In yesterday’s post I referred to the likelihood that for the rest of the year CPI readings go up from their June low of 3%. Let’s take a look at the numbers. What you see below is the existing CPI data, with the last reading then incremented upwards each month at an annual rate of 3%.

The second column is the actual CPI data (not seasonally adjusted) from FRED. The third column is the monthly change (not widely reported). The fourth column is the annual (year over year) change that makes the headlines.

Notice what happens after June’s reading of 2.97%. July comes out at 3.24%, then August at 3.53% … all the way through to December at 4.35%. This is a base effect artifact that occurs even as the actual monthly increases remain at an annual 3% rate. Of course they will not … but after markets having become accustomed to serial decreases in the year over year figures that make the headlines, this certainly represents a headwind to continued softening and in turn to bullish stock market psychology.