US consumers not so buoyant
|US Consumer Sentiment bounced on Friday, and the market seemed terribly excited about this news. Stocks made further strong gains, though the Nasdaq has yet to confirm a fresh high.
The consumer Sentiment data represented a very modest bounce, and still leaves consumer sentiment heavily lingering around all time historic lows. And that is since the index began in the 1950s.
Hardly a real reason for celebration. Though it did come on the back of some moderation in sky-high inflation and producer price data earlier in the week. That data however, included a 16% drop in gasoline prices.
It is likely the outlook for US inflation will be entirely dependent upon the movement of gasoline prices from here. With food in close pursuit. What the producer price data really showed us is that there are now broad inflationary forces at work in the US economy, and any repeat increase in gasoline prices will quickly build on top of those forces.
With Consumer Sentiment merely stabilising at all time historic lows, this return upside risk to inflation will need to be monitored closely.
The Federal Reserve is unlikely to slow its rate hikes with inflation still at extremely concerning levels, and certainly not on the basis of just one month's data point.
The outlook for the recent impressive strength in the equity market, most likely mis-placed in the idea that inflation has indeed peaked and that the Federal Reserve will suddenly stop hiking rates, remains problematic.
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