US inflation becomes worrying
The latest economic data from the United States have some interesting points to check out.
Economic data show that US economic recovery is moving fine, even if it is but slower than earlier months, but it is on its way. US PMI numbers, in both service and production sectors showing improvement. Consumer confidence falls a bit last week, however, it is still in an overall improvement, comparing last year.
Considering all these numbers, employment improvement also is fine. The unemployment rate fell to 5.2%, from more than 14% a year ago after the pandemic. Even though if outlooks for economic growth in the third quarter decreased, however it was what we were expecting and something normal in the economic cycles.
Now, eyes turning on Inflation numbers and that will be driven the FOMC members` minds to decide for the next monetary policies. Stimulus aimed to reset the economy, which is happened and now it is time to slow down and let the market lead itself. If we double-check the numbers, can say that Fed needs to be more aggressive going forward.
Why I am talking about inflation? Check the US producer and Housing inflation. These two kinds of inflation are the most stable inflation that can stay for a bit longer time. Producer inflation usually will end with higher product prices in the next months, so when PPI is growing, the prices will stay higher for a bit longer time. It is the same for Housing. When the House price is rising, most durable goods price is rising and they are stable inflation. In the past months, while Mr. Powell and FOMC members use to play down the inflation, emphasizing that it will be short-lived, numbers show the opposite point.
On the stock markets, they may be in the overall uptrend and bull market, but inflation in the next months will lead the market. So in the next weeks, more than Job data, we have to follow the inflation numbers as the guideline and catalyst for FED`s next steps in its decisions.
Mr. Powell has said that it is likely to see inflation cool-off, as supply chains heal and demand wanes. August inflation numbers are due to be released on September 14.
