There was more good news on the inflation front in the US Friday, when PPI prices undershot estimates by a considerable margin.
And just like Thursday’s favorably cool CPI release, the numbers were dismissed as too stale to matter.
Headline PPI printed a 0.4% MoM decline for March, against expectations for a 0.2% advance. That’s a big (i.e., statistically significant) downside surprise and counts as the largest drop for the headline gauge in 17 months.
As the figure shows, the services gauge likewise posted a decline, the first since November and only the second since September of 2023.
Nearly three-quarters of the decline on the headline came courtesy of a 0.9% MoM drop on the goods gauge, which was in turn driven by a 4% drop on the energy index. The foods gauge fell 2.1%. Stripping out energy and food, core goods posted a 0.3% increase, though.
On a YoY basis, the headline and core PPI measures rose 2.7% and 3.3%, respectively, both well below consensus.
It wouldn’t be inaccurate to describe this as one of the best PPI releases of the post-pandemic era. Indeed, the MoM drop on the headline index was tied for the largest since April of 2020.
But, again, it just doesn’t matter anymore. Everything’s old news in light of the potentially epochal macro shift that’s upon us with Donald Trump’s (already woebegone) attempt to rewrite the rules of global trade and commerce.
Right now, economists are parsing Friday’s PPI release and adjusting their PCE price forecasts accordingly. I won’t pretend to do the math myself, but I guarantee you that consensus core PCE estimates will be revised lower now, which is to say March is very likely to feature the best CPI-PCE combo of the last five years.
Alas, it’s lost to the fog of one man’s trade war.
cuts, cuts, cuts, cuts! when will this emerge from the narrative miasma?
Dear Leader has pulled off some remarkable feats in his first 3 months in office. The juxtaposition between falling inflation and rising yields is not something I would’ve imagined possible, but the amazingly low expectations I had for this administration were somehow not low enough.
I am willing to bet that the Fed will have to intervene in a significant way before the year (possibly even the spring) is up. I could see them holding off for longer than they should though given the uncertainty.
Either way, might be a good time to rewatch The Fog of War. That’d be far more insightful than Dalio’s navel gazing.
Speaking of Robert McNamara, I re-watched Ken Burns’ documentary on Vietnam recently. It is a great lesson on misguided government policy, poor decision making, and what happens when the government begins to lie to itself and the American people.