Thomas Costerg

Senior Economist. Fed watcher at heart. Big fan of NIPA data. Vigilant about the US business cycle. Watching corporate and consumer debt (all opinions are mine)

[Thomas Costerg @TCosterg]

Mounting expectations for higher unemployment ahead...

[Thomas Costerg @TCosterg]

US: Michigan 1Y ahead inflation expectations still quite sticky at 4.7%.
It might tempt the Fed to stay hawkish/keep pushing up rates as they believe they need to get back "ahead of the curve", ie. move rates above consumers' expectations.

[Thomas Costerg @TCosterg]

Negative macro signals are getting louder - here regarding business investment (capex).
(Source Bloomberg LP 21 July '22)

[Thomas Costerg @TCosterg]

Ahoy late cycle!
Pleasure-boat buying rises to new high (as a share of total US consumption) since pre-GFC

[Thomas Costerg @TCosterg]

Impressed by the US merchandise trade balance -- falling in a straight line -- as imports go through the roof

[Thomas Costerg @TCosterg]

The laws of economics work: Sharply-rising US mortgage rates=>falling mortgage origination. And indeed, what a drop.
Housing sector is where one would expect the most immediate impact, but business investment and labour market may be next if Fed steps up further its hawkishness.

[Thomas Costerg @TCosterg]

Super tight US labor market indeed: the weekly 'jobless claims unemployment rate' dropped to a new record low of 0.9% (series start in 1971)

[Thomas Costerg @TCosterg]

Not good.

[Thomas Costerg @TCosterg]

True, the Q4 ECI index abated a bit (1.0% q-o-q from 1.3% in Q3), but 'under the hood' some sectors including services are seeing massive wage pressure. Omicron is only likely to exacerbate the situation - let's see in 3 months' time.

[Thomas Costerg @TCosterg]

The surge in US merchandise imports (red line in graph) would validate the view that 'excess demand' may also be part of the US inflation problem.

[Thomas Costerg @TCosterg]

US CPI #inflation still mostly a function of disrupted supply chains (as we see in car prices), but we can't ignore strong US consumer demand too as a major additional driver (thanks to especially generous fiscal spending).
Graph below: retail sales (in level) vs. CPI index.

[Thomas Costerg @TCosterg]

US inflation: Grist to the mill of 'Team Transitory', the haircut price index is already moderating. Peaked at 5.8% yoy (3mma) in April 2021.
4.6% yoy (3mma) in November 2021.

[Thomas Costerg @TCosterg]

Some investors are actually not worried at all about US inflation: German investors!
(At least according to the ZEW survey)

[Thomas Costerg @TCosterg]

US population growth continues to slow... +0.31% y-o-y only as of October 2021
(data released in the BEA's monthly income & spending report)

[Thomas Costerg @TCosterg]

US GDI > GDP
Good news about the underlying solidity of the US business cycle.

[Thomas Costerg @TCosterg]

The sharp rebound in US car production in October may indicate we might be past the point of 'peak bottlenecks' and 'peak semi shortage' -- also at the global level.

[Thomas Costerg @TCosterg]

#FederalReserve's average inflation targeting: End of the line in October!

[Thomas Costerg @TCosterg]

Good news in all this #inflation doom and gloom: the haircut price index may have already peaked!

[Thomas Costerg @TCosterg]

"old school" US core PPI at 5.5% yoy in October.

[Thomas Costerg @TCosterg]

US #inflation: What we got on the labor cost side is no good.