ahead of CPI and ReSale TALES ...

Good morning / afternoon / evening - please choose whichever one which best describes when ever it may be that YOU are stumbling across this weekends note…

Out tomorrow - CPI day and so before I disappear for 24hr period of time during the all important ‘inflation week’, I’ll rip through a couple / few bullets / links which caught MY eyes and are helping set the table in as far as markets go, into CPI and ReSale TALES

First up, markets being markets and putting the JERK in kneeJERK response TO data, clearly something else is going on … here are 10yy …

… closing just outside my arbitrary 2024 UPtrend channel and so, make as much / little of it as you will but believe me when I say, come Thursday when I’m back in the seat, i’ll have a look at whatever CP(h)I did / did NOT do and I’ll quickly move to redraw some lines and then pretend they are relevant as I present them …

For now …

Bloomberg: US Producer Prices Top Forecasts, But Details Offer Some Relief

• PPI for final demand climbed 0.5% after downward revision

• Categories that feed into PCE price index were more muted

… “These days we mostly care about what the PPI means for the Fed’s preferred PCE deflator measure of core consumer price inflation,” Paul Ashworth, chief North America economist at Capital Economics, said in a note. “In that respect, April’s news was mixed but, on balance, encouraging.”

Several categories in the PPI report that are used to calculate the central bank’s preferred inflation measure — the personal consumption expenditures price index — eased.

Among those, the cost of hospital outpatient care fell 0.1% and airfares dropped 3.8%. Prices for physician care rose modestly. At the same time, prices for portfolio management services increased 3.9%. The April PCE price gauge is due later this month…

ZH: US Producer Prices Accelerating At Fastest Rate In 12 Months (bonds went down then bounced back smartly … putting me in position to be the JERK in kneeJERK …?)

ZH: Retail Wrecking Crew Hammers Hedgies Again; Stocks/Powell Shrug Off Stagflation Signals

Moving right along to some of THE VIEWS you might be able to use … here’s SOME of what Global Wall St is sayin’ AFTER PPI and JPOW and before CPI and ReSale TALES … interesting to note all are viewing SAME data but offering a wide variety of VIEWS (as PPI may / may not relate TO CPI and / or PCE … )

BAMLs Global Fund Manager Survey: The “No Landing” Peak (too stimulative code for … price in moar rate CUTS? askin’ for a friend)

… FMS on Macro: 1st drop in global GDP & EPS expectations since Sep'23 as US macro pessimism jumps; odds of “no landing” peak (31%) but 78% say recession “unlikely,” “soft landing” still consensus (56%) & “hard landing” odds (11%) low; record 55% say fiscal policy “too stimulative” (Chart 1) indicating peak “tailwind” from govt spending.

BAMLs RICs Report: Scale up, or power down

… A darling new economy, getting ahead of itself
Data centers, AI, onshoring, & electrification will strain the fragile grid. Power inflation is already at 40-year highs (Exhibit 1) and BofA analysts expect +2.1-2.8% US demand per year, or 70GW by 2030. The rapid march of AI could be halted if supply doesn’t appear …

BARCAP: PPI data seen providing less impetus to core PCE in April

The April PPI data showed core price pressures accelerated relative to March. However, the subcategories that feed into core PCE slowed on balance from March, and were also lower than the 3mma pace we had assumed in our core PCE forecast. All told, we mark down our April core PCE forecast by 3bp, to 0.25% m/m.

DBDaily: All eyes on US CPI today (chart of mkt response caught my eye)

DB FX Daily: Trading US CPI (RUSKIN)

• The market is going to sink or swim together, for it is extremely rare to find as many as 92% of market forecasts (as surveyed by Bloomberg) calling for the same m/m number - in this case 0.3% for core CPI.

• Fed expectations on a core CPI surprise is a little more sticky than usual and needs more than one modest downside surprise on core CPI (0.2% m/m) to pull rate cuts before the election, and more than another strong core number at 0.4%, to have the market start to price in the next move being a hike.

