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US markets rallied anticipating further moderation in inflation. You might be surprised by tomorrow’s CPI.
- Ford Motor announced Monday it will be working with a Chinese supplier on a new $3.5 billion battery plant for electric vehicles. The facility will be built in Michigan and is scheduled to open in 2026.
Months of steadily falling prices have left investors feeling that inflation is on a linear downward trend. But inflation is more complex than it first appeared and may still surprise markets.
Economists expect January CPI to rise 0.4% monthly – a jump from December’s -0.1%, meaning prices are actually down. So far, the market has been talking that inflation in services – such as travel, restaurant and hospitality prices – has proved more resilient than inflation in goods, mainly due to an extremely tight labor market.
However, logistics managers warn the supply chain is becoming congested again, which could contribute to higher commodity prices. “Late fees and storage fees are passed on to the consumer, which is why we are seeing products not falling as much as they should,” said Paul Brashier, vice president of drayage and intermodal at ITS Logistics.
Nevertheless, the markets were optimistic on Monday. The Dow was up 1.11%, the S&P 500 was up 1.14% and the Nasdaq Composite was up 1.48%. Investors may have been hoping for a “Goldilocks-like mix of industrial production recovery and falling inflation,” Credit Suisse’s Ray Farris said in a statement Monday. Time will tell if this comfortable narrative of disinflation – and defiant optimism in the markets – holds up.
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