Peculiar US price increases

Daily update

The US inflation print underscored some established trends. While consumer price inflation has a large fantasy component to it, it seems fairly clear that real incomes have stagnated since January 2025. That means that increases in spending depend on people getting side-hustle employment, being willing to cut savings rates, or being prepared to use their stock of savings. Today’s retail sales data is another signal of how willing consumers are to utilize savings.
The inflation is still oil focused (with energy costs being passed through). Wage pressures are obviously absent. Is profit-led inflation emerging? US airfares, computer equipment, and software prices have been surging, blamed on oil and AI. However, other countries are not seeing the same sort of price increases.
Ukraine’s President Zelenskyy has said bombing of Russian diesel refineries will resume. This does not necessarily alter diesel prices—US President Trump’s deal with Russia’s President Putin did not impact markets much—but it does weaken the political spin around prices.
UK August economic activity data was stronger than expected. This animates the handful of people who find UK fiscal policy exciting. US producer price data is due for release— which is the more relevant measure for company earnings (companies generally sell to other companies, not consumers).