End of the Month... April 2022 PCE, 2nd est. GDP, and Other Stuff.

 

The final results for April data is now in and it looks like a mixed bag. Sure the headline numbers are indicating deceleration of inflation, but there are still problem areas. The most important being my price index, which is increasing. I have highlighted some areas of acceleration of inflation. 

Remember that energy was flat for April and has risen in May, which comes out next month. The deceleration of inflation in overall CPI indicates a potential repeat of the April headline number. The core, which is without food and energy, indicates some moderation. We'll just have to wait. 

The Personal Income and Outlays for April came out and it isn't stellar in my opinion. Personal consumption expenditures were up 0.7% for the inflation adjusted month to month. The disposable personal income was flat on the inflation adjusted month to month. Credit cards anyone?

Somehow the concept of driving 120 mph on an ice covered road comes to mind, with a slight decrease in overall speed. Then the FED is slightly tapping the brakes. What could go wrong?

In other news, the 2nd release of the 1st Quarter GDP indicated a bit less than the Advance. I have read some comments about a potential negative 2nd quarter as meaning we are in a recession. WRONG! It is just a symptom. 2020 saw two quarters and no recession, as discussed by the gurus of such stuff. After debating most of 2008, it was finally decided that December of 2007, was the start of the great recession. The first back to back negative quarters were 3rd and 4th Quarter of 2008. So clearly more information than GDP numbers are a factor.

As for the 2nd quarter GDP, which will not be released until end of July... there is ample reason to believe it will not be negative. The trade numbers were a major hit to the 1st quarter GDP. The dollar has strengthened, which should reduce the deficit numbers, the inventory builds should be increasing, which is a plus for GDP, although troubling. The trade deficit should also be waning, due to a potential China slowdown.

So a positive number for GDP 2nd Quarter is in the offing... but that does not mean the economy is doing peachy keen. That expected positive inventory gain, could be a sign of demand destruction. With energy prices taking a bite out of disposable income, consumers will likely dial back in other areas.

So the outlook is a mixed bag in my opinion. A mixed bag is better than all negative, so there is some room for optimism. 

Have a good holiday!!

Funny, Strange, ODD, and Disinformation!

Where France's Macron buys his suits is front page news on one of the many international news websites I peruse. 

Germany's Chancellor has done another about face, which has left the columnists spinning, trying to keep up.

Europe is cooperating on gas, which suggests some sort of united front, but really ends up with several countries in Europe not cooperating and even one stating they will veto. I got to look up "cooperating", in the dictionary. Hungary claims there are 10 countries using the Rubles for Energy scheme.

Previously, Germany got the blame for obstinance regarding sanctions, but any meaningful sanctions have seen the EU bloc in disarray. Conveniently, the Germans are now pushing back by laying blame on "other" members of the EU. No doubt they will eventually coalesce their blame shifting and lay all this at the feet of Americans. Some things never change. 

Pelosi has been to Ukraine and is seen posing with Zelensky. Is it one of those selfies Zelensky was so critical of?

India is on pace to have a record wheat crop. Oh wait, India is undergoing a massive heat wave which may dramatically limit the wheat crop. 

Musk buys twitter and Homeland Security announces, "Disinformation Governance Board". DGB... not to be confused with KGB, which was a completely different committee. What qualifies as disinformation, misinformation, etc.? Who decides when a lie is no longer a lie, or when the truth is no longer the truth?

Speaking of disinformation... CNN is boldly proclaiming "3 Signs that Prices Could Soon Come Down." Prices coming down would be a sign of "deflation". The rate of inflation might come down, but prices... not so much. But it is CNN, so excuse the confusion or is this what the KGB DGB will soon remedy? Not intentionally leaving out FOX, MSNBC, et al, but it is way too much.

I keep reading where China's economy may be stalling, but until China says it is... it isn't. I fully expect them to say they are meeting targets. <wink> <wink>

A lot of concern about U.S. farmers cutting back on fertilizer and the potential for much lower crop yields as a result. The big farmers bought their fertilizers and inputs and had it all delivered by December 31st. Granted the big farmers does not equate to all farmers, but the weather is still the biggest factor. That weather has not been very cooperative at the start of this planting season.

This nugget from a Deutsche Welle opinion piece, regarding North Korea...

Pyongyang claims the most advanced weapon in its armory can carry multiple warheads and has a range of more than 15,000 kilometers (9,300 miles), putting the entire continental US within striking distance.  

Note that the continental US is singled out. That distance puts all of Asia, Europe, Oceania, the North American Continent, most of Antarctica, most of Africa, and South America above the equator. It would not be difficult to understand the continental U.S. would be the main objective, but the wording seems to indicate only the U.S., while ignoring fallout, etc. 

