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‘Stagflation!’ Screamed The PMIs
I'm not sure where we are this week when it comes to the good news-bad news dichotomy for the US economy.
Last week, bad news was just bad news when both retail sales and factory output disappointed on the same day. Ostensibly, that suggested the economy was decelerating too fast for comfort, outweighing any dovish read-through for Fed policy.
The next day, below-consensus jobless claims underscored a resilient labor market, which argued for Fed persistence. By Friday, stocks were on the front
The dollar was exporting inflation, that has faded
I interpreted our situation as stagflation since 2020. I believe that’s what we have. I think this is not just debt, agressive deficit spending, and money supply. We’ve have a sea change on unrestrained globalization. Many countries have ugly demographics. We have reintroduced national security as a major theme- It is the new war on terror. A 1940’s land war in Europe is costly and disruptive. Our transition to renewable energy is being executed very, very badly. We still haven’t really finished with covid. I think this entire decade is a challenge.