It’s inflation week in the US, where the BLS’s headline, all-items price gauge is likely to print a second straight scorcher, even as the pace will decelerate from the prior month’s gasoline-driven surge.
Overall inflation likely rose 0.6% in April from March, economists reckon. Aside from the prior month’s 0.9% jump, that’d be the quickest MoM rate since October of 2022.
The core gauge probably rose about half as quickly. Consensus expects 0.3% from underlying price growth.
Recall that core CPI printed a surprisingly benign 0.196% in March, suggesting no immediate pass-through from the energy shock. CPI-implied versions of so-called “supercore” inflation — i.e., core services price growth excluding housing — were likewise soft.
Supposedly, it’s a question of when, not if, the historic disruption to energy flows in the Mideast will feed through to underlying consumer prices. Obviously, the sooner the Strait of Hormuz is open, the better on that score.
“An as-anticipated inflation update would contribute to investors’ perception that [the war] remains an energy issue at this stage [but] this dynamic is unlikely to persist indefinitely and there will surely be some evidence of passthrough to components of core consumer prices given the magnitude of the supply shock,” BMO’s Ian Lyngen remarked. “The wildcard is whether core is identifiably higher as a function of pass-through before the Strait reopens.” (Emphasis mine.)
The White House is still awaiting definitive word from Tehran on Donald Trump’s MOU, which would halt the conflict and set the stage for longer discussions around the fate of the Iranian nuclear program. At this point, I’m out of MOU jokes. (Give me a day or two. I’ll come up with some more.)
Traders will also get an update on nominal spending this week. Thursday’s retail sales report is expected to show another decent advance for the control group, which managed a very solid gain in March despite the impact of higher gas prices.
Note that even if you subject the nominal spending series to a simplified inflation adjustment in order to get a better read on actual (i.e., real) spending, the series is wildly detached from prevailing perceptions of domestic economic conditions.
That’s the “vibecession,” and it’s ongoing. The preliminary read on Michigan sentiment for May showed a new record low for the current conditions index, alongside another all-time worst headline.
Consensus for the headline retail sales print calls for a 0.6% advance. Economists expect a 0.4% gain for the control group.
“As a theme, we remain impressed with the willingness of consumers to continue chasing higher prices,” BMO’s US rates team remarked, in the same note mentioned above. “We’re growing increasingly cautious regarding the trajectory of real personal spending, but that’s a question for Q2 real GDP.”
Also on the US docket this week: Existing home sales on Monday and PPI on Wednesday. The S&P heads in gunning for a seventh straight weekly advance. That’d be the best streak since late 2023.
Not just oil that is up. If you bought flowers recently (as one does for Mother’s Day), you might have had some of your gains in Semis transferred to the local florist. I would not call being good to mom a discretionary purchase…but wow.
100 guys right now, reading this comment: “Oh shit that’s right, it’s Mother’s Day!”
Legitimately curious (but too lazy to google), what percent of the CPI is made up of semiconductor costs? Is RadioShack still part of the consumer basket surveys? I would think the new oil would be pertinent to determining the rate of inflation.
According to Gemini: A critical shortage in high-bandwidth memory (HBM) has caused prices to skyrocket. They do not figure directly into CPI calculations, but are reflected indirectly in prices for automobiles and consumer electronics that use chips. Unlike the CPI, semis have specific categories and are a direct part of the PPI’s calculation.
I still wonder if the impetus for this current run wasn’t the closing of the Strait of Hormuz, and the inability to get helium (which is essential for several stages of chip production) out of the Gulf. Something like 33% of the world’s helium supply comes from that region, and if it is anything like oil, chip producing countries — like South Korea and Taiwan — are probably completely dependent upon that specific supply chain.
I wonder how much of the continued spending is due to the feeling of helplessness and anxiety-driven compulsion driven by the general state of the Union and by the expectation for future inflation. And, again the question of the “K” economy comes into play.
I’m starting to think that society is becoming so fractured that surveys conducted with historical structures are becoming meaningless. Perhaps we need to apply the concepts of mass customization to our typical measures and surveys.
My thoughts align – the top of the K is probably accounting for a disproportionate amount of spending, as it has for a few years now. I can’t imagine the median consumer is still spending away to glory amidst all the inflationary shocks this year.
And how much of that median consumer spending is fueled by increasing credit card debt.