from Arcadia Economics
Global Shipping-Market Strain Revives Fear of Inflation Comeback Again
The historic disruption of $25 trillion in global goods trade that culminated two years ago left the deep economic scars of inflation and paranoia about shortages
by Brendan Murray and Enda Curran
Business Standard
)
Jason Starr felt the first flashbacks of pandemic PTSD back in mid-April.
That’s when the vice president of operations at Montreal-based Globe Electric heard something he hadn’t in 18 months: Bookings on cargo ships from Asia were getting tight.
Within weeks, spot container rates surged the most since 2022 and customers were demanding lighting products sooner than ever before the peak sales season in the fourth quarter.
“We better start planning,” he recalled. “The shipping crisis during Covid really helped us understand how to handle future shipping crises like the one we’re in right now.”
Federal Spending Was Responsible for the 2022 Spike in Inflation, Research Shows
Increased federal spending helped the economy bounce back during the pandemic, but it also caused a surge in inflation, research reveals.
by Betsy Vereckey
MIT Management, Sloan School
Inflation is difficult to control. Its cause is often even harder to pinpoint.
In attempting to understand the 2022 spike in inflation that followed the pandemic, some policymakers — up to and including President Joe Biden — blamed shortages in the supply chain. But a new study shows that federal spending was the cause — significantly so.
“Our research shows mathematically that the overwhelming driver of that burst of inflation in 2022 was federal spending, not the supply chain,” said Mark Kritzman, a senior lecturer at MIT Sloan.
In writing “The Determinants of Inflation,” Kritzman and colleagues from State Street developed a new methodology that revealed how certain drivers of inflation changed in importance over time from 1960 to 2022.
When it Comes to Inflation, Interest Rates Might Work Like a “Jedi Mind Trick”
by Kristin Schwab and Sean McHenry
Market Place
Some Federal Reserve officials have signaled recently that they might be closer to making a cut (or two) in the key interest rate they use as a lever to slow down or speed up economic activity. But it’s clear that when the year is out, rates will be in the same elevated range they are now.
At least those high interest rates are doing their inflation-fighting job. Right? It turns out the answer might not be so cut and dried.
“I think almost every single economist I talked to kind of shrugged their shoulders and said, ‘We actually don’t understand the role that interest rates played in this disinflation of the past few years,’” said Rogé Karma, staff writer at The Atlantic.
Immigrants Power Job Growth, Help Tame Inflation, but is There a Downside for the Economy?
by Paul Davidson
USA Today
The surge into the U.S. of immigrants lacking permanent legal status has emerged as one of the most politically charged issues of the 2024 presidential election.
Yet the wave of new arrivals has boosted the U.S. economy while helping temper inflation, a top issue for voters.
“It (immigration) is helping to reduce the labor shortage and push down wage pressures” that have fueled price increases, says economist Michael Reid of RBC Capital Markets.
Strong job growth and lower inflation make for an unusual, best-of-both-worlds tandem that has helped the nation avoid a recession.
“Inflationary Forces”? Duh.
by James Hickman
Schiff Sovereign
Jamie Dimon is the CEO of JP Morgan Chase, one of the world’s largest banks. And last week he issued a stern warning on the bank’s quarterly earnings call that “multiple inflationary forces” are still lurking.
File that one away under “duh”. It should be completely obvious to just about anyone paying attention to the world that many of the key drivers that rocketed inflation higher are still with us.
The Federal Reserve, of course, desperately wants to pretend that inflation is in the rear-view mirror, never to return. And they keep insisting that the downward trend of inflation justifies their interest rate cuts.
Import Prices Come in Higher Than Expected, Hinting at More Inflation Ahead
by John Carney
Breitbart.com
Inflation might not be cooling by as much as thought.
The Labor Department’s index of import prices excluding fuel jumped by 0.2 percent in June, partially reversing the 0.3 percent decline in May.
While imports are just a small part of the overall inflation picture, the rise in prices indicates strong demand from consumers that could translate into broader price increases.
Including fuel, the import price index was flat for the month. Wall Street had forecast prices to decline 0.2 percent.
Imported fuel prices fell by a steep one percent in June, following a 0.4 percent increase in the prior month.
Republicans Hammer Biden On Inflation, but Do They Have a Better Plan?
Opening night of the Republican National Convention programmed a central issue with a Trumpian twist: “Make America Wealthy Again.”
by Billy Binion
Reason.com
The Republican National Convention (RNC) kicked off on Monday with a song as old as time: “It’s the economy, stupid.”
That quote, which traces back to the early 1990s, came from Democratic strategist James Carville, an adviser on Bill Clinton’s first presidential campaign. But in a testament to the staying power of that message, and its resonance across political parties, it reappeared tonight in MAGA form: “Make America Wealthy Again.”
A noble goal. Can the Republican Party deliver?
It would be hard to answer that based on Monday’s program alone, which—as is typical for national political conventions—focused more on platitudes than policy prescriptions.
IMF Sees ‘Bumps’ in Path to Lower Inflation
In its latest World Economic Outlook update, the International Monetary Fund said “the momentum on global disinflation is slowing, signaling bumps along the path.”
by Hakyung Kim
NBC Washington
The International Monetary Fund warned Tuesday that upside risks to inflation have increased, calling into question the prospect of multiple Federal Reserve interest rate cuts this year.
In its latest World Economic Outlook update, the IMF said “the momentum on global disinflation is slowing, signaling bumps along the path.” The rise in sequential inflation in the U.S. earlier in 2024 has put it behind other major economies in the quantitative easing path, the report said.
The report comes as traders ramp up bets for a Fed rate cut in September. Per the CME Group’s FedWatch tool, Wall Street has priced in a 100% chance of lower rates at the Sept. 18 meeting. Traders also expect another rate decrease in November.
However, IMF chief economist Pierre-Olivier Gourinchas told CNBC’s “Squawk on the Street” on Tuesday that one rate cut from the Fed is most appropriate this year, highlighting still-stubborn services and wage inflation as complications to the path to lower inflation.
Trump Wants to “Make America Wealthy Once Again:” How Wages Have Changed; Plan’s Impact Questioned
by Sara Chernikoff, Mike Snider
USA Today
Former President Donald J. Trump wants to “make America wealthy once again.” That was the theme for day of one The Republican National Convention. Economic policies, inflation, regulation and trade deals, were the focus of Monday’s speeches, according to the GOP.
Is pay keeping up with inflation? Are Americans on a path to become wealthier? Here’s what we found:
The average hourly wages of employees rose in June compared to a year ago. The Bureau of Labor Statistics found that wages grew 3.9% between June 2023 and June 2024, quicker than the rate of inflation. Although the news is beneficial to employees, many Americans still feel the burden of rising costs of living.
Fed’s Daly Says One Or Two Rate Cuts Could Be Appropriate
With the information we have received today, which includes data on employment, inflation, GDP growth, and the outlook for the economy, I see it as likely that policy adjustments will be warranted
by Ann Saphir
Yahoo! Finance
“With the information we have received today, which includes data on employment, inflation, GDP growth, and the outlook for the economy, I see it as likely that policy adjustments, some policy adjustments, will be warranted,” Daly said in a group interview held by phone. “Exactly when that happens and when it would be appropriate to make an adjustment to policy is still unclear.”
With inflation likely to cool further, though with potentially “bumpy” progress, the economy seems to be heading “more or less” to where one or two interest rate cuts this year as projected in the June Fed policymaker forecasts “would be the appropriate path,” she said.