Dow dropped an enormous 1276 finishing near session lows, decliners over advancers a hefty 8-1 & NAZ sank 632. The MLP index was off 4+ to the 218s & the REIT index tumbled 17+ to the 412s (the REITs directly feel increases from interest rates).. Junk bond funds saw more selling & Treasuries were sold, raising Treasury yields. Oil was only fractionally lower in the 87s & gold sank 27 to 1713 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
For the better part of a year, the inflation narrative among many economists & policymakers was that it was essentially a food & fuel problem. Once supply chains eased & gas prices abated, the thinking went, that would help lower food costs & in turn ease price pressures across the economy. The Aug consumer price index numbers, however, tested that narrative severely, with broadening increases indicating now that inflation could be more persistent & entrenched than previously thought. CPI excluding food & energy prices — core inflation — rose 0.6% for the month, double the estimate, bringing year-over-year cost-of-living increases up 6.3%. Including food & energy, the index rose 0.1% monthly & a robust 8.3% on a 12-month basis. At least as important, the source of the increase wasn't gasoline, which tumbled 10.6% for the month. While the summertime decline in energy prices has helped temper headline inflation numbers, it hasn't been able to squelch fears that inflation will remain a problem for some time. Rather than fuel, it was food, shelter & medical services that drove costs higher in Aug, slapping a costly tax on those least able to afford it & raising important questions about where inflation goes from here. “The core inflation numbers were hot across the board. The breadth of the strong price increases, from new vehicles to medical care services to rent growth, everything was up strongly,” said Mark Zandi, chief economist at Moody's Analytics. “That was the most disconcerting aspect of the report.” Indeed, new vehicle prices & medical care services both increased 0.8% for the month. Shelter costs, which include rents & various other housing-related expenses, make up nearly 1/3 of the CPI weighting & climbed 0.7% for the month. Food costs also have been nettlesome. The food at home index, a good proxy for grocery prices, has increased 13.5% over the past year, the largest such rise since 1979. Prices continued their meteoric climb for items such as eggs & bread, further straining household budgets. For medical care services, the monthly increase of 0.8% is the fastest monthly gain since Oct 2019. Veterinary costs rose 0.9% on the month & were up 10% over the past year. On the positive side, prices came down again for things such as airline tickets, coffee & fruit. A survey released earlier this week by the New York Fed showed consumers are growing less fearful about inflation, though they still expect the rate to be 5.7% a year from now. There also are signs that supply chain pressures are easing, which should be at least disinflationary.
Inflation isn’t just about fuel costs anymore, as price increases broaden across the economy
An 8.7% Social Security cost-of-living adjustment could be possible in 2023, based on gov inflation data released. The estimate comes from The Senior Citizens League, a nonpartisan senior group, which found that increase would boost the $1656 average monthly retirement benefit by $144. Such an annual increase in benefits would be the highest COLA ever received by most of Social Security's current beneficiaries, according to The Senior Citizens League. It would also be the biggest cost-of-living adjustment in four decades, surpassing this year's 5.9% boost to benefits. “Even though it’s not as high as we were predicting back in Jun, it’s still going to be the highest in four decades,” said Mary Johnson, Social Security & Medicare policy analyst at The Senior Citizens League. The calculation is based on consumer price index data released today, which showed inflation rose 8.3% over the past year as of Aug amid volatile energy & food costs. The Social Security Administration calculates the annual COLA based on a subset of the data, the Consumer Price Index for Urban Wage Earners & Clerical Workers, or CPI-W. That increased 8.7% over the past 12 months as of Aug. The official cost-of-living adjustment is typically announced by the Social Security Administration in Oct. Between now & then, there are several factors that could affect next year’s increase & how much of that money makes it to retirees' checks.
Inflation may spur a record high 2023 Social Security cost-of-living adjustment
At least 17M people in Europe suffered from “long Covid” within the first 2 years of the coronavirus pandemic, according to a new study by the World Health Organization (WHO). Around 10-20% of all Covid-19 cases reported in 2020 & 2021 across the region resulted in lingering effects lasting at least 3 months, with symptoms ranging from chronic fatigue to brain fog & breathlessness, the report found. Women were also twice as likely as men to experience long Covid. Among serious cases resulting in hospitalization, one in 3 women were found to develop long-term symptoms. The research, which was conducted by the Institute of Health Metrics & Evaluation at the University of Washington's School of Medicine, pertains to the WHO’s Europe region, which is home to nearly 900M people in 53 states across Europe & Central Asia. Long Covid refers to a range of mid & long-term effects that can emerge following a Covid infection. Those can include fatigue, breathlessness & cognitive dysfunction, such as confusion and forgetfulness. Some people's mental health can also be impacted, either directly or indirectly. While the majority of people fully recover from Covid, Dr Hans Kluge, the WHO's regional director for Europe, said the findings highlight the urgent need for more analysis & investment in monitoring the drawn out effects of the illness. “Millions of people in our region, straddling Europe and central Asia, are suffering debilitating symptoms many months after their initial Covid-19 infection,” Kluge said. “They cannot continue to suffer in silence,” he continued. “Governments and health partners must collaborate to find solutions based on research and evidence.” Cases of long Covid rose more than 300% in 2021 compared with 2020, in line with the drawn out nature of the illness, the study found. Worldwide, 1mn45M people are estimated to have developed long Covid during 2020 & 2021, according to IHME data.
At least 17 million in Europe got long Covid in first 2 years of the pandemic: WHO
Oil futures settled lower,
with Federal Reserve policy expectations dominating the price action. The very hot CPI report
brought a 100-basis-point rate hike into play at the Sep meting. A more aggressive Fed in the months ahead, will choke off
growth & ultimately weigh on broader consumer demand, including demand
for refined products. Oct WTI crude fell 47¢ (0.5%) to settle at $87.31 a barrel.
Oil futures settle lower as 'hot' inflation data raise likelihood of higher U.S. interest rates
Gold prices ended lower as US inflation for Aug came in surprisingly strong, raising the likelihood for further increases in interest rates & causing the $ to rise & short-term Treasury yields to reach fresh 14-year highs. Gold futures for Dec fell $23 (1.3%) to settle at $1717 per ounce. $ strength is directly related to the CPI report & that's dragging down gold markets. The US consumer-price index rose by 0.1% in Aug. The forecast called for a 0.1% drop in the CPI. What’s worse, the core rate of inflation, which omits food & energy, rose by a sharp 0.6%, higher than the 0.3% rise that had been expected. It remains to be seen whether gold can shake off that correlation & resume its longer-term role as an inflation hedge. But for now, traders feel confident that inflation won't spiral out of control — just that the Fed will need to act more aggressively & perhaps for longer than expected to tamp it down. Actions to tame inflation would likely include higher interest rates & higher interest rates can strengthen the $ & weaken demand for $-denominated commodities, such as oil. That's not great news for gold in the near term, but as this CPI report reminds us, inflation has proven difficult to predict, so conditions can (and may) change quickly.
Gold ends lower as August inflation surprise feeds likelihood of higher U.S. interest rates
Dow Jones Industrials
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