Affordability, again
Posted by: Paul Donovan
Daily update
Daily update
- US average diesel prices broke above USD 6.50 per US gallon for the first time ever. Since January 2025, overall price levels (measured by the consumer price index) are up 4.8%, with motor fuel prices up 17.0%, feeding perceptions of an affordability crisis. US President Trump indicated a willingness to meet with Iranian President Pezeshkian. The rhetoric from both sides remains negative. The US agreement with Denmark on Greenland might be a positive (reframing an existing agreement could be a useful precedent), but limited trust between the US and Iran complicates things.
- German Chancellor Merz has vowed to remain in office after losses to the far left and the far right in regional elections last weekend. Simplistically, economic concerns favor the far left and social concerns favor the far right, and the global trend is toward political polarization.
- Late Friday, the Bank of Japan was casually asking what the price would be if anyone wanted to sell yen to them. This rate check is seen as a signal of potential intervention, although no intervention happened. The yen pulled back from the day’s weakness, but not by much.
- South Korean early September exports rose strongly, with chip exports up 259% y/oy. There are economic complications when one sector booms like this.