Original title: sound the inflation warning! "New debt King" Gunrak: inflation is uncomfortably high. Official figures underestimate the problem.
Source: FX168
The market ushered in key US inflation data this week. Consumer price growth slowed in July, according to data released on Wednesday, easing concerns that the Fed is about to signal a tapering of its bond-buying program. But the Labor Department said on Thursday that the producer price index (PPI) rose more than expected in July, suggesting inflation is likely to remain high, putting renewed pressure on the Fed to adjust its low interest rate policy.
Data on Thursday showed that the producer price index (PPI) surged 7.8% in July from a year earlier, the largest increase since statistics in 2010, a higher-than-expected rise of 7.2%, a month-on-month increase of 1%, and a higher-than-expected growth of 0.6%, while core PPI, excluding food and energy, rose 6.2% year-on-year, higher than expected by 5.6% and 1% from a month earlier. Reflect rising commodity prices and supply chain bottlenecks, continue to put pressure on enterprise costs.
Investors remain wary of any signs of overheating inflation, which could prompt the Fed to scale back its asset purchases and raise interest rates ahead of time.
Jeff Gundlach, the billionaire investor, also sounded the inflation alarm this week, warning that US prices were rising at an uncomfortably fast pace and that official estimates underestimated the rate of rise.
"when it comes to inflation indicators, my definition of a disturbing 'rise' is more than 4% on a sustained basis," said the founder of DoubleLine Capital.TwitterIt says.
"now our CPI has risen 5.4 per cent year on year for the second month in a row." He went on. "it may not be, but it can prove to be undervalued."
Mr Gunrake's tweet follows a 5.4 per cent year-on-year jump in the US consumer price index (CPI) in the 12 months to July, in line with the year-on-year increase in the year to June and the biggest increase since August 2008.
However, the index rose only 0.5 per cent in July from a month earlier, compared with 0.9 per cent in June, the highest level since 1982.
Mr Gunrak, known as the "new debt king", has warned since last year that expansionary monetary and fiscal policies, coupled with supply constraints, will accelerate inflation. He also questioned whether the recent price increases were temporary if the stimulus continued.
The investor is also concerned that the inflation problem may be more serious than it seems. In an interview with Yahoo Finance in May, he described CPI as "a fake structure" because CPI uses "landlord equivalent rent" instead of the median house price to track house prices, which have risen many times in recent months.
Mr Ganglak also warned that if inflation persisted and the US federal government was forced to tighten fiscal and monetary stimulus measures, the stock market could fall because the current high valuations were partly the product of a trough in interest rates.