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U.S. Inflation Falling Quicker Than Expected




  • A cooler-than-expected CPI report has sparked a rally in stocks across the board.
  • Energy costs and used cars were the biggest drivers of the cooling.
  • Real wages for Americans have slid further.


The first of this week’s big event risks has finall arrived, and while the world and his pet rabbit is focused on the number’s potential for ‘dovishness’, bear in mind that expectations are for a 0.3% MoM rise and 7.3% YoY rise (which while ‘slowing’ remains extremely high by any standards). The banks’s CPI forecasts were all in sync:

  • 7.2% – Barclays
  • 7.2% – Credit Suisse
  • 7.2% – Goldman Sachs
  • 7.2% – Bloomberg Econ
  • 7.2% – Citigroup
  • 7.2% – Morgan Stanley
  • 7.2% – Wells Fargo
  • 7.3% – HSBC
  • 7.3% – JP Morgan Chase
  • 7.3% – UBS
  • 7.3% – Bank of America
  • 7.4% – SocGen

… which is precisely why the headline CPI printed cooler than all of the major expected, rising just 0.1% MoM, with the YoY rise falling to +7.1%, which was the lowest since Dec 2021…

… and the biggest monthly drop (-0.63ppt) in the YOY print (from 7.7% to 7.1%) since 2020…

Core CPI was expected to rise 0.3% MoM also (+6.1% YoY), and like the headline it came in cooler than expected at +0.2% MoM and +6.0% YoY…

Under the hood, energy costs and used cars were the biggest drivers of the cooling…

Services inflation YoY rose modestly as Goods inflation YoY dropped again…

Energy and Goods actually fell in price MoM…

More details from the report, first on food and energy…

  • The food index increased 0.5 percent in November following a 0.6-percent increase in October.
    • The food at home index also rose 0.5 percent in November. Four of the six major grocery store food group indexes increased over the month.
    • The food away from home index rose 0.5 percent in November, after increasing 0.9 percent in each of the previous 3 months. The index for limited service meals increased 0.6 percent over the month and the index for full service meals increased 0.4 percent.
  • The energy index fell 1.6 percent in November after rising 1.8 percent in October. The gasoline index declined 2.0 percent over the month, following a 4.0-percent increase in October.
    • The index for natural gas continued to decline over the month, falling 3.5 percent after decreasing 4.6 percent in October. The electricity index decreased 0.2 percent in November.

… and then everything else, starting with the shelter index which was the dominant factor in the monthly increase in the index for all items less food and energy:

  • The index for all items less food and energy rose 0.2 percent in November, its smallest increase since August 2021.
    • The shelter index continued to increase, rising 0.6 percent over the month.
      • The rent index rose 0.8 percent over the month, and the owners’ equivalent rent index rose 0.7 percent.
      • The index for lodging away from home decreased 0.7 percent in November, after rising 4.9 percent in October.

Other components were a mix of increases and declines. Among the indexes that rose in November were:

  • The index for communication which increased 1.0 percent over the month after decreasing 0.1 percent in October.
  • The index for recreation rose 0.5 percent in November, following a 0.7-percent increase in the previous month.
  • The motor vehicle insurance index increased 0.9 percent in November, the personal care index rose 0.7 percent
  • The education index rose 0.3 percent over the month.

And on the other side:

  • The medical care index fell 0.5 percent in November, as it did in October.
  • The index for hospital and related services decreased 0.3 percent over the month, and the index for prescription drugs declined 0.2 percent.
  • The index for physicians’ services was unchanged in November.

Other indexes which declined over the month include:

  • The index for used cars and trucks fell 2.9 percent in November, the fifth consecutive decline in that index.
  • The index for airline fares fell 3.0 percent over the month, following a 1.1-percent decrease in October.
  • The index for household furnishings and operations was unchanged in November, as was the index for new vehicles.

Of the above, it is interesting that apparel prices increased in November. As a reminder, Goldman noted that with the inventory-to-sales ratio for apparel stores is now above its December 2019 level, the more normal availability of apparel items this year is consistent with increased promotional activity, and online price data from Adobe shows a 15.5% decline in apparel prices over the course of November on a not-seasonally-adjusted basis. Expect a sharp drop in apparel prices next month.

Perhaps most notably, if we exclude shelter – on a sequential basis – we now have deflation, which of course we can’t do especially since both shelter and rent inflation are still rising at a rapid pace of 7.12% and 7.91% respectively, but about to roll over hard.

