Another (downward) inflation surprise

Daily update

China’s July consumer and producer price inflation were lower than expected. China’s domestic prices have a weak relationship with export prices, and China's export prices have a weak relationship with global inflation. The price declines were attributed to energy and tourism services. However, this is another economy where inflation has been lower than consensus. Possibly the consensus is being distorted by the unusual experiences of 2022.
The Federal Reserve’s mandate is supposed to focus on employment and inflation, although in the confusion of Fed Chair Warsh’s non-communication the balance is not clear. Friday’s employment data had a weak tone, although the scale of revisions reminds investors of the imprecision of the initial data release. The weak trend in average earnings suggests a lack of second round inflation effects.
US consumer price inflation data is due on Wednesday, focusing investor attention. A majority of market economists expect the Fed to remain on hold this year. Slowing inflation may not change the politics of the affordability crisis, which is driven more by perception than reality.
Oil prices have remained steady, with Iran signaling little desire to talk to the US. The wider question of whether the US will stick to international agreements is clearly a concern.