• The scale of the asset markets' reaction is then apt to be more tempered than usual, because Fed expectations are a little more sticky, and not least the data will likely not change the decision for the next FOMC meeting or the meeting thereafter…

Goldilocks: Core Producer Prices Well Above Expectations in April; Raising Our April Core PCE Estimate to 25bp

BOTTOM LINE: The producer price index (PPI) increased more than expected in April. Core producer prices also increased more than expected, as the PPI excluding food and energy rose 0.5%, and the PPI excluding food, energy, and trade services increased 0.4%. The decline in PPI airfares (-4.7%, SA by GS) increases the likelihood of a decline in the CPI analog in tomorrow’s report (GS forecast of CPI airfares: -2.5%, mom sa). We estimate that the core PCE price index increased 0.25% in April, corresponding to a year-over-year rate of +2.76%.

Goldilocks: Powell Reiterates That Confidence “Will Take Longer”, Emphasizes Lags in Inflation Process, Notes PPI “Quite Mixed”

BOTTOM LINE: Chair Powell said that he expected inflation to “move back down on a monthly basis to levels that are more like the lower readings” of late 2023. Still, he noted that his “confidence in that is not as high as it was” before the Q1 inflation reports and said that it would “likely take longer” for the FOMC “to become confident that inflation will decline to 2% over time.” Chair Powell emphasized that “even when [supply-demand imbalances] are alleviated there should be lags” in the inflation process and noted that this morning’s PPI data was “actually quite mixed.” Chair Powell also reiterated that he does not think “it’s likely based on the data that we have that the next move that we make will be a rate hike,” echoing his comments at the press conference following the FOMC’s May meeting.

MS US Economics: We Forecast Core PCE at 0.24% After PPI

Our preliminary forecast core PCE inflation for April at 0.24% vs. 0.32%M prior. Headline is forecasted at 0.30% for April vs. 0.32%M in March. We expect the Y/Y for core PCE inflation to come down from 2.82%Y to 2.75%Y. Core services inflation are tracking at 0.35% vs. 0.40% prior. Core goods inflation is tracking -0.08%M vs. 0.07% prior. Medical services were in line with expectations, increasing 0.25%M (MSe +0.3%), financial services were firmer, increasing 1.1%M (MSe +0.4%M), and airfares were much weaker, falling 4.7%M (MSe -0.4%M).

Prior to the PPI release we were tracking core PCE inflation at 0.24%M and headline PCE inflation at 0.31%M, right in line with today's tracking post PPI. While PPI kept our forecast on track, we await important details from the CPI report tomorrow, which is over 2/3rds of PCE inflation, to finalize our forecast…

Wells Fargo: Small Business Optimism Brightened in April (from other day…and a positive SPIN)

Summary
Small Business Optimism Turns Up
The NFIB Small Business Optimism Index rose slightly in April to 89.7, ending a threemonth streak of declines. Although modest, the upturn was driven by higher expectations for sales and easing cost pressures. Inflation is still a challenge, but a drop in the share of businesses raising prices is a welcome sign that price pressures for small firms are not intensifying. Plans to hire, to increase capital spending and to build inventory also improved slightly. Despite the headline edging higher, continued low readings on the underlying components of the index suggest a more moderate pace of economic growth is on the horizon.

… And from Global Wall Street inbox TO the WWW,

Bloomberg: Fed’s Powell Urges Patience Given Lack of Inflation Progress

WolfST: PPI Inflation Acts Up in a Nasty Way: It Spikes after Big Downward Revisions

Services knocked it out of the ballpark. Not helpful for the Fed-favored core PCE price index later in May, which includes some of those services.

WolfSt: Household Debt, Delinquencies, Collections, and Bankruptcies: The Free-Money Era Is Over for our Not So Drunken Sailors

Everything got more expensive over the years, the population grew, so debts rose, but income rose too.

NOW I’m done … back to regular spammation Thursday … thanks for listening and letting me drip into the inbox or take up some of your time … good luck as you plan your CPI trades and trade your CPI plans … Off to the day job…