Deflationary Trends Resume
The BLS Producer Price Report shows deflationary trends resume in June.
Final Demand
- Services: The index for final demand services moved down 0.3 percent in June, the largest decrease since falling 0.3 percent in February. The June decline can be attributed to margins for final demand trade services, which dropped 1.8 percent.
- Goods: The index for final demand goods rose 0.2 percent in June after increasing 1.6 percent in May. Leading the June advance, prices for final demand energy jumped 7.7 percent.
- Food:Final demand foods dropped 5.2 percent
- Less Food and Energy: The index for final demand goods less foods and energy inched up 0.1 percent.
Economists Miss the Mark
Real Economy vs the Stock Market
Not only did economists miss the mark badly, results were outside the range of any estimate on three of four categories.
Prices did not rebound as expected.
Demand destruction tops prices except of course for the stock market. That’s where the inflation is found.
Understanding Demand Destruction
- There is No Recovery in the Aerospace Industry
- Fewer People Pay Their Rent on Time in July
- United Warns It May Cut 36,000 Employees
- New York City Commercial Property Sales Plunge to 2009 Lows
There will be no recovery without a recovery in jobs. The recent data is grim.
Total Unemployment Claims on the Rise
For details, please see State Claims Decline But All Unemployment Claims Are on the Rise
Mish
Get back to me when fedgov’s stimulus wanes.
June high water mark for PPP + $1200 checks + $600 week extra UE
Supply destruction is outpacing demand destruction. Factories are closed, new cars will be in short supply this summer, pushing used car prices up. People on unemployment with the extra $30k/year in Bernie bucks are on a spending spree. Inflation this time around.
Next round of layoffs coming up, with aerospace, oil production, and manufacturing in the dumps.
You would think that the fact we are looking into the abyss of worst economic catastrophe in 100 years, people would have better things to worry about than TDS, but the derangement syndrome is strong in the weak minded……..
There was never any chance for “recovery”. We are now in a negative economic feedback loop, which will result in many waves of defaults, which will trigger bankruptcies and closures, which will increase unemployment, increasing defaults.
With industries the size of entertainment, transportation, food service, and hospitality devastated, the impact on the economy is not something we can get over.
When this reality becomes common knowledge, the markets will crash and hundreds of trillions of dollars will be wiped out. The resulting deflation will be as bad or worse than the great depression.
Trump will simply tell you that without him, it would have been worse i.e. it could have been down 15%!!! So he saved 14.7%. I mean what’s 0.3 compared to 14.7??
As usual Mish is complaining too much. We are winning and will continue to win!!!!
Winning!?!?
The last person I heard talk of “winning” so much was Charlie Sheen.
How’d that work out?
Sarcasm …..
He doesn’t even brag much any more, just carries on about how everyone has wronged him more than anyone in history has ever been wronged.
Still counts as winning i.e. he’s winning more criticism.
Trump can not stop winning. It’s in his nature.
Another thing deflationary? Federal Reserve’s balance sheet.
Down this week (4th week in a row) $88 billion … well under $7 trillion.
The “Federal Reserve is gonna buy it all up” crowd at SOME point will start to fidget.
Fed quietly reversing course?? You have to know the Fed Vs New York Fed Vs the Gov’t (Treasury) is prob in a titanic struggle right now: more money to the banks or do we Helicopter the money. Interesting. Now let’s throw in this: the Covid Crap is over. Passe (accent please). …and don’t even try to ques me. IT IS OVER. I wonder if the ‘interested’ parties above are aware of this or becoming aware.
But next month we have a couple more trillions in stimulus. The Fed will be the majority buyer.
Any drop in the Fed’s balance sheet will only be temporary.
“Demand destruction tops prices”
…
Yes!
Not to mention that credit tightening is just beginning … delinquencies / defaults just now leaving launch pad … when fiscal stimulus wanes + moratorium / forbearance ends … won’t be pretty.
Yield curve headed to 0.0% … murmurings of NIRP will rise like a (sudden) gale.