SEVERAL KEY INFLATION STATISTICS RELEASED THIS WEEK

Consumer sentiment unexpectedly declined to a six-month low as short-term expectations and concerns about the job market picked up.
Inflation is a two-part phenomenon, and the psychological component is rising. Consumers expect prices to climb at an annual rate of 3.5% over the next year, the highest in six months and up from 3.2% from last month. Consumers see costs rising 3.1% over the next five to ten years, also up from the month earlier.
Perhaps worse is that only 25% of consumers expect interest rates to fall in the year ahead, compared with 32% in April. This sub index has deteriorated considerably over the year given the unending narrative that the Fed will lower interest rates.
The data indicated that confidence deteriorated among Democrats, Republicans and Independents.
Sentiment surveys are generally regarded as the ultimate feedback indicator as they typically tell us where we have been not to where we are going. There is an exception to this generality and that is the inflation component given the two-part phenomenon of inflation…too much money chasing too few goods fearing higher prices tomorrow.
This week the government releases several key inflation reports. A major issue at hand, an issue validated by FRB Chair Powell, is that some of the data does not correctly measure inflation; the data points understate pricing pressures. Powell has also stated the measurement of the data has been corrupted by the political process.
Every Administration has altered how the data is collected, weighted, and analyzed. However, there is speculation the current Administration has altered the process for political purposes.
The ultimate consequences of this tinkering are infinite but perhaps the most obvious ones are the breach of trust or faith in these data points to make decisions and second the feeling of flying blind, operating in a vacuum.
Survey after survey states inflation is a major issue. The Administration is adamantly stating it is not perhaps resulting in the data being flawed or corrupted.
Commenting on Friday’s activity, Treasuries increased nominally in yields across the spectrum, the result of rising inflation expectations. Equites were bifurcated for the same reason. The Dow post a nominal advance while the NASDAQ a nominal loss.
As noted, this week’s economic calendar is comprised of the PPI, CPI, import/export prices. Also released is another sentiment survey, retail sales and industrial production/capacity utilization.
Last night the foreign markets were down. London was down 0.17%, Paris down 0.26% and Frankfurt down 0.23%. China was down 0.21%, Japan down 0.13% and Hang Seng up 0.80%.
Futures are flat. The 10-year is up 2/32 to yield 4.48%.