By now you have been hammered with three letters over and over and over. CPI, the Consumer Price Index has become a household term used in every news outlet from the world news all the way down to the local beat. A term that was once foreign to investors is now the center of attention for all levels. I write this as I believe CPI is greatly underestimated by the public. The number you hear most of all is the measure of inflation compared year over year when I believe the number that means the most is month over month. I would even like to see a measure of 2, 3, or even 5 years to truly see how inflation is affecting the American family.
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Using “Y Charts” data from a quick google search I see the following month over month inflation numbers for an example:
September 2023 0.1%
August 2023 0.5%
July 2023 0.1%
June 2023 0.3%
Which to me gives a picture of inflation better than that of year over year. Why? Well, if you break down what inflation we are all facing on a short-term time frame you get a pretty good idea of where we are headed. I will say that occasionally you have a negative month like we saw in October. I honestly can’t say that is predictable, but you must feel that just like being a contrarian in the market, one would think that any time a trend is strong it may be time for a correction.
How do wages historically keep up with jumps in inflation data? Well, it can’t. To be perfectly honest business can be seen as a front running indicator on products, but when it comes to the employees at said business, they tend to be trailing behind inflation with wages. Do I think it’s a bad thing? Not necessarily. The reason I say this is because if a business tried to predict a number like cost of living and moving wages to fit that level, they wouldn’t be in business very long. It must be trailing because of the back log in bookkeeping (btw that’s the only word in the English language with three repeating letters). And if we go into a deflationary period, do you think workers are going to be willing to let their pay be cut? Yea, I don’t think so. Or at least I can tell you I wouldn’t want that.
Until next time, keep swinging and never stop chasing.
Also, thank you to Y Charts for always being a great resource. I am in no way affiliated with them, I simply like to use them for my personal research, and it was the first link that was found when I googled month over month inflation data.