The punchline: if one excludes food (+0.5% M/M) and shelter (+0.7% M/M), it’s hard to find any inflation (and in fact, we may well have disinflation):

  • Food +0.5% M/M, vs 0.6% prior
  • Shelter +0.7%, vs 0.6% prior


  • Used Cars -2.9% vs -2.4% prior
  • New cars 0.0%, vs +0.4% prior
  • Energy -1.6% vs +1.8% prior
  • Gasoline -2.0%
  • Fuel oil +1.7%, vs +19.8% prior
  • Apparel 0.2% vs -0.7% prior
  • Medical care 0.2% vs 0.0% prior

And given the violent rollover in M2, we suspect inflation will continue sliding

Bear in mind that last month’s (11/10/22) YoY headline CPI print came in soft @ 7.7% (vs 7.8% expected and 8.2% prior), and with traders short into the event, the S&P exploded +554bps (sharpest rally since April of 2020).

Additionally, the S&P’s realized volatility into today’s CPI print is the highest since 2009…

Ahead of today’s print, both JPM and Goldman presented their market move forecasts, and indicatively a 7.1% print means the following for the S&P:

  • JPMorgan: S&P gains +2%-3%
  • Goldman: S&P gains +4%-5%

Finally, we note that real wages for Americans fell for the 20th straight month…

Source: Bloomberg

But hey, gas prices are down since the June peak, and ‘strong as hell’ economy, right?


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Federal Reserve Set to Shrink Rate Hikes Again as Inflation Slows – Bloomberg Markets and Finance



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It's a key week for the stock market. If you're not nervous, you should be, this global strategist warns. – MarketWatch



Investors have got the jitters as a big week unfolds — several central bank meetings including the Fed, earnings from Apple and, and jobs data. Yikes.

Read: The Fed and the stock market are set for a showdown this week. What’s at stake.

Any investor out there who isn’t nervous, perhaps should recheck his gut, says our call of the day, from Standard Chartered’s global head of research, Eric Robertsen.


“We do not expect an extreme economic hard landing, but we think the proverbial Goldilocks scenario is too optimistic,” Robertsen told clients in a Sunday note, adding that they are “now turning cautious on risky assets.”

Robertsen explains the two sides of an important market debate right now — the just-right Goldilocks crowd and the “recessionist” bears.

The former is growing confident with their view that inflation and central bank tightening is nearing a peak and any recession will be “shallow and short-lived,” he explains. The reduction of that “central-bank driven left-side tail risk” matters more to markets than any slowdown, that side also says.

“A central bank pause, declining inflation, and attractive yields and valuations will prompt investors to reduce their underweight exposure and increase their allocation to risky assets, the Goldilocks camp argues,” he said.

He says the varied year-to-date performance across asset classes reveals 2022’s laggards are 2023’s outperformers so far. “This suggests that short-covering may be a significant contributor to performance so far, rather than overwhelming faith in the Goldilocks economy.

“The outperforming sectors are distinctly pro-cyclical – which is surprising with recession themes all the rage,” he says, noting that “ominous message about the health of the labor market” from tech job cuts.

On the other side, the bears say investors are overstating a decline in volatility and understating economic risks, writes Robertsen, who is on board here, hence his caution on riskier assets. The so-called fear gauge, the CBOE Volatility Index, or VIX

didn’t register new highs last year when stocks tumbled, leading some to say it was a broken indicator.

“Real-time indicators are showing a loss of economic momentum, while others – such as the U.S. labor market – have yet to reflect growing economic headwinds,” he said. “Underlying the bear case is the view that we have yet to feel the full cumulative impact of the most aggressive monetary tightening cycle in decades.”

He says “volatility measures have fallen too far and the improvement in risky assets is due for a pause.” The catalyst for this pause could be any number of things: aggressive rate cuts priced into the U.S. money-market curve that will be unwound, a too-tight move from the European Central Bank or even an actual tightening from Bank of Japan, for example, said Robertsen.

Should the Fed disappoint markets this week

Risk assets may also struggle with the Fed’s message this week if it fails to reassure the rate-hiking cycle is complete, says Robertse,n who expects the central bank will push back on “aggressive easing priced into the money-market curve.”

Read: Wall Street’s ‘fear gauge’ flashes warning that stocks might be headed off a cliff

The markets

Stock futures


have trimmed losses, but all are down, led by those for the Nasdaq-100
Bond yields


creeping up and oil

pulling back. The China CSI

rose slightly as the market reopened after a week off. The Hang Seng

slumped 2.7% as Alibaba fell (more in buzz) and Taiwan’s index

surged 3.7% as Taiwan Semi


For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily. Also check out MarketWatch’s Live blog for up-to-the-minute markets updates.

The buzz

The A-listers of earnings are lining up this week, with not just Apple

but Alphabet’s Google

and Ford

as well.

Read: Could Big Tech layoffs keep growing? Apple, Amazon, Facebook and Google may give hints in biggest week of earnings.

