Biden’s CPI narrative for consumer differs from narrative for the trader

The consumer price index (CPI) in the United States increased 0.1 percent in August 2022, according to data from the U.S. Bureau of Labor Statistics. On a year-over-year basis, this amounted to an 8.3 percent increase in the cost of living for Americans. President Joe Biden attempted to put a positive spin on the CPI print in the following statement:

“Today’s data show more progress in bringing global inflation down in the US economy.  Overall, prices have been essentially flat in our country these last two months: that is welcome news for American families, with more work still to do.  Gas prices are down an average of $1.30 a gallon since the beginning of the summer.  This month, we saw some price increases slow from the month before at the grocery store.  And real wages went up again for a second month in a row, giving hard-working families a little breathing room.
It will take more time and resolve to bring inflation down, which is why we passed the Inflation Reduction Act to lower the cost of healthcare, prescription drugs and energy. And my economic plan is showing that, as we bring prices down, we are creating good paying jobs and bringing manufacturing back to America.” Source: Executive Office of the President.

Data bears out Mr Biden’s assertion that prices have been flat over the past two months. The July CPI print released last August reflected no change in cost of living from the prior month.

The stock market is processing Mr Biden’s spin on another frequency. At the time of this writing, MarketWatch reported the DOW was down 802 points and the Nasdaq was down 434 points. It is just inside the second hour of trading here in the United States, but being that the CPI is a lagging indicator and market data attempts to peep into the future, the markets may be forecasting some trouble ahead.

Politically, Mr Biden needs the markets’ forward looking indicators to be off. In seven weeks the Democratic Party will be tested in the mid-term elections. Mr Biden is counting on an argument that he is the steward for a recovering economy and that he will need majorities in the House and the Senate to continue his inflation reduction agenda.

Alton Drew

13 September 2022

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