Do you see recent US data pointing to stubborn inflation? In January we had some upside surprises, encompassing import prices, producer prices, both headline and core CPI, and the PCE deflator. We think prices were in part boosted by seasonal factors which are not fully accounted for in the usual seasonal adjustment, something that also happened last year.
While part of core services inflation remains supported by buoyant domestic demand, we expect core disinflation to continue over the rest of the year as shelter, and rent inflation in particular (a major part of the services component of inflation), move lower.
Key takeaways
- The US economy is showing signs of deceleration, with falling profit margins and a decline in the leading economic index suggesting a potential slowdown in the coming quarters.
- Rising delinquency rates on credit card and auto loans signal increased financial stress, especially among younger and lower-income households.
- Restrictive monetary policy and high mortgage rates are contributing to low housing market activity and this trend should also continue in 2024.
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