Run out of things to ponder, so time to wrap this up. 

End of the Month... March 2022 PCE, Advance GDP, and Other Stuff.

With the PCE index report this morning, we can wrap up all the March inflation numbers. Granted, some slight improvement was seen in some areas, but still double digit increases on the upstream models seem to suggest more inflation to the consumer.

As mentioned last month, the core seems to be decelerating and the potential for further decreases appear on the horizon. A lot depends on China's current covid lockdowns and impact on the supply chain.

We also see the personal income and outlays for March. Note the current dollars and chained dollars. Chained dollars are only used in a couple of categories. So thrown in inflation and the numbers aren't exactly rosy.

Yesterday the GDP Advance 2022 1st quarter was released and failed to live up to expectations. Quite a bit was made about Consumers still lifting the economy and the trade gap really stifling the numbers. As for the consumers, the bulk of that lift was in the service sector as the goods sector was flat. The Services was up 1.0% quarter to quarter and the trade gap was down 1.4% quarter to quarter. Outside of those two, everything else was tepid, imo. Although Non-Residential Fixed Investment was 2.2% above previous quarter. 

One quarter does not a recession make, so the numbers could significantly change as more data becomes available. 

Of course, the books are now closing for March, and it is on to April numbers. So, the impact of China's covid shutdown policies will become evident real soon, the "official" impact won't begin to be known until June. 

As for consumer inflation for April, I would tend to believe that energy would be flat from March. Don't be misled, as gasoline appears to be edging up at this writing as well as Natural Gas. Core inflation might be decelerating a bit, but food does not appear to be decelerating. Overall, the CPI should "cool" to near 8.0%. Welcome to the late 70s and early 80s of last century.

The U.S. should once again become a net exporter, for the year, of Petroleum and Petroleum Products over the next few weeks, as the exports have ballooned to nearly a 1-million-barrel net exports on a daily average. That million-barrel daily release from the SPR is slated to begin May 1st.

Oh well, this is "fun" times we live in!

Other Stuff...

It amazes me in this day and age... how utterly devoid of knowledge, we Americans have become. Although I can find numerous instances where we are not alone in knowledge deficit.

A near direct quote "Our politicians are always promising to fund infrastructure, yet here we are in 2022 and they have done nothing", which is greeted with broad agreement. Apparently we must all forget Congress passing a $1.4 Trillion infrastructure bill and the President signing it on November 15, 2021.

Usually during this conversation, someone will mention that Trillion Dollar shovel ready infrastructure bill signed by Obama in 2009... and ask what ever happened to that? It never existed. There was a $787 billion stimulus bill, which included about $98 billion for infrastructure, of which a portion was for shovel ready.

We have become equally adept at ignoring stuff that happens and making up stuff that didn't happen.

There really is no hope, so why bother? Everyone slows down to see a car crash or a train wreck or any number of other such things. 

Confusing Statements, Ideas and downright lies!!!

Where to start? I just read someone claiming to be an geopolitical expert... state that Russia is landlocked and this was one of the reasons for Russia seeking control of Ukraine. GEE OH!! Get a map for pete's sake. Or possibly St. Petersburg's sake as it is a saltwater port from May through December (not frozen in). I will lightly mention Murmansk, which is ice free year round and lies above the arctic circle.

Then we have the Sea of Azov, where Mariupol is located. To transit the Sea of Azov into the Black Sea means passing through the Kerch Strait, which is controlled on both sides by Russia. Once into the Black sea, passage through the Bosporus and  Dardanelles is needed. WOW!!

A lot of virtue signaling. A lot of countries are welcoming Ukrainians with open arms and little to no paperwork. This is really a grand thing, but most of the refugees are women and children. Are we simply ignoring they may wish to sometime return to Ukraine? Or are we simply ignoring the horrible truth of the men's survival rate and likelihood of a destroyed Ukraine for generations to come?

I am not even venturing into the racial aspects, which should also be questioned. Apparently there are estimates of some 26 million refugees worldwide, yet... never mind. 

I keep hearing how cutting off Russian oil and natural gas would bring Putin to his knees. Apparently the inconvenience that might cause some European countries is to great a cost to bear... even when factoring in Ukrainian lives.

I've been reading reports of the China lockdown being so severe... that farmers plowing their fields are being arrested for not staying in lockdown. Then there are reports that nearly 400 million are in lockdown. Let's hope the number is way south of that, as the global economic disruption would be HUGE! 

It's been a long time since I bothered with forex, but there is something weird going on. Maybe it was always this way and I have forgotten. 

I may edit this with some more information, as I see fit.