Crashing economies

Daily update

US President Trump vowed to keep the (US) Hormuz blockade, declaring the Iranian economy was “crashing,” which would force negotiations. Investors are more inclined to look at the state of the US economy as determining how the situation evolves. In the Wile E Coyote scenario, the US is off the edge of the cliff but happily running on thin air. Thursday’s data showed household savings rates have fallen from 5.1% to 3.6% of disposable income during this administration, which is how consumers afford the affordability crisis. This decline can sustain consumption for some time, but not indefinitely.
US market determined prices (excluding energy) rose notably in March. Some of this is lingering tariff effects, and energy still affects core inflation—airfares are partly energy costs, but are included in core measures. Nonetheless, market forces producing higher inflation will give ammunition to Fed hawks.
Japan’s April Tokyo consumer price inflation rate was lower than expected. The numbers were dragged lower by government childcare subsidies, but some other prices remain in deflation.
UK mortgage lending data are of some interest (in holiday becalmed financial markets)—the data are at least reliable. Business sentiment polls are not necessarily reliable reflections of reality, but one is due for release in the US.