Line chart showing CPI for the U.S., Japan, eurozone, and the Brazil, Russia, India, and China (BRIC) aggregate from January 2007 to November 2023. CPI moved higher starting in 2020 for all regions and peaked in mid or late 2022 for all regions except Japan, where inflation peaked in January 2023. The most recent read for the U.S. was for November 2023 where CPI was down to 3.1%. The most recent read for the eurozone was for November 2023 where CPI was down to 2.4%. The most recent read for Japan was for November 2023 where CPI was down to 2.8%. The most recent read for the BRIC aggregate was for November 2023 where CPI was up to 4.3%.
Line chart showing PPI for the U.S., Japan, eurozone, and China from January 2007 to November 2023. PPI moved higher for all regions in mid-2020 through mid-2022 before starting to decline in mid-2022. The most recent read for the U.S. was for November 2023 where PPI was down to -0.9%. The most recent read for the eurozone was for November 2023 where PPI was up to -8.8%. The most recent read for Japan was for November 2023 where PPI was down to 0.3%. The most recent read for China was for November 2023 where PPI was down to -3.0%.
Sources: Bloomberg and Wells Fargo Investment Institute. Monthly data from January 1, 2007 to November 30, 2023. BRIC is an acronym for the economies of Brazil, Russia, India, and China. CPI is the Consumer Price Index, which measures the price of a fixed basket of goods and services purchased by an average consumer. PPI is the Producer Price Index, which measures the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services. YOY = year-over-year.
Key Takeaways
- Inflation was propelled to a 40-year high in 2022 by aggressive monetary and fiscal stimulus, labor shortages, and supply-chain disruptions tied to the pandemic. A disinflationary trend has since taken hold, but we anticipate a bumpy path to the Federal Reserve’s target as pent-up demand for services dissipates slowly and certain “sticky” components of the CPI are slow to unwind.
- Capital markets remain exposed to the abrupt reversal of the ultra-low interest rates in place over the past 15 years that were suppressed by aggressive monetary stimulus in the U.S. and abroad.