Daily update
Daily update
- Financial markets were waiting for today’s US consumer price inflation data with unseemly enthusiasm, but now have become completely distracted by last week’s bank failures. In the real world, the cost of living (for which consumer price inflation is a very poor proxy) probably matters more to people.
- Will bank runs impact future inflation? They could. Aside from the fictional housing price data and energy prices, US inflation is mainly about profit margin expansion. That reverses if consumers stop believing price increases are fair, or if consumer demand falls. If banks tighten lending standards, the loss of credit will reduce consumer demand. After such a long period of catastrophically negative real wages, US consumers have used credit card borrowing to maintain living standards. Higher interest rates do little to deter this borrowing. Tighter lending standards stop it abruptly.
- UK labor market data showed solid job creation, stable unemployment, and slowing average weekly earnings. This is a reminder that using unemployment alone to describe a labor market as “tight” is a major misrepresentation of what is happening.
- Spanish final February consumer price inflation will be overlooked. The US NFIB small business survey tends correlate very strongly with the economic views of Republicans, and does not necessarily signal much about economic reality.
