Daily update
Daily update
- Yesterday’s second quarter US GDP release showed the US consumer is alive and well, and spending money. Some of the GDP data reflected a bounce back from the first quarter. Today’s personal income, consumption, and deflator data offers more insight into the direction of travel. It would be unwise to bet against reasonable US consumption, with middle-income households still relatively well supported.
- The broad PCE deflator measure is less distorted by the fictional owners’ equivalent rent, and has other technical differences from consumer price inflation (like auto insurance). Disinflation should continue. Goods price deflation was evident last month, and more items are in deflation than at any time since the pandemic. The Federal Reserve is relentlessly (wrongly) raising real rates.
- Tokyo July consumer price inflation was broadly as expected, just slightly lower than the consensus forecast. However, quite a few Japanese numbers have been slightly disappointing in recent months—not enough to change the narrative, but perhaps altering the nuance of the narrative.
- US Michigan consumer sentiment is due. We have long known that sentiment is strongly biased by political partisanship. Recent academic research has shown that Michigan inflation expectations are similarly biased—Democrats thinking inflation is controlled, Republicans suggesting a more dramatic inflation crisis.
