The Cure for High Prices is High Prices

"I've just been handed an urgent and horrifying news story" ... inflation is becoming deflationary.

Wal-Mart's stock is down ~10% after hours after this press release:

The markdowns are coming!

Weber Grill's, though much smaller and less important than Wal-Mart, put out a similar press release this morning basically saying "everyone that wants a grill already has one".

Consumers are reacting to high inflation by holding off purchases. Wal-Mart and other retailers have to much inventory and they now have to dump that inventory into a weaker environment. Ipso facto, prices are coming down in many product categories.

Could this be leading indicator for where inflation is headed? It's hard not to reach that conclusion.

Couple that with data we got from the Philly Fed on manufacturing delivery times last week. It was one of the largest drops monthly drops in the history of the survey.

This was a significant sign "nature is healing" and supply chain issues are normalizing, which would carry a lot of freight in moving inflation lower. (Yes, that was a supply chain pun.)

The real estate market is also cooling off. The 30-year mortgage has climbed 300+ basis points over the past 15 months.

In a recent earnings announcement , Lennar - one of the largest homebuilders in the country - mentioned:

“The weight of a rapid doubling of interest rates over the past six months, together with accelerated price appreciation, began to drive buyers in many markets to pause and reconsider. We began to see these effects after quarter end."

Redfin provided more flashing signals housing is slowing. The number of homes facing "bidding wars" dropped below 50% in June for the first time since May 2020.

None of this definitely proves inflations peaked but evidence is mounting it will be harder for inflation keep climbing.