Stagflation is the situation in an economy when inflation is high and growth low. The last time we saw widespread stagflation was in the 70s. The chart below shows the average of the ISM manufacturing and service indices for prices paid and employment. The prices paid index tends to lead consumer price inflation, but the employment index more or less coincides with the official employment numbers.
As is obvious, since January, the prices paid index has soared, while the employment index has declined. What this suggests is that inflation will be picking up, while employment is likely to decline. Note how the employment index had started to rise, only to start falling from February onwards, paralleling the pattern displayed by other indicators.
The consequences of Trump's tariff follies are starting to become apparent.
By the way, stagflation is not very good for bond or share prices. I am quite bearish about both markets.
No comments:
Post a Comment