Headline consumer and producer prices in July both exceeded consensus expectations, prompting worry about rising prices. The University of Michigan consumer sentiment survey of five-10-year inflation expectations is at 3%, the highest level since 2016 as the global pandemic has impacted a wide array of supply chains in the short-term, particularly affecting items that consumers notice on a daily basis.
Meanwhile, a look closer at price pressures along the production chain suggests there is less near-term inflation fear than meets the eye. Year-over-year core producer prices and final demand are both negative, reflecting diminished pricing power for firms.
