INTRADAY ALERT: August CPI "hot" but details better. Tape bombs ahead, so investors now likely wary until FOMC rate decision 9/20

THIS INTRADAY ALERT IS ONLY BEING SENT TO CLIENTS OF FS INSIGHT

August CPI came in “hot” as Core CPI came in at +0.30% versus Street +0.20% and above our +0.16% to +0.18% estimate. The details, however, are better than the surface level readings.

• The details for August CPI are actually better. The +0.10% MoM is entirely due to 2 categories:
  – Motor Vehicle insurance surged +2.4% (29% annualized) adding +0.08% to Core
  – Airline fares exploded +4.89% (59% annualized) adding +0.03% to Core
  – combined, these 2 added +0.11% to Core, or the entire upside surprise
• Vehicle insurance is simply catching up to the surge in auto prices over past few years (replacement cost, etc) and one wonders, do further hikes slow this? Not really
• Airline fare exploding higher is not congruent with the significant guidance cuts by American Airlines (AAL -0.04% ) and Spirit Airlines (SAVE 2.17% ). To me, this rise in airlines is somewhat one-time.
• These 2 items also drove the “super core” (aka Core Services ex-shelter) to +0.53% MoM.
  – Motor Vehicle insurance +0.28%
  – Public transportation +0.12%
  – Total +0.40% of the +0.53%
• Does the Fed want to hike further to contain these 2 items?
• The Fed fund futures pushed hikes into November
  – Sept odds now 2.3% -4.50%
  – Nov odds now 39.3% +4.10%
  So the hikes are pushed into November.
• That speaks to it all. There is not enough here to drive a September hike.
• In fact, look at other key market metrics:
  – US 10-yr yields 4.278% ~no change
  – VIX 13.64 -0.59 down
  – Oil flat $89
• So, there is not a whole lot of change in reaction to the CPI report.

BOTTOM LINE: Stocks sort of stuck now given upcoming tape bombs and FOMC

The message from the CPI report is that overall inflation is tracking lower but these one-time items highlight that progress is not linear. And there could be some difficulties with seasonal adjustments. Equities are potentially stuck until FOMC rate decision meeting next week (9/20):

• August PPI is released 8:30am ET and this is probably not a positive surprise
• Thu evening, 9/14 at near midnight, the UAW is expected to go on strike
• Investors will probably see how markets react Friday before moving forward
• Friday is U Mich consumer confidence 1-yr inflation mid-month
• Next week, Manheim is Tuesday 9/19 <– should be good
• FOMC rate decision Wed 9/20

So, there is plenty of fodder ahead for bulls and bears. Equities are flat to slightly up. This is consistent with what we have seen in prior CPI “misses”

Key incoming data September

•  9/1 8:30am ET August Jobs Report Tame
•  9/1 10am ET August ISM Manufacturing Tame
•  9/6 10am ET August ISM Services Mixed
•  9/6 2pm ET Fed releases Beige Book Tame
•  9/8 9am ET Manheim Used Vehicle Index August Final Tame
•  9/8 2Q23 Fed Flow of Funds Report Tame
•   9/13 8:30am ET August CPI Mixed
•  9/14 8:30am ET August PPI
•  9/15 8:30am ET September Empire Manufacturing Survey
•  9/15 10am ET U. Mich. September prelim 1-yr inflation
•  9/18 8:30am ET September New York Fed Business Activity Survey
•  9/18 10am ET September NAHB Housing Market Index
•  9/19 9am ET Manheim September Mid-Month Used Vehicle Value Index
•  9/20 2pm ET September FOMC rates decision
•  9/21 8:30am ET September Philly Fed Business Outlook Survey
•  9/22 9:45am ET S&P Global PMI September Prelim
•  9/25 10:30am ET Dallas Fed September Manufacturing Activity Survey
•  9/26 9am ET July S&P CoreLogic CS home price
•  9/26 10am ET September Conference Board Consumer Confidence

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 Tame
• 8/11 10am ET U. Mich. July prelim 1-yr inflation Tame
• 8/11 Atlanta Fed Wage Tracker July Tame
• 8/15 8:30am ET Aug Empire Manufacturing SurveyMixed 
• 8/15 10am ET Aug NAHB Housing Market IndexTame
• 8/16 8:30am ET Aug New York Fed Business Activity SurveyNeutral
• 8/16 2pm ET FOMC MinutesMixed 
• 8/17 8:30am ET Aug Philly Fed Business Outlook Survey Positive
• 8/17 Manheim Aug Mid-Month Used Vehicle Value IndexTame
• 8/23 9:45am ET S&P Global PMI Aug PrelimWeak
• 8/25 10am ET Aug Final U Mich 1-yr inflationMixed
• 8/28 10:30am ET Dallas Fed Aug Manufacturing Activity Survey Tame
• 8/29 9am ET June S&P CoreLogic CS home price Tame
• 8/29 10am ET Aug Conference Board Consumer Confidence Tame
• 8/29 10 am ET Jul JOLTS Tame
• 8/31 8:30am ET July PCE Tame
• 9/1 8:30am ET August NFP jobs report
• 9/1 10am ET August ISM Manufacturing

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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