Thoughts from the Divide

“Something called ‘supply chains’” Another week, another round of supply chain headlines. The Empire Fed’s Manufacturing Survey saw Delivery Times “inched up to a record high”. Business behemoths continue to announce production cuts. Toyota is expecting its “global output for November to fall by as much as 15 percent… due to difficulty securing parts amid […]

“More and more small businesses are struggling to find workers” With a host of recent headlines on the strength of the labor market, today’s NFP release was a little bit of a letdown. There were net gains of 194k jobs, and unemployment fell to 4.8%, but there were expectations of nearly a half million jobs […]

“The very difficult situation we find ourselves in” In his testimony to Congress this past week, Powell stuck to his guns, once again asserting that the Fed has “an expectation that high inflation will abate” but admitted that it could face “a difficult tradeoff” should inflation remain well above target. As far as the data […]

“The importance of having well-anchored expectations” While most of the headlines following this week’s FOMC meeting were about tapering (the phrases “a moderation in the pace of asset purchases may soon be warranted” and “could come as soon as the next meeting” leapt out of the transcript), the debate about the anchoring of inflation expectations […]

“Expectations of future inflation hit a record high” A few weeks ago, we went point-by-point through part of Jerome Powell’s Jackson Hole speech, addressing why the Fed may be overly optimistic in its belief that inflation will be “transitory”. Yes, CPI YoY retreated slightly, and high-flying used car prices “fell 1.5% in August”(“but are still […]

“Pervasive resource shortages” Wednesday saw the release of the Fed’s Beige Book, and though “growth downshifted slightly”, the deceleration was chalked up to either “concerns due to the rise of the Delta variant” (which, if cases are any indication, may be spreading less rapidly) or growth being hindered by “supply disruptions and labor shortages, as opposed to softening […]

“Profound transformation” While US-China relations may not be splashed across headlines quite as much as they were during the heyday of Trump’s tariffs and trade restrictions, there has been a recent uptick in coverage of the Middle Kingdom. A few news items, such as this one on the “fabrication” of Chinese economic data, come as no surprise (see […]

“Time will tell” Today, at the Jackson Hole conference, Jerome Powell gave a speech on “Monetary Policy in the Time of COVID”. In addition to his evaluation of the employment outlook, Powell offered his assessment on “the path ahead” for inflation, citing five different “factors” as reasons to believe that the “elevated readings are likely […]

The release of the FOMC minutes this week introduced a little bit of chaos as headlines trumpeted that a taper would likely begin this year, only to be followed by backtracking and caveats. The minutes themselves show that the Fed is wary of the price it will pay should there be a misstep, admitting that […]

“A stunning loss of confidence” Many of the headlines going into the end of this week focused on the horrendous results coming out of the University of Michigan Survey of Consumers. The headline Index of Consumer Sentiment saw a precipitous drop, one whose magnitude has only been surpassed “in six other surveys, all connected to […]