide August

this and those base effect concerns I

think are going to be a worse CPI report

than this one I think this CPI report

could still be good we'll see markets

should be pretty tenuous until this

comes in and of course if you look at

non-core non-core is expected to be 0.26

you can see the distribution here so

this gives you a little bit of the

projection for CPI the next report comes

out the very next day and it's the

producer price inflation so it's the

business side of it we're looking for

final demand at point two core excluding

food and energy at point two and then

excluding food energy and trade coming

in at point one or the expectations so

this gives us uh hopefully one more good

solid CPI report things are going to get

a little funky and more granular once we

get into July and August but for now I

think we should be okay for tomorrow's

CPI report knock on wood when I'm

optimistic for tomorrow and I'll be a

little bit more bearish for the next two

thereafter so hopefully this gives you a

little bit of a heads up and I'll see

you tomorrow at 5 30. now I want you to

know this when it comes to AI

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