A Going-out-of-Business Sale Where the Prices Rise!
Texas Tea (or Arab Coffee) is HOT right now! So is everything around it.
Just a quick rundown on the latest inflation data today, which turned up much hotter, as did Trump’s War with Iran. Israel and Iran both seriously turned up the heat right as Trump tried to turn it off while explaining out of the other side of his mouth why he may have to blow up the entirety of Iran’s largest gas field.
The inflation we got to take a peak at today was that up-the-pipeline inflation, which is the first place incoming inflation from the Iran War will hit.
U.S. producer prices increased by the most in seven months in February … and could accelerate further as the war in the Middle East boosts oil prices and the pass-through from tariffs persists.
The stronger-than-expected Producer Price Index report released on Wednesday also suggested key inflation measures tracked by the Federal Reserve posted significant gains in February….
The U.S.-Israeli war with Iran, which started at the end of February, has sent oil prices surging more than 40%, and with it retail fuel prices like gasoline and diesel fuel. Economists expected the war’s inflationary effect to show up in the March consumer and producer price reports to be released next month….
The Producer Price Index for final demand surged 0.7% last month, the most since last July, after an unrevised 0.5% increase in January, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast a gain of 0.3%. In the 12 months through February, the PPI increased 3.4%, the fastest rate of growth in a year….
Some economists said the strong PPI reading suggested that tariffs would not have a short-term impact on inflation.
The last bit there is a point I’ve been making, contrary to Fed Chair Jerome Powell and some others who have been saying for some time that the inflationary impact from tariffs would be nearly one-and-done. I’ve explained why inflation from tariffs will keep filtering through for a good while—likely over a year, and that was before the war started adding new heat.
While the Supreme Court struck down a major part of Trump’s tariffs, he immediately slammed 10-15% tariff replacements into place under a separate law. So, the tariff pressure may abate a little because of that partial shutoff, but not much due to Trump’s smaller restart. In the following quote, you can see both the dominant belief in the one-off effect of tariffs on inflation and the concern that the war will have a greater and more enduring impact. (I agree regarding the war; but the fact is that both sources of price pressure will keep adding inflation on top of inflation for some time.)
“The Fed’s inflation worries extend beyond weathering a fleeting wave of one-off price hikes associated with tariffs and, more recently, an energy price spike,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.
Egg prices have shot back up almost 100%, and fresh vegetables are up nearly 50% YoY. Energy, of course, has also begun going back up quickly, and energy was a category that had been cutting inflation a significant break back when crude was about $68/bbl, a price that may not be seen again for years with so much pumping and refining being blown up all over the Middle East by all parties in the war as each they play tit-for-tat with oil fields, resulting in price hikes the rest of us will pay for years. Resultant fertilizer price hikes will now also start adding to that rise in produce and meats.
… energy prices are the only component of the CPI that is actually declining. Remove that and the disinflationary impulse that has pushed equities higher since late 2023 is gone.
And, so, the stock market is gone, too.
Donald Trump’s one-time pick to lead the Bureau of Labor Statistics has said the US economy is too weak to handle oil at $100 per barrel as he warned of rising consumer prices triggered by the war in Iran.
“I don’t think this is an economy that is going to be able to handle $100 a barrel for oil, it’s just not,” EJ Antoni told the FT.
“The economy is weaker than we thought it was, and inflation is worse than we thought it was,” he added in a call on Wednesday, shortly before the Federal Reserve’s March rate-setting meeting.
Well, that’s because they don’t read here.
Economania (national & global economic collapse plus market news)
Powell: Job creation is near zero
Money Matters (monetary policy, metals, cryptos, currency wars & going cashless)
Fed Chair Powell says he will stay until Trump’s fight is resolved
Gold and silver sell-off accelerates as inflation fears grip global markets
Inflation Factors (too much money chasing too few goods due to weather, sanctions, tariffs, quarantines, etc.)
US producer inflation runs hotter in February, expected to accelerate further amid Iran war
Major indices sharply lower as hot PPI, FOMC decision rattle markets
The Iran War Is About to Unleash a Inflation Shock the Fed Can’t Stop
Trump ally warns US economy not strong enough to cope with inflation from Iran war
Jet Fuel Running Out; Prices Doubled. Airlines Can’t afford it.
