Just as the “sell in May” was brought forward, wasn’t the recession anticipated? GDP unexpectedly fell 1.4% from January to March. And inflation, not calmed down. The consumption deflator showed an annualized 7% (and 5.2% in the core version). Stagflation perhaps? Perhaps a warning in time for the Fed to calm down in its plans? No no and no. Supply contracted, aggregate demand flies. Consumption grew 2.7%. Investment, 2.3%. Non-residential investment, more than 9%. The purchase of equipment, 15%. Recession? Imports exploded 17.7%. Understand, in real terms. Neither recession nor stagnation. The product fell due to the disproportionate contribution of net imports (a sign of capacity limits), due to the decumulation of inventories and the pruning of public spending. But the economy overheats and seethes at full employment. Thus, the Fed will not calm down. Neither does inflation, unless you feel the rigor of a saber blow. Let’s be clear, the recession that genuinely takes away sleep did not start. Yes, its ingredients are present. As Powell said, inflation is too high. And the economy, very robust. They must be cooled quickly without triggering a new ice age. Easy to say, risky to carry out.
Inflation brought good news, although insufficient. Did we see his beak yet? Consumer prices stunned with a 1.2% jump in March after Putin’s invasion. But more surprisingly, core inflation slowed to 0.3%. And the divergence was noticed, for the second consecutive month, between both measurements. Now, the yardstick used by the Fed -the aforementioned personal consumption deflator- repeats the pattern like a carbon copy. A jump of 0.9% of the general index and moderation to 0.3% of the core reading (and the median). And it also adds two months of divergence. The Ukraine effect, it can be said, did not contaminate core inflation, which has remained stable since October. It is an important trait. The Fed will have to intervene in the same way because the plateau is very high, but it is one thing to run backwards uphill and another on the plateau. The danger of an accident is attenuated in a scenario more compatible with Mester’s constant method than with Bullard’s growing fury. Will it be a breather for Wall Street? Not a full-fledged lifesaver yet. But perhaps the third (monthly divergence) could be the charm for so much pessimism well-supplied with reasons. Only a Warren Buffet buys US stocks freely, and it’s not small change. It’s a 51 billion dollar ticket.
Source: Ambito
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
