Monday, Feb 12, 2024

the CPI circus, BTC accumulation

“The reformer is always right about what is wrong. He is generally wrong about what is right.” – G. K. Chesterton ||

Hello everyone! I hope you all had a great weekend, and feel ready for the week.

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IN THIS NEWSLETTER

• The CPI circus

• Signs of long-term BTC accumulation

WHAT I’M WATCHING

The CPI circus

Tomorrow is a big day for Fed watchers: at 8:30am ET, we get the official release of US inflation data for January.

Expectations are for a modest decrease in the month-on-month headline figure (0.2% vs 0.3%) with core CPI holding steady at 0.3% for the third consecutive month.

(chart via Investing.com)

The year-on-year moves are expected to show further deceleration in the headline CPI from 3.4% to 2.9%, which would be the first read below 3.0% in almost two years. Year-on-year core CPI is expected to moderate ever-so-slightly to 3.8% from 3.9%.

If expectations hold, this would be good news, even though the core CPI is showing some stickiness.

What continues to perplex me, however, is the market obsession with short-term backward looking data. True, in a fog any signpost is welcome, and of all the economic indicators thrown at us every month, CPI is one of the easiest to understand.

But we imbue it with a power it does not have. The indices do not fully reflect the price increases felt by families or students or pensioners or businesses. CPI data collects a tiny fraction of prices in the economy, it only takes into account urban consumers, and only around 70% of the issued surveys are completed.

And yet this number can influence how much we earn, how much rent we pay, and when the US central bank will start easing policy.

True, a flimsy number is better than no number. My rant is more directed at how we still rely on old methodologies to devise key signposts that we assume mean something significant. Given the data collection technologies at our disposal now, surely we can come up with a more targeted and personalized approach, that could better inform policy as well as future spending decisions.

That said, I do love a good batch of data and the stories it can tell. Tomorrow’s release will give us a chance to peer closely at price movements in many different categories, which in turn should reflect distribution issues, commodity prices and business trends.