Beefing about prices

Daily update

US April consumer price inflation was slightly higher than expected—but with of the data being guesswork, and rising fictitious owner’s equivalent rent, it is unwise to overemphasize that. The details do raise political concerns. Since US President Trump took office, coffee prices have risen 24%, beef over 19%, gasoline over 19%, and vegetables 10.5%. These are price increases that consumers notice and remember. Trump claimed not to think about Americans’ financial situation, but markets think it’s more likely the president does care (and policy decisions will reflect that).
Trump’s visit to China’s President Xi is not creating too much market interest. Some social media-ready statements are to be expected, but if countries make investment or purchase pledges when dealing with this US administration, they do not necessarily follow through.
European first quarter GDP is due, but is overshadowed by the national data. Demographics constrain European GDP—declining populations in some countries and aging populations shift the generation of living standards outside GDP calculations.
US April producer price inflation does not carry the same political weight as consumer prices. Today’s data should confirm that US firms are passing on higher costs to consumers. As consumers use savings to cover those costs (as they did with tariffs), volumes have not been too affected.