Inflation keeps breaking records. This is how bad things have become…so far.
July 23 (King World News) – Peter Boockvar: For the Eurozone … this is what was said on supply and inflation: “Average selling prices for goods and services meanwhile rose at a near survey record pace in July, primarily reflecting constrained supply at a time of rapid demand growth. Supplier delivery times continued to lengthen at one of the sharpest rates ever recorded by the survey, playing a key role in driving input costs higher. Manufacturers’ input prices rose to a degree unsurpassed since survey data were available in 1997. Service sector input cost inflation eased modestly, but remained the 2nd highest in 13 years.”
In the UK … Supply shortages too are inhibiting the flow of goods and services. With respect to supply and pricing in manufacturing, “delivery times continued to signal severe supply chain delays…but the latest downturn in vendor performance was the least marked since April. Input price inflation also eased from June’s peak, but factory gate charges increased at the fastest pace since this index began in November 1999.” With services, businesses are also having difficulty in filling vacancies and a “subsequent increase in wage inflation added to pressure on operating expenses across the service economy. Measured overall, input prices rose at the fastest pace since this index began in July 1996.”
The underlines are mine and inflation breakevens are rising both in the Eurozone and in the UK today and bond yields are higher after yesterday’s ECB driven bounce on Lagarde’s uber dovishness. As for the ECB, they chose the path of the Bank of Japan even with all the lessons that should have been learned and they are now trapped as well in QE and NIRP forever…
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Ruble Gains Strength As Russian Central Bank Hikes Interest Rates…Again
The Bank of Russia hiked interest rates again, this time by 100 bps to 6.5% and “If the situation develops in line with the baseline forecast, the Bank of Russia will consider the necessity of further key rate increase at its upcoming meetings.” This 6.5% benchmark rate compares with their inflation forecast of 5.7-6.2% in 2021 so no negative real interest rates here and it is amazing the differing approaches to monetary policy in the developed world vs emerging markets that have more experience with inflation. The ruble is higher in response.
Meanwhile In The US
Manufacturing remained solid but the inability to fully delivery product led to another rise in backlogs and “lead times lengthened markedly and to the 2nd greatest extent on record. Supply chain disruption was reflected once again in efforts to increase purchasing activity and build safety stocks. Stronger demand for inputs globally and a scarcity of materials led to the fastest rise in cost burdens on record. Subsequently, the rate of charge inflation accelerated to a fresh series high.”
Bottom line, the economy has reached a point that the inflationary pressures are so widespread and so intense that it is in turn slowing economic growth.
Forget Lumber And Used Car Prices, Look At The Big Picture
For those who keep relying on a likely peak in used car prices and the fall in lumber prices for their inflationary analysis, the CRB raw industrials index closed at a fresh record high yesterday…
CRB Raw Industrials Index Hits New All-Time High!
… and Zillow this week said this about rents in their June survey where rents make up about 30% of CPI and 40% of the core rate. “Rent growth maintained widespread momentum in June, with the Zillow Observed Rent Index (ZORI) up 1.8% month over month, pushing typical U.S. rents to $1,799/month in June. A strong recovery in the rental market over the past few months pushed year-over-year rent growth up 7.1% — the largest annual increase in the series’ history reaching back to 2015. Even discounting a weakened market last year, rents have risen 5.1% since March, the fastest quarterly growth in Zillow’s data.”
I’d love to be a fly on the wall (or hidden Zoom viewer) at next week’s FOMC meeting.
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