INTRADAY ALERT: July CPI good enough. Odds of a Nov hike fall 4% to 18% and eventually we expect to go to zero.

This morning July CPI was reported and the key number was core CPI MoM. This figure came in at +0.16% vs consensus of +0.22%. So it was a good figure, or at least good enough.

• Core CPI has fallen to a pace consistent with ~2% inflation. +0.16% x 12 = 1.97% and this is <2% and this is the second consecutive month of low core CPI.
• Under the hood, shelter is still elevated with a MoM % increase of +0.47% and this pace is above the +0.45% last month. I don’t think this will bother the Fed, as this is more emblematic of the widening gap between the reality of home prices and CPI calculation. Does anyone believe housing prices are up ~8% YoY? Some cities, sure. But for the ENTIRE STOCK of housing? Nope. If this was the case, housing is literally the best investment in the world right now.
• Another figure that matters is Core CPI ex-housing and ex-cars and that figure was +0.22% MoM. There is still an interplay between goods and services. Goods are deflating outright. Services are rising. But the bigger picture is inflation is cooling.
• Core goods are down -0.33% MoM. This is exactly what we want to see.
• Core Services ex-shelter is +0.22% MoM and this is consistent with 2% inflation. Housing is still biggest issue.
• Odds of a November Fed hike fell to 18% today, down from 22% yesterday and down from 31% last week. So this was seen as pushing lower the odds of a hike. We continue to see July as the last hike of the cycle and this is not a widely held view. Many still see Fed hiking one or two more times.
• There will be some key data points on Friday:
  – July PPI
  – U Mich 1-yr inflation Aug mid-month
• PPI might matter because there is focus on new labor contracts and how it affects PPI. This will not show up in July as the UAW and UPS contracts kick in later. But markets focus on what they want to. The deflation in China will spill over to US though.

Bottom line: This was good enough and affirms the view that July is the last hike.

More Fed officials are recognizing inflation is cooling. And we expect this to become more widely accepted and thus, shifts markets away from “higher for longer”

• August remains tricky
• but as we noted, we think the selling was front loaded

Key incoming data August

• 8/1 10am ET July ISM Manufacturing Tame
• 8/1 10am ET JOLTS Job Openings Jun Tame
• 8/2 8:15am ADP National Employment Report Hot
• 8/3 10am ET July ISM Services Tame
• 8/4 8:30am ET July Jobs report Tame
• 8/7 11am ET Manheim Used Vehicle Index July Final Tame
• 8/10 8:30am ET July CPI Tame
• 8/11 8:30am ET July PPI
• 8/11 10am ET U. Mich. July prelim 1-yr inflation
• 8/11 Atlanta Fed Wage Tracker July
• 8/15 8:30am ET Aug Empire Manufacturing Survey 
• 8/15 10am ET Aug NAHB Housing Market Index
• 8/16 8:30am ET Aug New York Fed Business Activity Survey  
• 8/16 2pm ET FOMC Minutes
• 8/17 8:30am ET Aug Philly Fed Business Outlook Survey
• 8/17 Manheim Aug Mid-Month Used Vehicle Value Index
• 8/23 9:45am ET S&P Global PMI Aug Prelim
• 8/25 10am ET Aug Final U Mich 1-yr inflation
• 8/28 10:30am ET Dallas Fed Aug Manufacturing Activity Survey
• 8/29 9am ET June S&P CoreLogic CS home price
• 8/29 10am ET Aug Conference Board Consumer Confidence
• 8/29 10 am ET Jul JOLTS
• 8/31 8:30am ET July PCE

Key incoming data July

• 7/3 10am ET June ISM Manufacturing Tame
• 7/6 8:15am ADP National Employment Report Hot
• 7/6 10am ET June ISM Services Tame
• 7/6 10 am ET May JOLTS Tame
• 7/7 8:30am ET June Jobs report Mixed
• 7/10 11am ET Manheim Used Vehicle Index June Final Tame
• 7/12 8:30am ET June CPI Tame
• 7/13 8:30am ET June PPI Tame
• 7/13 Atlanta Fed Wage Tracker June Tame
• 7/14 10am ET U. Mich. June prelim 1-yr inflation Mixed
• 7/17 8:30am July Empire Manufacturing Survey
• 7/18 8:30am July New York Fed Business Activity Survey
• 7/18 10am July NAHB Housing Market Index in-line
• 7/18 Manheim July Mid-Month Used Vehicle Value Index Tame
• 7/25 9am ET May S&P CoreLogic CS home price Tame
• 7/25 10am ET July Conference Board Consumer Confidence Tame
• 7/26 2pm ET July FOMC rates decision Tame
• 7/28 8:30am ET June PCE Tame
• 7/28 8:30am ET 2Q ECI Employment Cost Index Tame
• 7/28 10am ET July Final U Mich 1-yr inflation Tame

Key data from June

• 6/1 10am ET May ISM Manufacturing Tame
• 6/2 8:30am ET May Jobs report Tame
• 6/5 10am ET May ISM Services Tame
• 6/7 Manheim Used Vehicle Value Index May Tame
• 6/9 Atlanta Fed Wage Tracker April Tame
• 6/13 8:30am ET May CPI Tame
• 6/14 8:30am ET May PPI Tame
• 6/14 2pm ET April FOMC rates decision Tame
• 6/16 10am ET U. Mich. May prelim 1-yr inflation Tame
• 6/27 9am ET April S&P CoreLogic CS home price Tame
• 6/27 10am ET June Conference Board Consumer Confidence Tame
• 6/30 8:30am ET May PCE Tame
• 6/30 10am ET June Final U Mich 1-yr inflation Tame

Key data from May

• 5/1 10am ET April ISM Manufacturing (PMIs turn up) Positive inflection
• 5/2 10am ET Mar JOLTS Softer than consensus
• 5/3 10am ET April ISM Services Tame
• 5/3 2pm Fed May FOMC rates decision Dovish
• 5/5 8:30am ET April Jobs report Tame
• 5/5 Manheim Used Vehicle Value Index April Tame
• 5/8 2pm ET April 2023 Senior Loan Officer Opinion Survey Better than feared
• 5/10 8:30am ET April CPI Tame
• 5/11 8:30am ET April PPI Tame
• 5/12 10am ET U. Mich. April prelim 1-yr inflation Tame
• 5/12 Atlanta Fed Wage Tracker April Tame
• 5/24 2pm ET May FOMC minutes Dovish
• 5/26 8:30am ET PCE April Tame
• 5/26 10am ET U. Mich. April final 1-yr inflation Tame
• 5/31 10am ET JOLTS April job openings

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