Taps Coogan – June 6th, 2023

All the way back in early 2021, when inflation was just reaching 2%, we were warning (over and over, and over, etc…) that the preponderance of data was pointing to a large increase in inflation.

Among the earliest such indicators was the ISM Price Paid Index, which led the rise in inflation be nearly a year. Fast forward to today and the ISM Prices Paid Index (for services) clearly shows CPI falling towards 2% over the coming few quarters. Via Florian Kronawitter

While it doesn’t feel like it, since the peak last June, headline CPI has declined at the fastest pace outside a severe recession since at least the 1950s, a 5% drop in the past ten months. While we suspect that the decline may be slower for the next few months, CPI is still likely to fall further in the second half of the year.

Of course, that doesn’t mean that retail prices will go down; they’ll just keep going up more slowly. The loss of purchasing power suffered over the last three years will be permanent.