Inflation Indicators: April 2010

Includes: CPI, SPY
by: Francois Soto
Inflation Indicators (Part 1)
  • CPI Core YOY inflation is one of the most predictable component of CPI All YOY inflation and should remain subdued until end of Q3 2010. At that time, CPI Core YOY is expected to hover between 0% and 0.5% before bouncing back between 1.5% and 2.5% next year (1 to 4).
  • When CPI Core YOY will reach that level again, CPI All YOY may probably be high enough for FOMC to have great justifications to execute its hawkish plan but until then the Fed may wait.
  • CPI Food YOY reached its bottom and is now headed upward between 2% and 4% within the next 6 months. Meanwhile, CPI Energy YOY is expected to decline slightly or remain flat (5 to 6).
(Click to enlarge)
Inflation Indicators (Part 2)
  • While CPI Core YOY remains in a declining trend for the next year, CPI All YOY is still high and may even increase slightly due to inflation coming from Import Price and commodities (7 to 9).
  • Trade-Weighted US Dollar Index is suggesting Import Price YOY will keep rising within the next 5 months adding pressure on CPI All YOY to sustain itself or increase from current level (10).
  • As Import Price YOY increased, so did Export Price YOY. Following ISM Exports YOY, Export Price YOY are expected to remain near 5% at least for the next 3 months (11 to 12).

(Click to enlarge)
Disclosure: No positions