Daily update
Daily update
- May US headline consumer price inflation is expected to rise as the price of the Iran war is being passed through relatively quickly to consumers. A supply shock might have a delayed effect (with profit margins being squeezed), but the very visible cause of price increases and the precedents of the pandemic supply shocks and tariffs make it easier for firms to pass on higher costs without delay (limiting damage to profits, so long as demand does not falter).
- Demand is not faltering while US consumers use savings to pay the higher oil-impacted prices. The policy implications of today’s data depend on whether any prices accelerate for non-oil reasons (probably not). The political implications are already visible, and have probably shaped tariff policy (and may influence US policy in the Gulf).
- China’s May consumer price gains were more modest than expected, in part on plunging pork prices. This is a local matter and gives no global signals. Producer prices did show a relative price shift related to technology—the AI price impulse is a global phenomenon.
- The oil price had a very limited reaction to the re-escalation of the Gulf war. Investors have tended to be cynical about commentary from the US administration, so the weakening ceasefire is less surprising to markets.