What we’re reading (8/12)
“Inflation Is Spreading To More Parts Of The US Economy” (CNN Business). “America's soaring price hikes moderated last month, signaling that inflation may have peaked. But investors should pay heed to another trend: the spread of higher prices across more sectors of the economy. What's happening: Consumer price inflation remained elevated in July, according to the Bureau of Labor Statistics. Prices rose 5.4% from a year earlier, flat compared with June when the index hit a 13-year high.”
“Prices Rise 5.4 Percent In July Over Last Year As The Economy Claws Back From Pandemic Depths” (Washington Post). “Prices rose 5.4 percent in July compared with a year ago, as policymakers at the Federal Reserve and the Biden administration grapple with how long — and how high — inflation could climb as the economy rebounds. Data released by the Bureau of Labor Statistics on Wednesday showed prices rose 0.5 percent in July compared with June, a slight easing of the monthly pace of inflation. For months, the Fed and White House have said inflation will keep climbing as consumer demand surges while supply chains struggle to catch up. Their expectation is that as supply backlogs have time to clear, inflation will settle back down closer to the Fed’s 2 percent annual target.”
“The Cool Down In July’s CPI Data” (Fisher Investments). “This month, what really jumped out at us was the shelter component, which rose 0.4% m/m and contributed over one-fourth of CPI’s monthly rise. Hotels contributed about half of that. The other half came from rent. Not rent of primary residences, which is what you actually think of when you think of rent. That figure rose 0.2% m/m, and it is only 7.6% of the total CPI basket, making its impact on headline inflation negligible. The real culprit: Owners’ equivalent rent (OER), which rose 0.3% m/m and is a whopping 23.6% of the CPI basket. Yes, you read that right, nearly one-fourth of the CPI basket is imaginary. Owners’ equivalent rent isn’t real—it is the hypothetical amount homeowners would pay to rent their own home, if they rented instead of owning it. It is not something anyone ever pays. It is instead a crude stand-in for home prices, which are an investment, not a capital good, and therefore excluded from CPI. We will leave it to you whether it is sensible to put this made-up service in CPI, but it is there nonetheless.”
“Why Lumber Prices Have Already Bottomed, But Will See Upside Capped At 15% Over The Next 2 Years, According To An Investing Chief” (Business Insider). “The price of lumber has already bottomed, according to Mace McCain, chief investment officer at Frost Investment Advisors. But he's not expecting a runaway rebound either. Instead, McCain sees lumber trading rangebound in the $500 to $600 per thousand board feet range for the next two years, reflecting just 15% upside from current levels over the period.”
“Lordstown Eyes Contract Manufacturing, Leasing Space At Its Ohio Plant” (Bloomberg). “Lordstown Motors Corp, which previously warned it needs to raise additional funding, hung the "open for business" sign on its northeastern Ohio plant on Wednesday, saying it was in talks to build vehicles for other automakers or lease space in the factory. Shares of the electric vehicle startup, which also said it will begin limited production of its Endurance pickup truck in late September, rose 6.1% in after-hours trading.”
