Mission Accomplished?

This was inflation data week. The CPI was Wednesday, the PPI Thursday, and U of Michigan posted the prelim inflation expectations for July. For all appearances, it looks like Powell has navigated Fed policy to squash inflation without squashing the economy. Here are the charts;

I got this chart from Genevieve Roch-Decter’s substack:

Inflation slows, markets rally

I think it does a good job detailing energy’s big impact in the slowing of inflation. Energy went from adding ~2% to the inflation number to dropping inflation by ~1.75%.

I see this in the PPI figures as well:

You see a much bigger drop in the total PPI versus PPI w/o food & energy.

I chalk these big swings up to the continued policy of SPR sales.

I wonder how long this can last. The sales were averaging around 2 million barrels per week but it has now dropped off. The Biden administration has allowed the price of oil to push higher. We’ve seen the crude oil futures push higher since 6/26.

These last few weeks have seen the energy names that I’m keen on go on a really good run. In time, I see the administration releasing more barrels from the SPR to try to contain the rise. I imagine that this will be a great time to pick up more shares. The key is going to be patience.

While I wait, I may re-read these great write-ups by Ferg:

Why Energy is a Fat Pitch here

Offshore the Future Oil Supply Story