Earnings are weakening, retail won’t stop buying the dip, and real money is going to war with bond vigilantes. When macro fails, what’s left - and where is the next trade?
That is correct. Imported goods that are used in the services industry could lead to higher services prices. There are definitely knock-on effects. It is tough to say how large these effects are.
For example, roughly 50% of the core inflation calculation is shelter inflation. Will shelter inflation rise if imported goods prices rise? I have not tested this, but I would expect the impact to be modest.
I would expect shelter inflation (rent prices) to be largely driven by house prices with a multi-month lag and house prices to be mainly driven by interest rates. So 50% of the core inflation basket, i.e., shelter, would probably not be impacted heavily by tariffs on imported goods.
It’s a good point on the size of goods imports, though there’s also goods that underly service businesses that aren’t included there?
That is correct. Imported goods that are used in the services industry could lead to higher services prices. There are definitely knock-on effects. It is tough to say how large these effects are.
For example, roughly 50% of the core inflation calculation is shelter inflation. Will shelter inflation rise if imported goods prices rise? I have not tested this, but I would expect the impact to be modest.
I would expect shelter inflation (rent prices) to be largely driven by house prices with a multi-month lag and house prices to be mainly driven by interest rates. So 50% of the core inflation basket, i.e., shelter, would probably not be impacted heavily by tariffs on imported goods.