U.S. ISM Manufacturing Index vs. U.S. Core CPI (Core Inflation Leading Indicator) U.S. annual core CPI at 1.3% in February. The U.S. ISM Manufacturing Index tends to lead U.S. Core CPI by 24 months. You may also like “ISM Manufacturing Index vs. S&P 500 Index” and “U.S. Core Inflation Expected Over the Next 21 Months.“…
Emerging Markets Total Return Index (Equities Relative to Bonds) and OECD Core CPI (Leading Indicator) Emerging markets equities relative to bonds tend to lead OECD core CPI by 40 weeks. Image: BCA Research
Inflation – S&P 500 LTM Sales Growth vs. Core CPI Since 1970 Rising inflation tends to boost S&P 500 earnings. According to Goldman Sachs, a 100bp increase in average annual core CPI would lift the S&P 500 EPS to $170 in 2021. Image: Goldman Sachs Global Investment Research
Inflation – U.S. Core CPI Goods and Core CPI Services 20 years of almost no inflation in goods. Image: Deutsche Bank Global Research
Inflation – Core U.S. CPI and Real Annualized Total Return for the S&P 500 U.S. core inflation above +0.2% MoM typically does not bode well for S&P 500 real returns. Image: Deutsche Bank
Inflation – Core PCE and CPI Core PCE and core CPI are expected to decline substantially in 2022 and 2023. Will the Fed be more dovish than expected? Image: Goldman Sachs Global Investment Research
Inflation – U.S. Core Goods CPI U.S. core goods CPI is expected to decelarate markedly this year. Image: Morgan Stanley Research
U.S. Core Inflation Expected Over the Next 21 Months (Leading Indicator) M2 velocity year-over-year tends to lead U.S. core CPI by 21 months (R² = 0.52 since 1996). It has been quite accurate for more than 20 years. Click the Image to Enlarge
Core Consumer Price Inflation vs. Velocity of Money There are downside risks to U.S. inflation, as velocity of money tends to lead U.S. core CPI. Image: BCA Research
U.S. Core Inflation vs. Home Prices (Leading Indicator) Home prices suggest that core CPI seems likely to fall further. Image: Scotiabank Economics
Why Is Core Inflation So Low Compared To Previous Business Cycles? The Consumer Price Index Less Food & Energy (Core CPI) is very low compared to previous business cycles in the US, for several reasons: – not fast-rising money supply – globalization: inflation is a global phenomenon – lack of wage acceleration – increase in…