Driven by "rigid demand", U.S. inflation has exceeded expectations again :

2021-10-14: [Article Link]. [Caixin net] (columnist Peng Wensheng) the United States in September C PI growth of 5.4% year-on-year, higher than the previous value and market expectations; Core CPI growth of 4%, with the previous value and expected flat. The rebound in C PI growth in September was mainly driven by life-related "rigid demand. From the sub-item point of view, the projects with a larger month-on-month increase are: home food (1.2%), energy commodities (1.3%), energy services (1.2%), home decoration (1.3%), gardening services (1.9%), Rent (0.4%). One explanation is that the rebound in the Delta epidemic in July has brought some consumers back to their homes, boosting demand for food, household goods and services. On the other hand, due to supply bottlenecks, the price of new cars (1.2%) is still rising, but due to the decline in travel activities, the prices of other items related to going out have fallen. For example, the prices of air tickets (-6.4%), car rental service (-2.9%), clothing (-1.1%), used cars (-0.7%), hotel accommodation (-0.6%) and other items decreased month on month. Higher prices for necessities are more likely to push up inflation expectations. Historical experience shows that food, energy products, and household goods are all commodities that can be accessed anytime and anywhere in daily life, and their price increases are easier to create an atmosphere of "price increases everywhere, this makes it easier to push up consumer inflation expectations. In September, the New York Fed's 1-year and 3-year consumer inflation expectations, and the University of Michigan's 1-year and 5-year consumer inflation expectations rose further than in August. At the same time, the market's view of inflation in the United States is quietly changing. In the past three weeks, the implied break-even inflation rate of 10-year U.S. debt has risen from 2.29% to 2.49%, the 5-year dollar inflation swap rate rose from 2.14% to 2.34%. One, the impact of rising energy prices on the CPI. Energy product accounts for roughly two-thirds of the CPI basket relative weight of approximately 3%, law of history shows that WTI oil prices rise significantly boosted CPI energy commodities sub-item, which may in turn push up the overall CPI inflation. According to the view of CICC's commodity group, global crude oil production capacity is not in short supply, and oil prices are difficult to continue to rise. However, considering factors such as low crude oil inventories in the short term and cold climate, it is not ruled out that oil prices will rise in the fourth quarter. We did a scenario analysis: If the average value of WTI oil prices in the fourth quarter is $75/barrel, corresponding to the fourth quarter of the year-on-year growth rate of about 5.1%; But if the average oil price rises to $80/barrel, the growth rate of CPI will rise to 5.3%; If the average oil price rises to $90/barrel, the growth rate of CPI will reach 5.8%. In addition, there is a positive correlation between natural gas price movements and the energy component in the CPI, although the correlation coefficient is not as high as the oil price. After entering the winter, if power generation demand drives natural gas prices to continue to rise, it will bring more inflation risks. Second, the transmission of wage increases to inflation. Historically, during the overheated US economy, wage increases have tended to push up service CPI inflation because of the higher share of labor costs in service production relative to industrial production. Since the beginning of this year, affected by labor shortage, wages in the service industry have shown an accelerated upward trend, especially in contact and low-income service industries such as hotel leisure and catering. Looking ahead, we believe that labor shortages may be difficult to resolve soon, and wage increases will continue, which also means that the transmission effect on inflation may be further revealed. A question of concern is whether there will be a "wage-inflation" spiral, in which wage growth and inflation are mutually reinforcing. To examine the possibility of this scenario, we add non-farm production and non-management wage growth to CPI inflation as a measure of the "inflation spiral" if the indicator continues to rise, it means that the probability of an "inflation spiral" rises. Sep the index has risen to 10.4%, higher than in the United States over the past few economic cycle at the height of the level if you continue to rise towards the 19 1970s High move. Third, the impact of high inflation on Fed policy. First of all, the inflation in September will be more firm than expected in September. We expect the Fed to announce the paper after the interest rate meeting on November 3. Secondly, judging from the current situation, the probability of CPI inflation in the fourth quarter will remain high. Will this make the Fed give up the judgment of "temporary inflation? Before the release of inflation data, Atlanta Federal Reserve Chairman Bostik (FOMC voting committee this year) has said that US inflation has lasted longer than expected, and inflation may not be a temporary phenomenon. If more officials agree with this view, the "temporary inflation" argument will be subverted and the Fed's monetary policy will also face more uncertainty.

Note: This is auto-translated version of a Chinese domestic news media article. A mature and nuanced reading is suggested.