December 2019 headline CPI came in at 2.29% this morning, with a seasonally-adjusted drop from Nov 2019 coming in at -0.1%. This was based on a gas price YoY delta of +7.9%, well below the EIA’s own calculation of +9.10%. Had 9.10% been used, headline CPI would have printed at over 2.5% and MoM would have printed a positive 0.1%-0.2%.
The charts below show how much of an outlier December was.
Seasonally adjusted, there’s nothing to worry about. Without the adjustments, however, we see that rising oil and gas prices are once again papering over the deflation that the current BLS goal-seeking reporting methodology would otherwise report. Had we seen another 10% YoY drop instead of a 9.1% rise in gas prices, headline CPI would have come in at a lethargic 1.6%.
Without the BLS’s methodology, of course, inflation remains very much a problem. The chart below, courtesy of ShadowStats.com, shows what CPI would be if the methodology hadn’t been changed numerous times over the years.
continued for members…So far, futures are taking the data in stride — off 4.50 points even as USDJPY rallies and VIX dumps.
Oil and gas, having come through the month without excessive finger pointing, are getting a bit of a relief bounce. Remember we get API inventory this afternoon and EIA data tomorrow morning.
SPX continues to be susceptible to a backtest, though a breakout in USDJPY or breakdown in VIX could send SPX up to its 3306 target and/or ES to its 3614.49/3336.49 targets.
UPDATE: 1:40 PM
VIX is having no trouble with the algos, testing its latest little TL of support and driving SPX/ES higher in the process. If VIX bounces here, the rally should unravel pretty quickly. Otherwise, more meltup.
CL is clinging to its SMA200.
While, USDJPY has made no move to break out…yet. 
Bonds are reflecting some nervousness but are still fairly well contained.
For ES, keep an eye on the red midline and the 1.272. A drop through either opens up 3263.50, 3232, and 3200.
