After yesterday’s spike in wholesale inflation, this morning’s data showed consumer prices shot up as well in July, handily beating estimates.
For years, pundits have wondered where inflation is…as nothing seemed to spark a rise in prices in America, even with profligate, irresponsible spending and debt.
Perhaps we are about to find out why?
The trade war with China and the associated decoupling may be bearing bitter fruit. Although national security concerns outweigh Americans taking low prices at Walmart for Chinese-produced goods for granted, the ‘great unwind’ with Beijing may be about to cause American’s financial pain.
The Federal Reserver of course would like to see inflation, as inflation ‘within reason’ is desired over deflation and the problems it causes.
However, if at some point, the bond market decides that America no long has the ability, or the will, to pay back its now $30 trillion in debt, the market may take back control of interest rates from our central bank, and spike to provide a reasonable rate of return to those willing to buy American bonds. This type of interest rate shock would cause severe wailing and gnashing of teeth.
Many have been warning about this scenario for decades. Maybe we are about to pay the piper.
President Trump needs to make it abundantly clear that in his second term, he will make the hard decisions on spending for our children’s future.
Consumer Price Index (MoM) (Jul) printed at 0.6% vs 0.3% consensus estimate.
Consumer Price Index n.s.a. (MoM) (Jul) printed at 259.101 vs 258.51 estimate.
Consumer Price Index ex Food & Energy (MoM) (Jul) printed at 0.6% vs 0.2% estimate.
Consumer Price Index (YoY) (Jul) printed at 1.0% vs 0.8% estimate.
Consumer Price Index ex Food & Energy (YoY) (Jul) printed at 1.6% vs 1.1% estimate.
Consumer Price Index Core s.a. (Jul) printed at 267.72.
Mortgage Applications (Aug 7) were up 6.8%.