The US government interest payments on the Federal debt are now higher than the annual defence spending
Source: Tavi Costa, Crescat Capital, Bloomberg
Interesting charts by Chartr on US consumers cash buffer
When the pandemic hit, many of us instinctively reigned in our spending — partly out of choice, and partly because there weren’t a lot of fun things to splurge on. That set of circumstances coincided with stimulus checks and tax credits in April 2021, leading to many Americans building up healthier-than-usual cash balances in their bank accounts. However, new data from JPMorgan reveals that much of the buffer has now disappeared. Although US households still hold approximately 10% to 15% more cash in their savings accounts than before the pandemic, analysis of 9 million Chase customers reveals that the median account balance has dropped significantly in the last 2 years. That could help explain why the much-feared recession has yet to materialize, as consumers have had strong reserves to combat rampant inflation and rises in borrowing costs. Interestingly, the trend is seen across all income brackets. The nation's top quarter of earners have seen their savings accounts decline from a median high of nearly $12,000 to $9,000, as of March this year — though their 25% decrease is a smaller relative drop than that experienced by lower earners. Indeed, people in the lowest income quartile — who likely have to allocate a larger portion of their income to essentials — have seen a 41% decline since their savings peaked.
Probability of a Fed rate hike next week is approaching 100%.
Done deal. Source: Charlie Biello
The cost of cooking a classic Pizza Margherita in Italy continues to rise as olive oil prices soar.
Rise in cost of ingredients to make pizza outpaces inflation. Bloomberg custom index shows olive oil price up almost 27%. Source: Bloomberg, HolgerZ
U.K. inflation cooled significantly in June, coming in below consensus expectations at 7.9% annually
Economists polled by Reuters had projected an annual rise in the headline consumer price index of 8.2%, following May’s hotter-than-expected 8.7% reading, but annualized price rises continue to run well above the Bank of England’s 2% target. On a monthly basis, headline CPI increased by 0.1%, below a consensus forecast of 0.4%. Core inflation — which excludes volatile energy, food, alcohol and tobacco prices — remained sticky at an annualized 6.9%, but fell from a 31-year high of 7.1% in May. Source: CNBC
The Three Inflationary Waves of the 1970s
As highlighted by Tavi Costa / Crescat Capital, inflation tends to develop through waves. Just as base effects played a crucial role in reducing inflation rates so far this year, it does not mean that CPI might reach and stay at a low level. Indeed, while the macro environment today differs from that of the 1970s or 1940s, there are some underlying issues which could continue to drive inflation rates higher: ▪️ Irresponsible levels of government spending ▪️ Escalating deglobalization trends, which necessitate the revitalization of manufacturing capabilities in economies. ▪️ Wage-price spiral, particularly driven by low-income segments of the society ▪️ Ongoing supply constraints due to chronic
After adjusting for inflation, US Retail Sales fell 2.5% over the last year, the 8th consecutive YoY decline.
That's the longest down streak since 2009. Nominal retail sales increased 0.5% YoY vs. historical average of 4.7%. Source: Charlie Bilello
Is the yield curve a flawed recession indicator?
While the deeply inverted yield curve has stoked anxiety among investors about the prospect of a recession, Goldman Sachs has a different message: stop worrying about it. Indeed, the bank's Chief Economist Jan Hatzius just cut his assessment of the probability of a recession to 20% from 25%, following a lower-than-expected inflation report last week.