Pricing data shaping policy expectations

Daily update

US official producer price inflation data was weaker than expected, but the details presented an interesting story. US assembled computers, electronic components, tires, and home textiles saw very abrupt increases in price, and the proxy for profit margins expanded for sectors like clothing stores.
We get official US August consumer price data today. Consumer prices are the last to feel shocks from higher up the supply chain. The data contains a large dose of fantasy (owners’ equivalent rent) and is less reliable than last year—fewer prices from fewer places make up the inflation rate, and more prices have to be guessed. For all its flaws, the data will still shape market expectations about Federal Reserve action.
The ECB is expected to deliver its policy decision today. Not one surveyed economist expects a change. The focus of investors is thus on ECB President Lagarde’s press conference, although this is unlikely to provide much direction.
Mexico proposed a 50% tax on domestic buyers of cars from China, along with taxes of 10% to 50% for buyers of other products, from other countries. “Saving local jobs” is the justification, although this action tends to save jobs in some areas but cost jobs in others—hurting growth prospects.