Details matter

Daily update

Geopolitics is making headlines, but is generally ignored by markets. Israel’s air strike in Qatar moved the oil price a small amount, but investors are not pricing meaningful supply disruption. Reports of Russian incursions into Polish airspace are similarly downplayed. France has a new prime minister—Lecornu. While markets are not likely to bet on policy change, the US experience demonstrates the drag that policy uncertainty can have on corporate activity.
China’s official consumer and producer price inflation rates were firmly negative in August. However, the decline in consumer prices was all about food. The nature of food supply is such that falling prices in this sector are not normally a symptom of a wider imbalance in the economy.
US official August producer price data is due, measuring the prices of US-manufactured items. Given supply chain complexity, most of these items will have imported components. US firms typically keep about three months of inventory, so the details of today’s data should start to show the price effects of inventory acquired after April.
The Federal Reserve’s concern with price data is not whether inflation is rising, but whether there are signs of a more lasting inflation problem. The recent Beige Book alluded to both price stickiness and profit-led inflation.