Inflation

Supply-driven upside inflation risks were mounting even before the Hormuz shock. We traced 29 PCE goods categories through the domestic supply chain to produce a Supply-Chain Weighted PPI composite to better forecast goods inflation. The model suggests more upside risk to goods inflation ahead.

Summary We pride ourselves on being among the closest in our forecasts / nowcasts of Core PCE, especially after receiving all of the relevant information from CPI, PPI, and import prices. January proved to be an uncharacteristic miss for us (8-9bps too high on Core PCE). We would be suspicious

Summary The December PCE release came with very few surprises relative to our models, in what is a confusing schedule of data releases and one-off revisions. Core PCE was 1bp lower on a month-over-month basis for December relative to what we anticipated for this release (0.36%