'The End of the Beginning' of This War on Inflation

The End of the Beginning

Winston Churchill has a phrase for any occasion. After German troops were defeated in a pivotal battle at El Alamein in 1942, he commented that it was “not the end, not even the beginning of the end but, possibly, the end of the beginning.” That's probably a fair assessment of the state of the west’s war against inflation after a week that looked a turning point. War and killing dragged on for 30 months after El Alamein before Hitler was defeated, but with the Allies the increasingly likely victors throughout; and while the stakes aren’t that high this time, it’s fair to expect something similar for today’s global economy.

This comment from Bespoke Investment LLC sums up the mood by the end of the week:

“After a strong jobs report last Friday reignited fears of an overheating economy, markets were edgy heading into a busy week for inflation data. It doesn’t happen that often, but bulls hit the inflation superfecta. It started with Monday’s release of the July Survey of Consumer Expectations which showed a continued decline in inflation expectations. On Wednesday, the big bad CPI report for July was released and that came in lower than expected for a change. The weaker-than-expected CPI was followed by a weaker PPI Thursday and then a weaker-than-expected report on Import Prices Friday. After months where it seemed as though every inflation report was coming in hot, this week’s data on prices was cold, cold, cold, and cold. The heat wave has been broken!”