2 days ago
US Seeing Rolling Pockets of Inflation: Schwab's Sonders
00:00
Some confidence. Thanks, Jon. That we're seeing a limited tariff pass through, but may be, I think, recently some nerves emerging that perhaps we're starting to see evidence of demand destruction. How concerned are you about that? Well, you know, one thing that I think needs to be pointed out, when you look at what was perceived to be fairly benign core goods, inflation up only about one and a quarter percent on a year over year basis is what the direction has been. So many people forget that we were actually with core goods. We were in deflation territory as recently as the second half of last year. So that's a full three percentage point more than increase from where we were at the latter part of last year, where you had core goods in deflation to the tune of -2%. So you've gone from -2% to one and change and now you've got this hook higher on the services side. So I think this kind of data inflation, data, labor market data, you really need to dig under the surface to get a true sense of what the the impact is as to whether the Fed will cut. It depends on on the next set of reports. I think the mapping typically suggests you could see a little bit of a hotter move. That doesn't tend to be as market moving as CPI. And but that's what I'd be keeping an eye on. Let's analyze. You know, the range of outcomes is still really, really wide. The way things are right now. They might change in several months time. We talked a lot. Michael McKee was on the program earlier and we were talking about how much companies were absorbing at the moment and whether they pass it on in the months to come or whether they cut costs. Do you think September is still too early to draw any firm conclusions? I think it is too early. But what I will say, and this has already been underway and I think it will continue in the September and thereafter. As it relates to the Fed, I think you're likely to continue to see a wider dispersion of perspectives from members of the Fed, certainly when they're in the, you know, federal open mouthed committee mode out there speaking. But even in things like the summary of economic projections and particularly the dots plot, you're seeing a wider array. We had two dissents with the most recent meeting, the July meeting. I think that that sort of dissent probability stays relatively high with a wider range, depending on who the individual is on that committee expressing their views going forward. So I think that's kind of the name of the game, at least in the near term. Well, if the tariff impact is mixed under the surface, when do you think we'll actually see it fully priced in? Well, the problem is that this was not you know, a lot of people talked about the inflation impacting one time in nature, a one time price level reset. The problem is there's no one time as it relates to the implementation of tariffs. It has been such rifle shot on off delays, tariffs being used as a tool beyond just raising revenues or improving the trade deficit. So I think we've got the rolling nature of this. You know, several years ago we talked a lot about rolling recession. So we didn't think you were going to see an actual economic recession. But pockets of weakness at different times, I think that's manifesting itself in the inflation data, too, meaning the rolling nature of it, where you see pockets of impact on the upside, you maybe get some some pockets of offset on the downside as opposed to anything that is one time in nature. And I think that will also continue to be the name of the game because there isn't anything one time about how we're getting information on tariffs and that increasingly makes it more difficult for companies to map out a longer term pricing strategy.
