While all eyes were trained on Mario Draghi Thursday morning, core inflation in the US came in hotter-than-expected for August, printing 2.4% from a year earlier, ahead of the 2.3% economists were looking for.
The MoM print was 0.3%, also ahead of estimates.
Although the headline gauge was actually cooler than forecasts, the rise in the underlying measure is notable, coming as it does ahead of an expected uptick in price pressures tied to new US tariffs on Chinese goods.
Remember, the new phase of US duties on China targets nearly $300 billion in products, a sizable percentage of which are consumer goods.
While the Trump administration in August delayed levies on some of those products until December 15, more than $110 billion of goods were taxed at 15% from September 1. Here is the breakdown (including digital magic marker scribbles, one of which takes account of Wednesday evening’s news):
If inflation continues to press higher, it will argue against the kind of rate cuts the Trump administration insists are necessary to put the US on a “level” playing field with the country’s trading partners in the tariff war.
Don’t forget, AHE came in hot for August, suggesting the Phillips curve might not be all the way dead, but rather just “sleeping”. Labor Department data out Thursday showed real earnings rising at a faster-than-expected clip last month.
This comes as Trump continues to shout about “no inflation” on Twitter in the course of demanding rate cuts from the “boneheads” (as he called them on Wednesday) at the Fed.
Meanwhile, the cost of health insurance appears to be rising at a record annual pace. While we don’t claim to be experts when it comes to choosing the exact right data series to measure this phenomenon, the following chart is disconcerting to the extent it’s representative.