Displaying items by tag: stagflation

Headline inflation, which includes food and energy prices, rose at a staggering 4.4% annual growth at the end of September, which is the highest number posted since 1991. This isn’t necessarily the Fed’s preferred inflation metric because food and energy prices are more volatile than other areas, but even excluding those categories core inflation was at 3.1%. On top of that, personal income is down almost 1%, which makes that inflation gain even more painful. Policy makers are worried about overall economic health as stagflation becomes a real possibility with GDP coming in at just 2%, the weakest quarter since the recovery started. Treasury Secretary Yellen says that yearly inflation will remain high but she expects monthly inflation to come down as the year closes, with headline figures coming down towards the target of 2%. On the positive side, wages and salaries kept up this month, hitting 4.6% but that still poses challenges for the labor market in its own way.

FINSUM: Inflation is still posting strong gains but keep your eyes on the monthly annualized numbers to gauge if what Yellen says is accurate.

(New York)

We don’t want to say that investors are sleepwalking into it, but in many ways it seems an apt metaphor. Whether stock investors like it or not, the US trade war with China is continuing apace. The two countries’ negotiations on the issue last week went nowhere, and the US is about to hit Beijing with $200bn more in tariffs. Their response will hurt the US economy, as many of them will be on consumer goods, which could raise prices and lower demand. Industrial stocks are likely to be hit by Beijing’s retaliations. 50% of all Chinese imports will soon be subject to new tariffs.

FINSUM: We are starting to wonder if tariffs might lead to “stagflation” in the near term. In consumer demand ebbs at the same time as prices rise for goods, it seems like a perfect recipe for stagnation and inflation.