Archive

US Inflation Skips Several Months

• July’s US inflation print reversed all of the increase built in from tariffs over the past several months, despite matching expectations prevailing into the release.
• Core goods inflation eased slightly, suggesting ongoing corporate success in avoiding the tariff shock. But service inflation is stuck too high to be consistent with the target.
• Anti-avoidance measures and belated pass-through will drive further rises. We doubt they will be as severe as many fear, yet still not create much space to cut rates.

By Philip Rush

US/Taiwan: Xi Calls The Shots

• In stark contrast to its dealings with other trade partners, Washington is firmly in the position of supplicant in its dealings with Beijing.
• This reflects not only Xi Jinping’s carefully prepared and strong hand but also Donald Trump’s seeming determination to strike a deal with China at more or less any cost.
• Increasingly, therefore, Taiwan stands to be “a pawn in a bigger game”.

By Alastair Newton

Payrolls Challenge Resilient Narrative

• Revisions drove payrolls into a stagnation that runs contrary to our narrative of rolling resilience, but some contributors are spurious and don’t break the broader strength.
• Seasonal adjustment caused 76k of the 258k revision. State and local education workers represented 108k, and are lower since April, despite the DOE closure shifting jobs here.
• Payrolls still grow by 1% y-o-y, like household employment, with JOLTs data fine and the unemployment rate stable. The Fed should resist cutting without follow-through.

By Philip Rush

HEM: One-Touch Easing

• Payrolls revisions challenge the rolling resilience seen in most other hard data releases, but seem over-weighted.
• Underlying price and wage inflation mostly track >2%, especially in the UK, which doesn’t need more rate cuts.
• Policymakers biased to ease will deliver it on a batch of bad outcomes, even if the evidence proves fleeting.