Headline import prices in March fell .6% m/o/m and by 4.6% y/o/y. Import prices ex food/fuels were down by .4% m/o/m and 1.6% y/o/y as the comparisons are really tough and prices disinflate. A 2% m/o/m and 17.4% fall in industrial supply prices led the way.
I want to make an important point here, for import prices and the PPI and CPI numbers we saw this week, the price of crude oil in March averaged $73.40 for WTI. Today it stands at $82.85 and averaging almost $81 month to date so expect headline inflation to pick up in the next month (and I think many more) and therefore eyes will stay on the core rates, up until the rise in energy price filters into core of course.
Industrial production in March rose .4% m/o/m which was twice the estimate and February was revised up by 2 tenths. The upside though was all due to a sharp rise in utility output. If we include the upward revisions to February, manufacturing production was pretty much as forecasted and we saw m/o/m declines with machinery and computer/electronics, along with mining. US manufacturing is in a recession as seen with a variety of data points.
The preliminary UoM consumer confidence index rose 1.5 pts m/o/m to 63.5 and that was a bit better than the estimate of 62.1. This was 67 in February and 64.9 in January for context. Both Current Conditions and the Expectation components were up m/o/m. One yr inflation expectations jumped to 4.6% from 3.6% and that is a 5 month high. Longer term inflation expectations were unchanged at 2.9%. We can partly blame the jump in those expecting gasoline prices to ‘Go Up.’ According to AAA, the average gallon of gasoline is at the highest since November by the way. Positively on pricing but with a big caveat, the UoM said “high price mentions for durable goods reached its lowest point in 18 months. However, the prices consumers face day-to-day remain painfully high.”
They also said, “About 42% of consumers blamed high prices for eroding their personal finances, up from 38% last month, and comparable to the average over the previous 12 months when overall inflation was even higher.”
Before I delve into the details, I’m amazed by some who think that magically inflation is going to disappear like nothing happened. Yes, inflation will continue to slow in its rate of change, but I strongly disagree that we’re just going back to a SUSTAINABLE trend of 1-2% in 2024.
Ok, on to the details. Expectations for employment deteriorated, falling by 8 pts to match the lowest level since August 2011. Those seeing ‘Higher Income’ fell 2 pts to 27 but has remained in a 26-29 range over the past 6 months. There was a gain in the % of those who expect family income to beat inflation over the next 5 years but just getting back some of the decline seen in March.
There was a sharp drop in the category titled ‘Business Expectations Over the Last Few Months.’ It fell to 17 from 36. That matches the lowest since last July.
Spending intentions improved but only after the sharp drops in March. Those that plan to buy a vehicle rose 1 pt but fell by 6 last month. Those that said it’s a good time to buy a home was up 2 pts but dropped by 4 last month. For a major household item, buying intentions rose 7 pts but fell by 8 last month.
The UoM said this, “Rising sentiment for lower income consumers was offset by declines among those with higher incomes. While consumers have noted the easing of inflation among durable goods and cars, they still expect higher inflation to persist, at least in the short run.” The UoM specifically talked about the impact of the failure of Silicon Valley Bank on the survey response and while “the financial turbulence that ensued had little measurable impact on overall consumer sentiment…the recent developments have weighed on a small subset of consumers. In April, 15% of consumers, primarily those with higher incomes and college degrees, spontaneously mentioned bank failures during their interviews, up from 8% in March. Furthermore, early evidence suggests that confidence in banks deteriorated markedly compared with last fall. These factors have likely contributed to the relatively pessimistic views about the 12 month economic outlook for higher income consumers relative to lower income consumers.”
UoM
Employment