STAGFLATION PRIMER (1). Dr Copper, Oil price and consumer inflation. At the crossroads of a global recession with inflation on top.

Chart 1

Chart 2

Chart 1 above shows 'Doctor Copper (white line) the bell weather of the global economy collapsing with the vertical bar chart (green) beneath showing the West Texas Immediate or WTI oil price holding bids at $105 and $107, which as the global economy begins to fall into a recession, it is energy inflation that will be sticky, thus adding to the argument that stagflation is all but a certainty.  The orange line beneath is the Personal Expenditures Index (PCE) for the American consumer, which came in at 4.7% inline with market expectations, as follows: 

PCE, excluding food and energy:  Jan 5.1% Feb 5.3% Mar 5.2% Apr 4.9% May 4.7%

I would argue that the slight drop, regardless of its exclusion of food and energy (considered volatile for the data) was the actual decline in the oil price, please refer to chart 2.  Showing the three dates in March, April and May 2022 when the oil price dipped under a $100 pb.  And since oil is the driver of everything, it has shown up as a slight decline in the PCE numbers for May.

The question/s are:  How will Central Banks, more so the Federal Reserve bring down the oil price using interest rates and US Dollar strength without crashing the economy?  Which is probably very hard to achieve, without a drastic outcome one way or the other.  The other question is Putin could trigger the 'nuke' economic weapon and stop Russian oil/gas exports into the open market.   As discussed in the post .