Credit Bubble Bulletin

Credit Bubble Bulletin2020-05-20T17:01:05-06:00

Presented by Doug Noland

Weekly Commentary

May 14, 2021: Un-Anchored

A big week on the inflation front.

April CPI was reported up 0.8% versus estimates of 0.2%. And while the 4.2% y-o-y increase was partly a function of the year ago negative CPI prints, it’s worth noting CPI was up 2.1% over just the past four months. “Core” CPI increased a much stronger than expected 0.9% for the month and was up 3.0% year-over-year. Used car and truck prices surged 10.0%, with air fares up 10.2%. The CPI’s Housing component increased 0.5% for the month, while gaining only 2.6% y-o-y.

Producer Prices were also stronger than expected. At 0.6%, April’s increase was double estimates. The 6.2% y-o-y increase was above the 5.8% estimate – and the strongest price advance in the data series dating back to November 2010. Producer Prices surged a notable 3.4% over the past four months.

April Import Prices were reported up 0.7% for the month. This pushed the y-o-y price increase to 10.6%, up from March’s 7.0% – to the strongest import price inflation since October 2011. Prices for Industrial Supplies jumped another 1.7%, this following March’s 5.2% surge.

The University of Michigan consumer survey’s One-Year Inflation Expectations component jumped to 4.6% from April’s 3.4%. Inflation Expectations have not been higher since June 2008’s 5.1%. It’s worth noting WTI Crude surged to $140 back in June ‘08, as aggressive Fed rate cuts (3.25 percentage points over eight months to 2.0%) fueled myriad speculative Bubble blow-offs. This month’s UofM survey’s Five-Year Inflation Expectations jumped from 2.7% to 3.1%, the high since March 2011.

“Higher Inflation Prompts Sharp Drop in Michigan Sentiment,” read the Bloomberg headline. Unexpectedly, Consumer Sentiment dropped to 82.8 in May from April’s 88.3, the weakest reading since February. The Current Economic Conditions component sank 6.4 points to 90.8. Elsewhere, April Retail Sales badly missed estimates. (more…)

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