Alibaba shares


are tracking a slump in Hong Kong amid speculation the company will shift headquarters to Singapore. Alibaba dismissed the rumors. And shares of Baidu are bucking a weaker landscape for tech, with reports the China tech group is developing its own AI search engine.

Russia’s invasion of Ukraine will lead to lower oil and gas demand and a move to greener sources, says BP


The data calendar is quiet for Monday, but the week is busy with updates on the housing market, manufacturing, unit labor costs and nonfarm payrolls.

A 25-basis point hike is forecast from the Fed this week, while a 50-basis point cut is expected from the ECB and Bank of England, which could narrowing the differential between the two sides.

Financial News is launching its first Twenty Most Influential in Crypto, recognizing the top executives making waves in the crypto and blockchain industry. 

Best of the web

A short seller report has now wiped $72 billion in value from companies of the world’s number-eight billionaire.

Who gives the best retirement advice? Suze Orman and Dave Ramsey or economists?

Rio Tinto is looking for a lost radioactive capsule the size of a coin in Western Australia.

We are ‘greening’ ourselves to extinction, says this Dutch academic.

The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:


Security name



Lucid Group I

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Bed Bath & Beyond

AMC Entertainment Holdings


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Random reads

Ain’t no greased pole greasy enough for Philadelphia Eagles fans celebrating that NFC win over the San Francisco 49ers.

But lighting up the Empire State Building in Eagles green was a step too far, some New Yorkers were fuming.

Boris Johnson says Russian President Vladimir Putin threatened to take him out as the war in Ukraine began.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton

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Why the golden age of flying is never coming back — and it might not be a bad thing – Yahoo News Canada



Meal service on a 1955 Trans-Canada Airlines flight. Experts say most people associate the golden age of flying with the era when commercial aviation in Canada was regulated and airlines didn't have to cut costs to stay competitive. (Air Canada - image credit)

Meal service on a 1955 Trans-Canada Airlines flight. Experts say most people associate the golden age of flying with the era when commercial aviation in Canada was regulated and airlines didn’t have to cut costs to stay competitive. (Air Canada – image credit)

From pricey parking to pat downs at security and long lineups everywhere you turn, air travel these days can be unpleasant.

“I get on a plane now at least once a month and to me, it’s like riding on a bus in the sky. Herd me on, sit me down, get me off. They’ve taken away the lure of the travel,” said Susan Barnes, 75, of Halfmoon Bay, B.C., who has been a frequent flyer for more than half a century.

Barnes, who was a flight attendant in the 1960s and ’70s, says she remembers when flying was like a Mad Men cocktail party in the sky. She jetted around the globe pouring free champagne for passengers flying CP Air, a carrier that operated until 1986 when it was taken over by Pacific Western Airlines (PWA) and then, Canadian Airlines.


Barnes said her job was to provide top notch treatment to every passenger, even those sitting in economy. That meant handing out hot towels before and after every meal. Breakfast, lunch and dinner were served on real china, with silverware and cloth napkins — then out came coffee, tea and a fruit basket.

Submitted by Susan BarnesSubmitted by Susan Barnes

Submitted by Susan Barnes

“We were treating these people as if they were in a first-class establishment. We just happened to be in the air,” Barnes said.

Barnes and other retired CP Air, Canadian and Air Canada flight attendants interviewed by the Cost of Living described flying back then as “a pleasure.”

It’s a far cry from the experience thousands of Canadians had with airlines this past holiday season. Staff shortages, weather issues and computer outages resulted in lost baggage, cancelled flights and stranded passengers who are now battling air carriers for compensation.

This, along with a summer of major travel disruptions due to COVID-19 labour shortages, has the federal government promising to overhaul Canada’s airline passenger bill of rights.

If you’ve been caught in that tangled web of travel chaos, you may be asking yourself what happened. Experts say it comes down to costs, and competition — and that we’re unlikely to ever return to that golden age of flying.

Keeping prices competitive meant airlines had to be more ruthless about the bottom line, said Fred Lazar, an associate professor of economics at York University.

“Here’s a fare, it gets you a seat from A to B. Anything else costs more.”

Carrier competition

What most Canadians remember as the golden age of flying was the era when commercial aviation was regulated, explained Lazar. It was a time when airlines didn’t have to cut costs to stay competitive, because the federal government didn’t allow them to compete with one another.

“So it was essentially the government saying this is where you can fly, when you can fly and these are the prices.”

Up until 1986, the two big players were private carrier CP Air and government-owned Air Canada (formerly Trans-Canada Airlines), said Lazar, and the government did not allow much overlap on routes.

In the absence of competition, experts say Canadian carriers were guaranteed to attract customers and make money, which meant they could afford to offer perks on their flights to passengers.

According to Julie LeBlond Parker, who started as a flight attendant for CP Air in 1968, airlines also invested in their staff. She received extensive training in “decorum” and “finesse” before taking to the sky.

