Uncertainty in Inflation Outlook After Critical Phase... Focus on Recovery Strength of Overvalued Stocks with Excessive Declines

September US CPI Hits Highest Since 2008... Rise Slows Since June
Passing the Peak for Now... Focus on New Car and Housing Sector Trends

U.S. President Joe Biden is delivering a speech on September employment statistics on the 8th (local time) at the South Court Auditorium on the White House grounds in Washington, D.C. Photo by Yonhap News.

[Asia Economy Reporter Minwoo Lee] The U.S. Consumer Price Index (CPI) inflation rate has not risen further for four consecutive months, leading to an assessment that the uncertainty surrounding inflation forecasts has passed a critical point. Although various issues such as rising raw material prices, supply chain disruptions, and wage inflation pressures persist, market expectations have also adjusted upward. Consequently, there is an analysis that a recovery in the overcorrection of overvalued stocks may occur.

On the 17th, KTB Investment & Securities analyzed the recent U.S. September CPI inflation rate, which rose 5.4% year-on-year, as announced by the U.S. Department of Labor. While maintaining the highest level since 2008, attention was drawn to the fact that additional increases have been restrained for four months since June. Core CPI also increased by only 4.0% year-on-year, continuing to slow since June. Park Seok-hyun, head of the investment strategy team at KTB Investment & Securities, said, "Although the CPI inflation rate is expected to continue its high-level trend, the additional increase in the core CPI inflation rate is likely to be relatively small," adding, "The uncertainty regarding U.S. inflation forecasts has, for now, passed a critical point."

However, challenges remain before inflation forecast anxiety fully subsides. Market concerns may recur over unresolved issues such as rising raw material prices, ongoing supply chain disruptions, and wage inflation pressures caused by labor supply mismatches. Nonetheless, since these issues have already surfaced, the uncertainty is considered to have diminished.

Park said, "It is necessary to consider that various inflation factors have all been placed on the table, and market expectations for inflation rates have risen significantly as a result," adding, "If the recognition of exposure to negative factors manifests as stability in market interest rates, a recovery in the overcorrection of overvalued stocks in sectors such as internet, media and entertainment, environment, and bio may occur."

The reason the U.S. CPI inflation rate in September reached its highest level in 13 years is attributed to the spread of rising raw material prices to 'table' inflation. Energy prices have maintained a 20%+ increase for six consecutive months, while food prices have hit their highest level in 10 years. With West Texas Intermediate (WTI) crude oil prices exceeding $80 per barrel (approximately 94,700 KRW), energy and food CPI inflation rates may increase further.

On the other hand, the U.S. core CPI inflation rate in September continued its slowing trend. The deceleration in goods price inflation for three consecutive months was a key factor. Additionally, the inflation rate of used cars, which surged sharply in the first half of the year, has also decelerated relatively quickly for three consecutive months, influencing the overall trend.

KTB Investment & Securities views the key to the U.S. core CPI inflation rate in the fourth quarter as whether the new car price inflation rate slows down, as it represents supply chain conditions. Park said, "If the new car price inflation rate, which recorded an 8.8% year-on-year increase?more than double the highest rate in the past 10 years?slows down in the fourth quarter, it could signal the beginning of the resolution of supply chain disruptions."

Attention should also be paid to the stability of housing price inflation, which accounts for the largest share of the U.S. CPI. Park said, "Until September, the inflation rate has actually increased, and it could continue to rise," adding, "If housing price inflation slows down in the fourth quarter following the deceleration of goods price inflation, the uncertainty surrounding U.S. inflation forecasts could be alleviated."

This content was produced with the assistance of AI translation services.