8.3% U.S Inflation. Crisis Inbound?
The lesson is clear. Inflation devalues us all. —Margaret Thatcher
Censorship around CPI data.
Inflation pushes another blow of pain to equities.
Commodities and China.
CPI data, true or manipulated?
If you’re also wondering when will this bloodbath stop, I’ve got some news which may not be music to your ears per se.
The inflation report for the U.S was released yesterday beating expectations at 8.3% YoY for April down from 8.5% in March. Now, if you’re still under the assumption that true inflation is the figure presented by the Bureau of Labour Statistics you’re in for a bit of a shock. Whilst CPI is meant to represent a measurement of price change in a basket of goods, the question you have to ask is who decides what the basket of goods is? And what happens if you change the items within the basket of goods? You guessed right, a manipulated CPI reading.
True inflation is believed to be well above the 10% mark with analysts saying 13% was the true inflation figure for March 2022. For those in the Uk and U.S, think about it for a second, does inflation really feel like it’s high single figures or does it feel a lot more costlier than that? Chainlink has created a censorship-resistant inflation index called Truflation which runs on their public network, so check it out for some more insights.
U.S equities & risk assets suffer
Equities and risk assets faced another set of losses as inflation added to fears that the Fed need to act aggressively and hastily to prevent even higher readings. Capital flowed out of risk assets such as cryptocurrencies, which faced a pounding with ETH down 10% and BTC 5% lower, to the perceived safety of government debt. As of yesterday, all three major indexes were down, however, the Nasdaq once again took the headlines for all the wrong reasons closing 3% lower.
U.S 10Y debt fell below 3% to 2.9% following the inflation reading.
Commodities are still under the thumb of suppressed economic activity in China. Despite lower case numbers according to reports China doubles down on its strict lockdown measures which escalate worries overseas regarding supply chain disruptions. With China being one of the world’s largest consumers of commodities a drop in workforce doesn’t help commodities or the global outlook anymore. So now you see it, the real driver of global economic prosperity or hardship is China, the U.S and other nations simply following the leading indicator of the Chinese economy.
Later today we have an array of releases from the Uk, we’ll see how GDP fared across Q1 and YoY.
Once again, I appreciate you for reading all the way through, let me know your thoughts!