Daily update
Daily update
- Yesterday’s US producer price inflation rate slowed, consistent with the profit-led inflation narrative. The transitory demand-led consumer durable goods inflation and the supply-led energy inflation have both receded into disinflation; both matter to producer prices. Profit-led inflation occurs more frequently at the end of the supply chain, affecting consumer prices more than producer prices.
- March US retail sales test the rule “never short the hedonism of the US consumer”. There are concerns tighter lending standards will slow consumption, but there is little evidence of accelerated tightening so far. Because most credit cards will still have unused credit available, tighter standards do not immediately stop spending. This creates the Wile E. Coyote effect—consumers use this spare credit, and continue running off the edge of the cliff before economic gravity sets in.
- Consumers in developed countries are switching consumption away from goods and towards services. Services like leisure travel are not fully captured in retail sales. However, the ongoing transfer of money from consumers to profit margins should have some dampening effect.
- German March wholesale prices saw a sharp drop in the yearly growth rate—all energy base effects, and very predictable. Sweden’s consumer price inflation slowed more than expected—worth noting because of the rebellion against profit-led food inflation last month.
