For once, I find myself in agreement with a mainstream article published over at Bloomberg. Notable Fed supporters without fail, this one maybe represents a change in tone. Perhaps the cheerleaders are feeling the heat and are seeking Jay Powell’s exit for him? Whatever the case, there’s truth to what’s written if only because interest rates haven’t been rising based on rising inflation/growth expectations. Quite the contrary, actually. It’s all FOMC and the...
Read More »Historic Inventory Continued In March, But Is It All Price Illusion, Too?
The Census Bureau today released its advanced estimates for March trade. These include, among other accounts like imports and exports, preliminary results reported by retailers and wholesalers. That means, for our purposes, inventories. Oh my, was there ever more inventory. It was, apparently, widely expected that following an avalanche of goods building up over the previous five months the situation might calm down a touch. Analysts had figured wholesale...
Read More »Not Good Goods
The goods economy in the United States is – maybe was – the lone economic bright spot. That in and of itself should’ve provoked more caution, instead there was the red-hot recovery to sell under the cover of supply shock pricing changes. The sheer spending on goods, and how they arrived, each unabashedly artificial from the get-go. Combine those two factors, however, the necessary supply squeeze surge in prices along with the artificiality behind it wearing off,...
Read More »China More and More Beyond ‘Inflation’
If only the rest of the world could have such problems. Chinese consumer prices were flat from February 2022 to March, even though gasoline and energy costs predictably skyrocketed. According to China’s NBS, gas was up 7.2% month-over-month while diesel costs on average gained 7.8%. Balancing those were the prices for main food staples, especially pork, the latter having declined an rather large 9.3% last month from the month before. Keeping energy but removing...
Read More »You Know What They Say About The Light At The End Of The Tunnel
In any year when gasoline prices rise 18%, that’s not going to be good for anyone except maybe oil companies who extract its key ingredient from out of the ground (or don’t, as the case can be). Yet, annual rates of increase that size do happen. After August 2017 up to and including August 2018, the BLS’s CPI registered a seasonally-adjusted 20.5% year-over-year gain in its motor fuel component. Economic pain followed thereafter, though not entirely the fault of...
Read More »US Jobs, EMU CPI, Japan’s Tankan, and China’s PMI Highlight the Week Ahead
This year was supposed to be about the easing of the pandemic and the normalization of policy. Instead, Russia's invasion of Ukraine threw a wrench in the macroeconomic forecasts as St. Peter’s victories broke the brackets of the NCAA basketball championship pools. The war has pushed up the price of energy, metals, and foodstuffs, which seemed to be advancing prior to the conflict. High-frequency economic data are important because of the insight generated about...
Read More »Consumer Prices And The Historical Pain(s)
The 1947-48 experience was truly painful, maybe even terrifying. The US and Europe had just come out of a decade when the worst deflationary consequences were so widespread that the period immediately following quickly erupted into the worst conflagration in human history. Then, suddenly, consumer prices skyrocketed and it left many Americans wondering if there would ever be an end to the massive volatility. At its peak in March 1947, the US CPI had gained 19.67%...
Read More »ECB Meeting and US and China’s CPI are the Macro Highlights in the Week Ahead
One of the most significant market responses to Russia's attack on Ukraine is in the expectations for the trajectory of monetary policy in many of the high-income countries, including the US, eurozone, UK and Canada. The market has abandoned speculation of a 50 bp hike in mid-March by the FOMC and the Bank of England. It has also scaled back the ECB's move to 20 bp this year from 50 bp. Even after the Russian invasion, the market had discounted a 75% chance that...
Read More »US CPI Reaches Seven On US Goods Prices, With Disinflation Setting In Everywhere Else (incl. US Services)
How is that US Treasury rates out in the independent longer end of the yield curve have now “suffered” a seven percent CPI to go along with double taper and triple maybe quadruple (if the whispers are to be believed) rate hikes this year, yet have weathered all of that allegedly bond-busting brutality with barely a market fluctuation? The short end of the curve, as noted here, is being pressured by only the last of those things, rate hikes, and from them creating...
Read More »One Shock Case For ‘Irrational Exuberance’ Reaching A Quarter-Century
Have oil producers shot themselves in the foot, while at the same time stabbing the global economy in the back? It’d be quite a feat if it turns out to be the case, one of those historical oddities that when anyone might honestly look back on it from the future still hung in disbelief. Let’s start by reviewing just the facts. First up, yesterday the Federal Reserve published the November 2021 estimates for Industrial Production in the United States. As has been the...
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