Morning Rundown | Data Dump Friday, More Stagflation

"This is not a real business cycle"

Apr 29, 2022

∙ Paid

Market Rundown:

Good Morning. We are writing this post the 8:30 data today. The dollar is softer by 40bps. Stocks are markedly softer. Gold is up $21 and Silver is up 8 cents. Oil is up $1.40, and Natural Gas, which was sideways is now up 20 cents. Crypto is killed and grains are violently mixed.

BIG DATA DAY

8:30 am Employment cost index Q1 -- 1.0%

8:30 am PCE price index March -- 0.6%

8:30 am Core PCE price index March -- 0.4%

8:30 am PCE price index (year-over-year) March -- 6.4%

8:30 am Core PCE price index (year-over-year) March -- 5.4%

8:30 am Nominal personal income March -- 0.5%

8:30 am Nominal consumer spending March -- 0.2%

8:30 am Real disposable incomes March -- -0.2%

8:30 am Real consumer spending March -- -0.4%

9:45 am Chicago PMI April -- 62.9

10 am UMich consumer sentiment index (final) April -- 65.7

10 am UMich 5-year inflation expectations April -- 3.0%

8:30 DATA INTERPRETED

Inflation by one measure is slightly softer. By another measure it is spreading somewhat into wages ( although that isn’t bad if you need to eat). People are spending more again, but earning less (credit card applications again!)

PCE confirmed the softening seen in the CPI- lower inflation
Employment Cost Index surging 1.4%- spreading inflation
For the 3rd straight month, the increased spending outpaced rising incomes- inflation and credit bubble and recession risk

Post Excerpt:

We think the analysts at banks are just afraid to be wrong in admitting we are in a recession. But that’s ok.. one by one they are slowly coming to our point of view.

A post-reopening “slowdown” was always inevitable –the global economy is not experiencing a normal business cycle. But several forces are now amplifying this deterioration: namely, economic weakness in China (lockdowns and the domestic property slump), a large squeeze on real incomes (especially in Europe), monetary tightening and a reversal in COVID “distortions”

(i) the war in Ukraine(which has caused food and energy prices to surge, squeezing global consumers);

(ii) significant economic weakness in China (the result of a serious slump in the domestic property sector and, more recently, new government “lockdowns”); and

(iii) a major tightening in financial conditions, as central banks (particularly the Fed) attempt to normalize monetary policy faster than investors had expected earlier in the year.