Prices Are Marching Higher Regardless of Wednesday's CPI Print
I expect Core CPI to remain above 3%.
Real world Food and Energy prices have marched higher in December and January, regardless of what CPI may tell you.
Surely price increases have sapped discretionary spend for luxury goods, expensive wines and the like, particularly as people struggle to make debt payments. Similarly, many companies that carry debt have struggled to stay current with interest payments as input costs rise.
Companies are not selling more units of “X”, rather, “X” is selling at a higher price than it did 6-12 months ago (maybe not in the case for used cars). It is these price increases that are driving the majority of Revenue growth. Just ask companies such as Microsoft (MSFT).
What will get prices moving lower? A higher cost of debt capital. I expect the cost of debt capital to rise on balance in January and February. At some point (a 6% 10 year Treasury yield?), the rising cost of debt capital will stifle demand for goods and services.