Posted on 05/25/2021 4:57:19 PM PDT by SeekAndFind
For the past several months we have warned about the pernicious effects soaring prices are having on both corporations ("Buckle Up! Inflation Is Here!") and consumers (""This Is Not Transitory": Hyperinflation Fears Are Soaring Across America"), prompting even otherwise boring sellside research to get (hyper) exciting, with Bank of America predicting that "Transitory Hyperinflation Lies Ahead."
But none of this has spooked the Fed into conceding - or believing - that inflation is anything more than transitory. And maybe just this once, the Fed has a point because all else equal, by which we mean lack of rising wages, the best cure to higher prices is, well... higher prices.
Presenting Exhibit A: understanding that Biden's stimmy bonanza is about to end and that soon they will have to live again within their means, Americans' buying intentions (6 months from today) as measured by the Conference Board, have cratered across the 3 major spending categories: homes, automobiles and major household appliances.
The drop was so massive, it amounted to the biggest one-month drop in intentions to purchase appliances...
... and homes...
This confirms what we noted earlier, namely a record divergence between crashing homebuyer confidence (due to record home prices) and soaring homebuilder confidence (also due to record home prices). Guess which one will matter in the end.
This, for better or worse, screams stagflation: as Lynn Franco, senior director of economic indicators at the Conference Board, said while consumers’ assessment of present-day conditions improved, "consumers’ short-term optimism retreated, prompted by expectations of decelerating growth and softening labor market conditions in the months ahead.”
While it's clear why stagflation will be "worse", we say better because if nothing else these data confirm that US consumers are now tapped out, if not today, then certainly 6 months from today when Biden's trillions in stimmies will have been long spent, and the spending spree will be over.
Oh, and for those saying wage hikes may be permanent we have some bad news: employers know very well that the extended unemployment benefits bonanza ends in September at which point millions of currently unemployed workers will flood back into the labor force sending wages sharply lower, and is why instead of raising base pay, most potential employers offer one-time bonuses, which - as the name implies - are one-time. As for higher wage pressures, well... just wait until October when everything reverses, Uncle Sam is no longer a better paying competitor to the US private sector, and wages slump.
What does that mean for the economy? Well, all those producers and retailers who got used to bumper demand and pushed their prices sharply and not so sharply higher, will face a stark choice: either drag prices right back down, or sell far fewer goods and services. That, or just await the next bailout.
One thing is certain: six months from today, the US economy will be far, far uglier.
No cherries in the supermarket this past weekend. This is the time of year I usually consume cherries by the bowl. But none to find!
It will also slow down because those who sell their homes have to buy another somewhere else and when there isn't enough existing home inventory to enable movement of buyers and sellers the housing market comes to a halt. Additionally new home sales are dropping because of two factors: accelerating prices and the the lack of lumber coming across the border from Canada driving lumber prices through the roof, causing builders to put new home construction on hold until lumber prices come down.
As for housing, it looks to me like it's going to get a whole lot uglier before it gets any better.
Probably to much.
I’m Retiring as we speak,
Single with no pets.
A 2005 trailer in a
Retired community is
Perfect for me.
50K.
It’s been a few weeks since I’ve been in a grocery store... so these newest horrors are recent?
In the last week. I just found it to be an odd data point.
L
Starvation’s a commie tactic... I just didn’t think corrupt liberal/commie ‘elites’ would use that one yet... I’m guessing they pull that one out of hell after the midterms.
I think the service guy did that too plus other things. Spouse has run self cleaning time and time again.
This is the last appliance I will buy from Lowe’s.
The 2x to the local laundromat gets old. At least the dryer works.
I’m about to the point of looking at outsourcing the laundry if I get nowhere on this warranty.
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