Good Thursday morning from your Hometown Lender,

Yuck, bonds are off this morning.

Almost no data out today sans a bit of second tier reports. Unemployment came in about as expected and there was no reaction to that. The S&P manufacturing and services report came in hotter than expected. That is putting pressure on all markets. The trader logic is that stronger manufacturing/services = stronger growth and stronger economy = strong demand and could keep inflation higher than the Fed wants = The Fed cuts are not happening soon. Do I agree with the logic? Well sort of, but there are lots of other components here. The same index last month was weak, so I don’t see this as a pattern at all. We also have a holiday weekend coming up and traders are heading for the door this afternoon to start the summer…

The WSJ shared a sobering graph…

Here’s another data point to answer why negative feelings about the economy persist, despite solid job growth. About 64% of parents living with children under the age of 18 said they were doing all right financially in 2023, down from 69% in 2022, according to a survey released Tuesday by the Federal Reserve. Sentiment among that group has plunged since 2021, as you can see in the chart below. That is worse than Americans at large. About 72% of total respondents said they were doing all right, down slightly from a year earlier. Perhaps the most jarring finding: Some households with young children reported paying nearly as much on child care as they did on housing.

I thought the below was interesting from Bloomberg:

I’m sure that economists are going to be writing papers for decades to come about what caused the huge inflation spike in 2021 and 2022. Fiscal policy, monetary policy, supply chain snarls, general societal disruption… an intelligent person can find a way to implicate any of these factors.

That being said, an important thing to bear in mind is that inflation truly has been global in nature.

So if you’re going to point to any specific policy choice, you have to argue one of two things. Either the policy was more-or-less implemented in every country around the world. Or if it’s specifically a US policy decision, then the impact of US policy and US demand is so great, that it creates ripples all around the world. The latter of course is totally plausible.
Another thing to note is that not only was inflation was a global phenomenon, the disinflation of the past year is similarly widespread.

Here’s a chart with a bunch of different CPI measures from around the world.

It’s kind of a random list, and some measures don’t map perfectly to others. But the general point is that the lines are, for the most part, going down. There are some outliers —the US in white has obviously gone sideways for awhile and Mexican inflation has bounced since last fall. But, for the most part, the lines are going down.

So if you accept the premise that there’s some common factor driving inflation (and it would be weird if there weren’t, since the lines all basically peaked around the same time) then it also makes sense to look at measures across a bunch of different countries to see it ebbing, as inflation (at least so far) continues to cool.

Stay safe and make today great!