Inflation Views
Disinflationary Pressures Strengthen
Welcome to Prometheus Asset Allocation. The Prometheus Asset Allocation program offers a stable, macro-focused approach to asset management. Prometheus Asset Allocation aims to outperform a traditional stock and bond portfolio by leveraging our proprietary systematic macro process to rotate between 3 ETFs monthly (plus cash). As part of the program, we will be sharing our views on Growth, Inflation, and Liquidity in addition to our monthly video updates.
Our primary takeaways are as follows:
The latest CPI data disappointed consensus expectations but drove up the three-month trend.
Looking at CPI dynamics, inflationary pressures sequentially increased in the transport and shelter-related components and declined in the energy-related components.
The constellation of our inflation equilibrium monitors suggests significant pressures on inflation, with signs of deceleration towards the 2% target.
Today we share our Inflation Views. Below, we show our proprietary inflation regime monitor which offers us a real-time insight into the pressures on future CPI on a daily basis. This measure contracted sequentially, the persistence of a disinflationary regime.
In August, headline CPI came in at 0.19% disappointing consensus expectations of 0.2%. Core CPI contributed 0.22% to this print, with food & energy contributing the remaining -0.04%. This print drove an acceleration in the three-month trend. Below, we display the sequential evolution of the data:
The primary drivers of CPI inflation are food, energy, transport, and shelter. These components have contributed 0.02% (Food), -0.05% (Energy), 0.04% (Transport), and 0.19% (Shelter), respectively. We display these contributions to the 0.19% change in CPI below:
For further perspective, we show how these areas have accounted for the majority of variation in inflation both economically and statistically. Over the last year, food, energy, transport, and housing have contributed 0.28% (Food), -0.27% (Energy), 0.24% (Transport), and 1.84% (Shelter), respectively, to the change in inflation. We display these principal drivers of inflation over time below:
