Chart of the Day: May 22, 2023
Predicting a Negative CPI Inflation Rate?
Today’s Chart of the Day displays an intriguing correlation between the Fed Global Supply Chain Index and the US Year-Over-Year (YoY) CPI %, presenting compelling insights about future inflation trends.
Chart Description:
The chart lays out two lines: one representing the Fed Global Supply Chain Index with a 6-month lead, and the other showing the current CPI inflation rate in the US. The timeline spans several years, providing a comprehensive view of the trends.
Key Takeaways:
The striking aspect of this chart is the seemingly predictive nature of the Global Supply Chain Index on future CPI inflation rates. When the index turned sharply lower, a similar trend in the CPI appeared approximately six months later.
Impact on the Economy/Financial Markets:
The key inference from this correlation is that a healthier global supply chain tends to reduce inflationary pressures. As global supply chain conditions have improved, it has led to pulling down inflation rates.
Actionable Insights:
Currently, the Global Supply Chain Index has continued its downward trend, falling again this month. If this correlation remains consistent, it predicts a potentially negative CPI inflation rate sometime in the next six months. For investors, this might be a cue to adjust portfolios towards assets that typically perform better during periods of low or negative inflation.
Educational Aspect:
This chart demonstrates the far-reaching effects of global supply chain conditions on domestic inflation rates. It's a vivid reminder of how interconnected our global economy is and how external factors can directly influence domestic economic indicators.
Conclusion:
So, are we headed towards negative inflation in the next six months? It's a possibility worth considering.
— Brant
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