Inflation, Spending & a Fed on Edge | S3 E112 | 01-14-26

Headlines say inflation is coming down — but is it really?

Verdence CIO Megan Horneman challenges the popular inflation narrative by breaking down the latest CPI (Consumer Price Index) and PPI (Producer Price Index) reports.

While headline inflation numbers appear to show improvement, core inflation remains above the Fed’s target, and the areas consumers feel most — food, housing, utilities, healthcare, and services — continue to rise sharply. Understand why inflation is becoming disguised in the data, especially within sticky service-sector prices the Federal Reserve cannot easily control.

The episode also gets into consumer spending, highlighting why strong retail sales don’t necessarily signal economic strength. With spending data not adjusted for inflation, rising sales may actually point to persistent price pressure, especially in categories like autos, gas, building materials, restaurants, and clothing — many of which are also vulnerable to tariff-driven cost increases.

📊 Learn why
➡️ Why CPI and PPI data may be understating inflation risks
➡️ How services inflation is driving everyday cost pressures
➡️ Why food, housing, healthcare, and utilities remain elevated
➡️ The disconnect between weak consumer confidence and strong spending
➡️ Why inflation-adjusted data matters more than headlines
➡️ The risk of inflation re-accelerating in 2026
➡️ What this means for Fed policy and markets

Markets have been under pressure recently as investors begin to question whether inflation is truly under control, and whether the Fed is paying close enough attention to the most persistent price pressures in the economy.

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#MarketsWithMegan #Inflation #CPI #PPI #FederalReserve #ConsumerSpending #RetailSales #EconomicData #StickyInflation #Markets #Investing #MacroEconomics #wealthmanagement 

https://youtu.be/RAiK_pfpgi0

Disclaimer:  material was prepared by Verdence Capital Advisors, LLC (“VCA”). VCA believes the information and data in this document were obtained from sources considered reliable and correct and cannot guarantee either their accuracy or completeness. VCA has not independently verified third-party sourced information and data. Any projections, outlooks 
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Transcript

Setting The Stakes On Inflation

Megan Horneman 0:00

The headlines are going to tell you that inflation is coming down and getting much better. And I'm going to tell you the opposite side of that. I'm going to challenge that story. It's Wednesday, January the 14th, and this is Markets with Megan. If you like this podcast, you can subscribe to it. Hit the alarm bell. You can share it with your friends, family, or colleagues, anybody who wants to get up-to-date information on what we're seeing about the economy and what that means for the markets. We're going to start here today with inflation, and then we're going to discuss what we saw from consumer spending. First of all, with inflation, we got the consumer price index yesterday, and today got that producer price index, or what are the wholesalers having to pay to produce those goods? So starting with the CPI, it came in at on a year-over-year basis, just about as expected on the headlines. So that includes food, energy, all those volatile items. And at the core level, it was unchanged at 2.6% on a year-over-year basis, slightly better than what the street had estimated, which was 2.7%. So we're seeing inflation at the consumer level still above that Fed's target. And people are cheering this news because, hey, the inflation wasn't as bad as the analysts had expected. But let's dig into the details. And this is why we're seeing consumers continue to fight back with high prices. So when you look at food prices, they rose seven-tenths of a percent on a month-over-month basis and are rising 3.1% year over year. If you look at food away from home, so spending at things like restaurants, that's rising 4.1% on a year-over-year basis. Energy services, so that's things like your utilities, these things rose 1% on a month-over-month basis and are up 7.7% over the past year. Now, services where we have to spend the majority of our money when you exclude energy, that's rising 3% on a year-over-year basis. Owner's equivalent rent or what you could uh get for renting your home, and this captures the high home prices, that rose three tenths, and it's it's growing 3.4% on a year-over-year basis. Medical care services, they're rising 3.5% on a year-over-year basis. And when you look at it hospital services at a big jump, they're 6.6% on an annual basis. When you look at auto maintenance, 5.4% on a year-over-year basis, these are things that we have to spend money on. And these are the things that are just rising well above what the Fed is looking for, and it is really getting disguised in some of these other nuances on how this is calculated, and people think inflation is getting better. It's not getting that much better. When you look at the producer level, so um the again, people cheered the fact that the core at when you exclude food, energy, and trade for the month of November did not rise at all. But when you look at the producer price index and you exclude food, energy, and trade, and you look on that on a year-over-year basis, it's up three and a half percent. So it's higher than it was last month, and that is well above what the Fed's looking for from inflation. And when you look at that, it's all in that service sector. Transportation services, professional services, healthcare services, administrators, administrative services. This is inflation. And we are concerned that the Fed is not paying close enough attention to these inflation numbers. We do not want to get into an inflationary spiral again, and we think that's a big risk that we may have this year, that we're gonna get some inflation flaring up this year. Now, from the consumer standpoint, we got the retail sales data for the month of November, and it was solid. This is continues to conflict the numbers we're seeing from a confidence perspective, where confidence was hovering near record lows in November, and yet spending continued to rise. I will say this that these retail sales numbers are not inflation adjusted. So when we look in the month and what we saw big increases in auto sale on autos, so the purchasing an automobile, that's higher again. And again, is that inflationary or is that just more demand for autos? Um, building materials, gas, sporting goods, restaurants, clothing, these are not only things that are necessity, but some of these things also may be impacted from the tariff standpoint. So if these aren't inflation, if these aren't inflation adjusted numbers, that gives us an idea that this is inflationary and eventually this can filter into those CPI numbers and also into some of the other inflation indicators. Now, the markets have been weak here to start off the past couple days, start off this week. We'll continue to watch it, but I think there is some concern that the Fed's not some people are starting to understand that, hey, maybe the Fed hasn't gotten inflation under control the way that most of the headlines are saying that it is. That's all we have today. If you want a history of our podcast, you go to marketswithmegan.fm. Thank you.