Stagflation Alert: US Economy Decelerates, Inflation Raises Due To Rise In Gasoline, Electricity, Eggs… And Consumers Are Not Happy!!!

US Economy Decelerates As Industrial Production Misses, Capacity Utilization Lowest Since October

Earlier today we reported that producer prices in May rose primarily as a result of a jump in electricity and nat gas prices. Which is why it is somewhat surprising that Industrial Production among Utilities dropped by the most, or -1.8%, for the second month in a row, following last month’s -3.2% decline. This drop was offset by an increase in Mining IP of 0.7% (a decline from April’s 1.1%) and the general manufacturing production which increased by a tiny 0.1%, still the best result of the past three months.  Altogether, these amounted to an unchanged print in the broader index, which printed at 98.7, same as April, and the lowest since February, not to mention below expectations of a 0.2% increase.

Lights Out: Weak Utilities Output Hurts Production

US industrial production was unchanged in May, the Fed said, compared with forecasts for a light increase.


May PPI Jumps Due To Rise In Gasoline, Electricity, Eggs And Imitation Cheese Production Prices

So much for continued disinflation: moments ago the PPI headline number came out at the highest level since February, or 0.5%, well above the expected 0.1% and up significantly from the -0.7% in April. The core PPI ex-food (which rose 0.6%) and energy (increasing 1.3% in May, the highest since February) rose a far more manageable 0.1% in May, and just 1.7% Y/Y, below the statutory accepted 2% annual growth on both the producer and consumer side: a break down of just which finished products led to this increase (gasoline, eggs and imitation cheese as it turns out) is provided below. Luckily, since nobody in the US either eats or uses energy (because they are such a “small component” of the hedonically-adjusted purse), nobody will mind when companies have no option but to pass through rising input costs to consumers.

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WTI Crude Tops $98 – Highest In 9 Months

Amid the Syria debacle (or growth ‘hope’ if you are a true believer), the price of a barrel of WTI crude oil just topped $98 – its highest since September of last year.


The bad news for all those that ‘consume’ is that this level of crude suggests the price at the pump will be hitting $3.80 – that elusive P/E expansion-ending level – very soon.



Charts: Bloomberg



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Fading Optimism Sparks a Decline in Sentiment

US consumer sentiment fell this month after reaching its highest in nearly six years in May, a survey released on Friday showed.


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