Consumers set their inflation expectations based on a range of factors. Exposure to price signals like groceries and gasoline, central bank communications, lifetime experiences and economic sentiment are but a few of the factors that shape individual behavior and determine inflation expectations. The ... READ MORE >
Economics
U.S. tariffs and their impact on growth and inflation
The new administration has the primary goal of narrowing the United States’ trade and current account deficits, which have continued to grow. To do this, the administration has imposed trade taxes on the United States’ three largest trading partners—Canada, China and Mexico. Together, those three ... READ MORE >
Defense buildup in Europe points to a broader fiscal realignment
Significantly increased defense spending in Britain and Europe implies that a broader fiscal realignment could take place. On Tuesday, the European Union announced $158 billion in loans to bolster defense spending and proposed activating a fiscal escape clause that would allow countries to spend $685 ... READ MORE >
Market minute: The volatility smile in a time of trade disruption
One way to understand the financial impact of policy uncertainty is to look at the implied volatility of important bilateral currency pairs in the price of options. This dynamic is seen in a curve known as the dollar volatility smile, which shows how the American dollar can strengthen against another ... READ MORE >
Manufacturing prices rise in February amid higher tariffs
The impact of new tariffs and the anticipation of new ones on imported goods, especially raw inputs, showed up in the ISM Manufacturing data for February with the prices paid subindex rising to the highest level since June 2022. The subindex rose to 62.4 from 54.9 in the prior month, the Institute for ... READ MORE >
Market minute: Credit availability and consumer expectations
Professional investors often focus on inflation expectations, which is understandable given the role it plays in determining actual inflation. But there is far less focus on consumer expectations around credit availability. Despite a strong jobs market and rising real wages, expectations around the ... READ MORE >
January PCE index: Strong income gains amid elevated inflation
Turn-of-the-year issues were on display in the January personal consumption expenditures price index data that showed inflation rising at 2.5%, well above the central bank’s 2% target. Friday’s report will keep the Federal Reserve on the sideline with any rate cuts until the second half of the ... READ MORE >
Market minute: Rising short-term inflation expectations
This morning, we get the January personal consumption expenditures price index, which I expect to show a 2.5% increase in both the top line and core inflation pace on a year-ago basis. But given the general uncertainty around trade policy, one should begin looking more closely at short-term inflation ... READ MORE >
Jobless claims rise as durable goods data is mixed
Initial jobless claims spiked last week, rising to 242,000 from 220,000 for the largest increase since September. While the government layoffs contributed to the increase, new filings for jobless benefits in Washington accounted for only about 2,000 of the 22,000 overall increase. The overall ... READ MORE >
Market minute: The growing complexity of U.S. supply chains
As the global trade and financial system enters an era of rising uncertainty, it is critical that firms understand the complexity of the supply chains they depend on to navigate this change. RSM has undertaken a project to both define and measure that complexity to better understand how it has evolved ... READ MORE >