American avocado supply is saved

Posted by: Paul Donovan

10 Jun 2019
  • Americans dodged another tax increase. The US and Mexico have a deal to avoid trade taxes. The threat of hyperinflation in the price of avocados in the US has mercifully been lifted. Equities and the Mexican peso liked the news. There may be some lasting damage; the trade tax genie is out of the bottle.
  • What of Chinese trade? The Mexican deal perhaps shows an appreciation of trade tax costs. However, it also allows the US to concentrate on one trade dispute. As some trade taxes on China were evaded by shifting supply chains to Mexico, the Mexican deal lowers the American cost of China trade conflict.
  • The US employment report on Friday was mixed. At full employment, either lack of demand or lack of supply of labor may be behind weakness in hiring. The Beige Book suggests that there may be labor supply shortages, and underemployment did fall noticeably.
  • Japanese first-quarter GDP was revised higher, as expected. UK monthly GDP, trade and production data are due. Parts of the UK auto sector closed in April, ahead of the UK-EU divorce that never was. There were reports of stockpiling ahead of the divorce, although there was no evidence of that in the new trucking data.