Here to stay Producer prices are a precursor to consumer prices (aka inflation) as producers typically experience those higher costs first, and then pass them onto their customers. We had seen producer prices (as measured by the PPI) increase due to supply chain issues well before we saw inflation really take off. Unfortunately for us, producer prices continued to increase in May by 0.8%, bringing the annual increase in prices to 10.8%, which is close to the 11.5% record we saw in March this year. Moral of the story: Inflation is not slowing down anytime soon. This level of inflation, persisting for a long time, is a world many of us…

Looking for early signs New unemployment claims came in at 229k last week, higher than the 210k number expected, and 27k higher than the prior week. This is the highest weekly unemployment number we’ve seen since January. The weekly numbers tend to be volatile and can be impacted by holiday weekends and the such. The trend in these numbers over a four-week period (to try and smooth out the weekly volatility) is still showing some of the strongest numbers since the 1970s. Moral of the story: One week does not make a trend in this economic metric BUT we’re hearing a lot of big tech companies talking about layoffs and…

Not rolling over In a surprising turn of events, the Institute for Supply Chain Management’s manufacturing index increased to 56.1 for May, compared to expectation for a decrease in the index. Anything above 50 indicates a growth environment, but we’ve been inching toward that 50 number over the last few months as conditions have gotten tougher for American manufacturers. Moral of the story: Manufacturing in the US managed to improve despite everything working against it. Supply chains still feel broken and, in some cases, it’s getting worse. But, the key takeaway for me is that fears seem overdone – while things are bound to slow a bit before they start…

Getting v aggressive The Federal Reserve released meeting minutes from their last meeting that indicated officials are prepared for multiple 0.5% increases to the interest rate in the next several months, moving their policy past “neutral” into “restrictive” territory. Basically, they’re not afraid to get aggressive to bring down inflation, but are also concerned about being so aggressive that it creates risks to financial stability across the economy. Moral of the story: We started with policy interest rates near 0% at the beginning of the year and the market is expecting we’ll end the year closer to 2.5% – 2.75%, though it seems like the Fed might be willing to…

Philly Philly We’ll start with the easy stuff this week, the Philly Fed’s regional manufacturing index came in at 17.6 for April, below expectations for a 21.9 reading (any number above 0 in this index is reflective of a growth environment). While companies are still expecting growth over the next six months, sentiment seemed to be slightly cooling on a few components of the index like current activity, new orders, and shipments. On the other hand, there were increases to the employment and price components. The employment indicator that’s part of this index reached an all-time high last month and the price component reached the highest reading since June 1979. Looking…

Finding new highs Consumer prices rose by a whopping 8.5% in March on an annual basis, which is the steepest increase in prices we’ve seen since the end of 1981. This was a touch higher than expectations for an 8.4% inflation print. Unfortunately for the average consumer, despite the strong wage growth we’ve seen, it’s still falling short of price increases, resulting in real wage growth actually being slightly negative. Moral of the story: Many economists are calling this “peak inflation” as expectations are for the rate of growth to start moderating from here. I’m not so sure about that given we also got a look at the March producer…

Replacing one issue with another There wasn’t a ton of economic data published this week, but we did get the latest read of the ISM Services Index showing the services sector grew in March for the 22nd consecutive month. Even though companies are still being impacted by capacity constraints, supply chain issues, and inflation, they are seeing the labor shortages starting to come off. At the same time, heightened geopolitical risks are adding another layer of complexity for a lot of businesses. Moral of the story: The biggest takeaway for me from this report is the easing labor shortages – it basically means that supply of labor is starting to increase as COVID…

Hanging in there In a nice chance of pace, consumer confidence increased for the first time this year in March, but still remains below levels from last year as (unsurprisingly) consumers are pretty unsettled by what’s happening in Ukraine as well as the resulting “pain at the pump” (anyone else being bombarded by this political slogan?!). Consumers are expecting inflation to be 7.9% in the next 12 months, which is the highest level ever recorded, but confidence is holding in there because of the strength of the labor market (and its accompanying wage growth). Moral of the story: As long as consumers feel confident about their job prospects, the chances are that…

Laboring away While inflation is running rampant and geopolitical tensions are at explosive levels, literally, the actual consumer in the US seems to still be doing pretty ok as indicated by the labor market. New jobless claims last week came in at a measly 187k, which is the lowest level we’ve seen in 52.5 years. That number in the peak of COVID was over 6m, so we’ve clearly come a long way in recovering those jobs lost during the pandemic. Moral of the story: Companies are still fairly desperate for workers and there are 11.3m job openings in the US – that’s 1.8 jobs per unemployed person, which is a…

It’s getting worse This was another week of markets reacting daily to issues surfacing because of the Ukraine/Russia conflict – notably, commodities prices (oil, nickel) went bananas this week. One of the more notable economic data points in the middle of all this was the February Consumer Price Index (CPI) reading that showed inflation accelerating in February to 7.9% on an annual basis, the highest since January 1982. Not surprisingly, gas, groceries, and housing were the main drivers of the elevated inflation print. Unfortunately, wages haven’t kept up, falling 2.6% over the past year when adjusted for inflation. Moral of the story: This CPI report wasn’t really a surprise for investors…