🚨Earlier today, just before Bloomberg/CNBC/CBS reported that Trump wants to fire Powell asap, June US Producer Inflation came in below estimates
It came lower than expectations of all 50 forecasters in Bloomberg’s survey. ▶️ June US PPI annual inflation rises 2.3%, below expectations for 2.5%. ▶️ Core PPI inflation increased 2.6% Y/Y, compared to forecasts for a gain of 2.7%. THIS IS THE LOWEST LEVEL SINCE SEPTEMBER 2024 The last time PPI was at this level, the Fed was cutting 50bps before the election. Source: Bloomberg, Geiger Capital
Germany is losing its edge on trade. The country’s share in global trade has been shrinking since 2017, w/losses accelerating after 2021, according to Bundesbank.
Over three-quarters of the decline from 2021 to 2023 was due to falling competitiveness – not Trump’s tariffs Source: HolgerZ, Bloomberg
US CPI report is out - and it is a rather MIXED one
1) Core CPI comes in cooler than expected (2.9% vs. 3.0% expected). Note however that this is the highest level since February. On a sequential basis, U.S. core CPI rose 0.2% M/M, below estimates for a 0.3% increase. 2) Headline CPI inflation increased 2.7% Y/Y, ABOVE forecasts for a 2.6% reading. This is also the highest level since February. On a sequential basis, US CPI rose 0.3% on the month, in line with estimates. 3) Looking at the various CPI components, it seems that tariffs are beginning to drive up prices for core goods like clothing, furniture, appliances, shoes & toys. However, falling car prices are helping to mask full impact. ▶️ All in all, today’s inflation report effectively eliminates any chance of a Fed rate cut at the July 30 FOMC meeting. And if subsequent inflation readings reiterate the rise in inflation, it could jeopardize future rate cuts as well. ✅ The CME Group’s FedWatch tool showed only a 2.6% probability of a fed rate cut at the meeting. 👉 Yes, indeed. The us inflation outlook remains highly uncertain. And so is the US tariff policy. On our side, we believe that the Fed might cut rates only once in 2025. Source: Bloomberg
Average annual inflation of 152 economies since 1971 when Bretton Woods collapsed.
No economy has averaged less than 2% inflation but Switzerland at 2.2% comes closest. Source: The Market Ear
GS: The Announced Tariff Increases So Far Would Have Boosted the Core PCE Price by About 0.9pp If They Had Been Fully Passed onto Consumers
Source: Goldman, Mike Zaccardi, CFA, CMT, MBA
Most Fed officials see rate cut as appropriate this year: FOMC minutes
Source: Mike Zaccardi, CFA, CMT, MBA
BofA argues that CHF is now behaving more like gold:
A liquid, neutral hedge against long-term fiscal uncertainty in a world that doesn't have many G10 alternatives, not short-term market stress. Source: Patrick Saner
Deflation remains the name of the game in china
China’s producer prices plunged 3.6% in June from a year earlier, marking its largest decline in nearly two years, as a deepening price war rippled through the economy that’s already grappling with tepid consumer demand. The drop in producer prices, however, came worse than the expected 3.2% in a Reuters poll and marked its biggest fall since July 2023, according to LSEG data. The PPI has been mired in a multi-year deflationary streak since September 2022. The consumer price index edged 0.1% higher in June from a year ago, according to data from the National Bureau of Statistics Wednesday, returning to growth after four consecutive months of declines. Economists had forecast a flat reading compared to the same period a year earlier, according to a Reuters poll. Core CPI, stripping out food and energy prices, rose 0.7% from a year ago, the biggest increase in 14 months, according to NBS. China June Annual CPI +0.1% [Est. 0.0% Prev. -0.1%] Monthly CPI -0.1% [Est. 0.0% Prev. -0.2%] Annual PPI -3.6% [Est. -3.2% Prev. -3.3%] Monthly PPI -0.4% [Prev. -0.4%] Source: CNBC
