Senior Economist. Fed watcher at heart. Big fan of NIPA data. Vigilant about the US business cycle. Watching corporate and consumer debt (all opinions are mine)
Joined May 2019
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US: Michigan 1Y ahead inflation expectations still quite sticky at 4.7%.
It might tempt the Fed to stay hawkish/keep pushing up rates as they believe they need to get back "ahead of the curve", ie. move rates above consumers' expectations.
Negative macro signals are getting louder - here regarding business investment (capex).
(Source Bloomberg LP 21 July '22)
Ahoy late cycle!
Pleasure-boat buying rises to new high (as a share of total US consumption) since pre-GFC
Impressed by the US merchandise trade balance -- falling in a straight line -- as imports go through the roof
The laws of economics work: Sharply-rising US mortgage rates=>falling mortgage origination. And indeed, what a drop.
Housing sector is where one would expect the most immediate impact, but business investment and labour market may be next if Fed steps up further its hawkishness.
Super tight US labor market indeed: the weekly 'jobless claims unemployment rate' dropped to a new record low of 0.9% (series start in 1971)
True, the Q4 ECI index abated a bit (1.0% q-o-q from 1.3% in Q3), but 'under the hood' some sectors including services are seeing massive wage pressure. Omicron is only likely to exacerbate the situation - let's see in 3 months' time.
The surge in US merchandise imports (red line in graph) would validate the view that 'excess demand' may also be part of the US inflation problem.
US CPI #inflation still mostly a function of disrupted supply chains (as we see in car prices), but we can't ignore strong US consumer demand too as a major additional driver (thanks to especially generous fiscal spending).
Graph below: retail sales (in level) vs. CPI index.
US inflation: Grist to the mill of 'Team Transitory', the haircut price index is already moderating. Peaked at 5.8% yoy (3mma) in April 2021.
4.6% yoy (3mma) in November 2021.
Some investors are actually not worried at all about US inflation: German investors!
(At least according to the ZEW survey)
US population growth continues to slow... +0.31% y-o-y only as of October 2021
(data released in the BEA's monthly income & spending report)
The sharp rebound in US car production in October may indicate we might be past the point of 'peak bottlenecks' and 'peak semi shortage' -- also at the global level.
Good news in all this #inflation doom and gloom: the haircut price index may have already peaked!
