Trade Deficit Jumped 7.1% in January Setting All Time Record, While 2022 Inflation Estimates Now Double Previous Forecasts
Remember that fourth quarter GDP result that seemed manipulated? Well, I suspect the record setting trade deficit now being reported for January is an outcome of those pesky fourth quarter trade results being intentionally skewed by the withholding of December 2021 import data.
Additionally, methinks we are likely to get some increased economic clarity about why the White House needed Ukraine to become the big shiny thing with such urgency.
Just like everything else, geopolitical dynamics –especially those surrounding entrenched ideology– are always about the economics. Someone, eventually, always has to pay. Follow the money; there are trillions at stake.
First, keep in mind that missing Port of Los Angeles result from December as you review the import/export details:
(REUTERS) […] The goods trade deficit jumped 7.1% to an all-time high of $107.6 billion last month. Imports of goods increased 1.7%, led by food and motor vehicles. There were also large increases in imports of industrial supplies, capital and consumer goods. Imports of other goods, however, tumbled 15.3%.
Exports dropped 1.8%, weighed down by consumer goods, motor vehicles, food and other goods. But exports of capital goods and industrial supplies increased. Trade has been a drag on gross domestic product for six straight quarters. (read more)
That missing Port of LA December import data, now being introduced into the month of January, might just be the cause of the “all time high” noted above. I will bet one sustainable rice cake on it.
Next up, inflation.
As we have outlined exhaustively, inflation comes in waves because inflationary costs flow like tides within the overall supply chain. The three stages are Origination (commodity), Intermediate (processing), and then Final (to wholesale).
Inflation on raw materials flows into the pricing, then layers of energy inflation overlap the material and labor costs, and eventually the final product exits with the full weight of higher costs embedded.
Additionally, the payment for goods has terms of 30, 60, 90 or 180 days depending on the sector. Pricing contracts are then reset with each new purchase order. Price increases can sometimes lag in this process depending on whether the retailer needs the proceeds from the ending sales to fill the banking exchange account and pay the supplier.
(Daily Mail) U.S. inflation will be even worse this year than expected, after the Federal Reserve’s primary inflation measurement hit its highest level in 40 years, according to a new report from Goldman Sachs.
The personal consumption expenditures (PCE) price index rose 6.1 percent in January from a year ago, the largest annual gain since February 1982, as seen in federal data released Friday.
Goldman Sachs predicts that PCE inflation will remain high throughout the year before dropping to 3.7% by the end of 2022, economists for the Wall Street giant wrote in a client report Sunday (more)
CTH has continued to stick with the models that have proven accurate. We see inflation on highly consumable goods getting another wave in the spring of this year. It looks like by Memorial Day that wave will end, and food inflation will level off. There will be a period of pricing stability in the summer until the 2022 harvest season cycles. At that point, we should see the newest field costs showing up in the end harvest price.
The price of gasoline is a big variable. Current trends put the price of unleaded regular gasoline in the $6 to $7/gal range toward the end of this year. This issue makes estimations on downstream inflation more challenging.
On the durable goods side, things are less clear. A lot depends on what happens with employment and wages.
If the economy is slowing as it appears, durable goods prices may be subject to decreased demand. You guys will be able to see if prices for durable goods begin coming down long before the economists and financial analysts will be able to quantify it.
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