“The service was based on old European service. It was a very high standard,” said LeBlond Parker, who now lives in South Surrey, B.C.

Domestic and international flight prices, 1959 vs. 2023

But the golden age of air travel was also out of reach for many Canadians. Fare schedules from collectors and the archives of the Canada Aviation and Space Museum reveal that throughout the 1940s, ’50s and ’60s, flying was incredibly expensive.

In 1950, a return flight on Trans-Canada Airlines from Vancouver to Johannesburg, South Africa, cost over $21,000 when adjusted for inflation. Flying Toronto to Vancouver in 1962 on CP Air was roughly $1,900.

With prices like that, LeBlond Parker, said the regulars on her flights were business travellers, not vacationers. Leisure travellers were usually newlyweds, couples and families embarking on a once-in-a-lifetime trip.

“What was really amazing about it is that they all dressed up. They probably got a new outfit just to fly because it was special. It was a very special thing.”

City of Vancouver ArchivesCity of Vancouver Archives

City of Vancouver Archives

Goodbye blankets, hello bargains

Barry Prentice, the director of the Transport Institute at the University of Manitoba, said Canadians saw a “tremendous drop” in airfares south of the border when the U.S. deregulated its airlines in 1978.

“They went from $700 to $200, or something. And everybody in Canada was sitting there, you know, wondering, ‘well, why don’t we have that?'”

WATCH | Is air travel broken?

Prentice said the Canadian government followed the U.S., loosening its grip on the airline industry throughout the 1980s and ’90s. During that time, Air Canada became privatized and more carriers entered the Canadian market. As competition ramped up, airfares went down.

But that’s not the only reason flying became cheaper, explained Prentice.

Advances in aviation technology meant planes became more fuel efficient and larger, which increased air cargo and passenger capacity. Prentice said that — along with the 1980s oil glut, brought down the price per seat.

Even when crude prices rebounded, legacy airlines like Air Canada couldn’t go back to charging passengers as much for flights as they did before deregulation because they were up against the à la carte pricing model of no-frills carriers, said Lazar.

Submitted by Julie LeBlond ParkerSubmitted by Julie LeBlond Parker

Submitted by Julie LeBlond Parker

“Many people said, ‘We didn’t have to pay for bags, we got food for free, we didn’t have to pay for earphones,” Lazar said.

“Well now, in the lowest-fare categories, you do, because the airlines want to compete with the ultra low-cost carriers. And that’s the only way they can do it.”

Lazar, who has also worked as a consultant for Qantas, Air Canada and Porter Airlines, said stripping away the luxuries and packing more seats on planes is a “major contributing factor to making flying in economy much less comfortable and attractive, yet much more affordable.”

Snafus at security

While Canadians often blame airlines for a lousy flying experience, chaos at airport security and gates can also contribute to the overall unpleasantness of air travel. Experts say that’s because airports aren’t designed for the realities of today’s travel.

Between 1973 and 2008, Anthony Wade-Cooper was a flight attendant for CP Air, Canadian and Air Canada. He says before 9/11, he could make it from the check-in counter to the gate in 20 minutes.

“It was just so different. You just walked into the airport and you got on a flight,” he said Wade-Cooper, who is now retired in a town called Mooloolaba on Australia’s Sunshine Coast.

Nowadays, airlines ask passengers flying domestic to arrive at the airport two hours in advance and Wade-Cooper said he often spends most of that time standing in a queue.

Brenna Owen/The Canadian PressBrenna Owen/The Canadian Press

Brenna Owen/The Canadian Press

Security snafus are also a result of a steady increase in air travel over the last decade — peaking in 2019 with nearly 163 million passengers passing through Canadian airports, according to Statistics Canada.

According to Lazar, most airports were not built for a post-9/11 world where every traveller has to take off their belt and shoes. There are also design problems when passengers arrive at gates. Lazar says some airports are designed like malls — a lot of shops and restaurants but not a lot of seating.

“There’s no place to sit. You know, if you have long delays, where are you going to go?”

But what we get in exchange for fewer perks and busier airports, said Prentice, are cheaper flights — and that means more people than ever can afford to fly. Which he thinks is a “really good thing.”

“More families can travel and, over time, families have split up wider and wider. My grandchildren are in Montreal and I’m in Winnipeg and I wouldn’t see them very often if it weren’t for air travel.”

If you’re wondering if there’s a way to get back a bit of the elegance or at least the enjoyment of flying, Lazar said you can’t expect to pay rock bottom prices.

He said the only way back to the golden age of travel is to fly first class or rent a private jet.

“Otherwise, just accept the fact that air travel is really the same as travelling on a bus. Except it gets you from A to B much more quickly.”

Air CanadaAir Canada

Air Canada

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