A Comment -- General Comments From an Expert (A Commentary)

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Inflation Components and Future Expectations. A rough outline of the CPI weighting towards each good and service. Food represents about 1/6th of the total CPI weighting and has been a major source of stickiness in the recent elevated inflation readings. Energy represents about 1/10th of the inflation index and has been a major contributor to elevated inflation readings, however, this has recently been declining with the fall in oil and gasoline prices. Housing represents about 1/3rd of the index and often lags other asset prices. Just under half of the index is made up of vehicles (new and used), transportation, healthcare, and apparel, which have all been contributors to high inflation, but we consider these as much more elastic to fluctuating input costs (raw materials). While we note we expect some of these components to continue rising modestly, this would be at a lower annual rate of 2-4%, as opposed to the large increases of 5%+ that we have seen of late. We believe that energy will continue to see downward pressure in the coming year, and this will be reflected in lower producer costs, and in turn cause consumer prices to decline across vehicles, transportation, healthcare, apparel (43% of total CPI). Unlock Premium - Try 5i Free

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Breaking Down the CPI Inflation Reading. The 0% month-over-month change against the prior month helped to alleviate the previously high inflation reading of 9.1% in June, and this was the result of the gasoline index declining by 7.7% in July, which offset increases from the food and shelter indexes. The food index rose 1.1% for July, which marks the seventh consecutive monthly increase of at least 0.9% or higher. The energy index declined by 4.6% in July after facing large increases in May and June. Shelter is seen to continue rising but at a decelerating pace. Unlock Premium - Try 5i Free