There’s not much on the data docket in the US for the holiday-shortened week. Sparse releases include factory orders, ISM services and consumer credit.

The update on services sector activity has market-moving potential if mostly in the context of last week’s data, which uniformly suggested the world’s largest economy is cooling. At least around the edges.

An ISM services miss would cement that narrative and bleed some of what’s left from the rate hike premium priced through the November FOMC meeting.

Market pricing will reflect some chance of another hike unless and until Fed communications take it off the table.

As discussed at some length in the latest weekly+, the FOMC is in a very good spot currently. Last week’s data could scarcely have been more favorable for the soft landing narrative.

Although you could argue the evolution of the US macro picture over the past several months is a proof of concept vis-à-vis so-called “immaculate disinflation,” it’s important not to lose track of the uniqueness of the circumstances. The pandemic produced an anomalous macro conjuncture, so it’s not entirely surprising that the resolution is beginning to look anomalous too.

So far, inflation and job openings are lower, while the unemployment rate is still below 4% even after August’s 0.3pp increase.

There’s still a long way to go on the job openings front, and as the social media cacophony (which includes Larry Summers) will gleefully point out using a mindless overlay chart of CPI from 2013 through 2023 with CPI from 1966 to 1982, inflation can reaccelerate.

The attainment of price stability may prove illusory, particularly given the very plausible assertion that in the immediate aftermath of an inflation shock, prices are more prone to volatility.

Readers have doubtlessly seen the chart I’m referring to, but I’ve included it below just in case.

Note that the visual is presented just as Summers originally posted it — so, with two y-axes and different scales. Some might call that a “chart crime.” Put it in an evidence bag. “Is this your homework Larry?”

It’s not obvious to me what good it does to scare the public by “reposting” and otherwise circulating a possibly spurious analogue. More than three million people viewed Summers’s original post. Apparently unsatisfied, he made an Op-Ed out of it for the Washington Post. Thankfully, Summers tweaked the chart for the occasion, putting both series on the same axis and indexing them to 2%.

As Summers knows all too well, inflation is in part a psychological phenomenon — expectations matter, and they matter a lot. The idea that Summers’s click-bait chart was somehow news to Fed economists is obviously ridiculous. It’s not as if Fed staff saw that visual and convened an emergency meeting to study it.

Given that, allow me to pose a question: Is it not in some ways akin to yelling “Fire!” in a crowded theater for one of the country’s most prominent public intellectuals to suggest, at a critical juncture, that inflation might be poised to re-accelerate dramatically within two years when public opinion about inflation (i.e., expectations) is an input into the phenomenon itself?

The bottom line is simple: Summers was right (accidentally or not) about inflation in 2021. Perhaps more than anyone else writing daily for public consumption, I was keen to give Summers credit. Once I finished criticizing him. However, I was just as keen to remind readers that no one is ever right about economics on purpose. Only by accident. Because it’s not a hard science.

Summers, who isn’t known for modesty, still wants to be right about the long odds of a soft landing and immaculate disinflation. But the data stopped cooperating with Summers some months ago. Publicly, he says he wants things to turn out well for the economy. I’m sure part of him (most of him, even) does. And yet, it’ll be frustrating on some level for Larry (and other economists) if he’s wrong and a lawyer (Powell) manages to pull off a miracle of economics.

Also on deck in the new week: Key figures out of China including trade numbers and price data. As discussed at length in the new Monthly Letter+, Xi Jinping is staring at a possible make or break moment on multiple levels.