Carlos Caballe

Apasionado de las Graficas / No Recomendaciones

[Joseph Brusuelas @joebrusuelas]

US May PCE Inflation: take a look at the year over year increase of 4.8% in goods,3.3% in durables and 5.6% in non-durables. That is tariffs and AI related pricing pressures.

Second, look at the increase in service sector prices that advanced 3.8% from one year ago in contrast with 3.5% previously.

Falling oil prices will not impact those sticky service costs nor will it provide relief to trade policy induced inflation and the cap-ex supercycle driven by AI.

Finally, there is a large increase in US defense spending on the way to replenish the weapons stock and address the revolution in military affairs around drone and robotic warfare-which will draw on many of the same resources that are in demand from tech companies to support the AI buildout-will put pressure on core and topline inflation going forward.