Making News: New Spectator Article on Trump’s Mexico Tariffs Threat – & More!

Tags

American Enterprise Institute, Breitbart.com, Claude Barfield, consumers, i24News, inflation, John Carney, Making News, Mexico, migrants, tariffs, The Spectator USA, Trade, Trump

I’m pleased to announce my publication of my newest magazine article.  The piece, which appears in The Spectator USA, explains why President Trump won his bet that a tariff threat would push Mexico to work harder to stop migrants traveling through its territory to the United States – and why he shouldn’t resort to this gambit again.

In addition, it was great to be quoted in John Carney’s post on Tuesday for Breitbart.com reporting that all those supposed experts who predicted raging consumer price inflation resulting from Mr. Trump’s various tariffs were dead wrong.  Here’s the link.

The video is also available of my Tuesday appearance on the American-Israeli TV network i24News.com.  Click here, and press the download button to access this interview on the Trump Mexico tariffs threat.  I also appeared (on short notice) on this subject on i24 on June 5, but unfortunately, the recording is no longer available.

Last Friday, June 7, I debated trade specialist Claude Barfield of the American Enterprise Institute at a lunchtime event at AEI.  The program was not video-ed, though.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

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(What’s Left of) Our Economy: Tariffs-Led Wholesale Price Inflation Going, Going….

Tags

aluminum, China, inflation, metals, metals-using industries, Producer Price Index, steel, tariffs, Trade, trade war, Trump, wholesale prices, {What's Left of) Our Economy

Amid all the recent trade policy-related news, I’ve struggled (unsuccessfully) to keep up with the U.S. inflation data, but kept my nose to the grindstone this week and have now managed to scrutinize the new producer price figures (for May) in detail. These Bureau of Labor Statistics (BLS) figures contain unmistakable signs that whatever tariff-led inflation had begun to be generated in the American wholesale sector has been dramatically dissipating lately – which no doubt has much to do with continuingly weakening core inflation on the consumer side.

As usual, let’s start with the impact of President Trumps metals tariffs, which have lasted the longest (their first full month was April, 2018), and it’s easiest to identify the industries affected, since steel and aluminum-heavy sectors are pretty obvious (along with the metals themselves), and since we’re not dealing with the dependency on metals from any one trade competitor.

And a special bonus: It’s with steel and aluminum prices per se that the loss of any inflationary momentum comes through most clearly. Specifically, after rising 12.37 percent between April and their most recent (September) peak, prices for steel mill shapes fell 6.44 percent through May. As a result, they’re now 5.14 percent higher than during their first tariffs month. In their control group (the processed goods minus foods and feeds – or “core” – super-category) prices rose by 3.41 percent from April through their peak (in October), and have since declined by 2.62 percent. Consequently, they’re now 0.70 percent higher than during the first metals tariffs month.

So although in absolute terms, steel prices remain higher than those in their super-category, they peaked earlier and have come down faster.

Aluminum prices have been much weaker for much longer. After rising by 6.66 percent between April and their (latest) June peak, aluminum mill shapes prices are down by 6.53 percent. As a result, they’re now actually 0.30 percent lower than during their first full tariffs month.

Significantly, signs of markedly decelerating inflation are just as evident in numerous metals-using manufacturing sectors. In past posts on producer price trends, I looked first at industries where price increases since the metals tariffs onset had initially been faster than that for their super-category – final demand goods minus food and energy products.

The table below makes plain that a sizable, widespread slowdown has taken place. The columns show the percentage price changes between April and whichever month saw such prices hit their latest peak; and such changes for such goods since January. In every instance, the percentage changes for the latter have been much smaller than for the former. And in the cases of mining machinery and equipment and construction machinery and equipment, the slowdowns were more dramatic even than that for the super-category (which was awfully dramatic).

                                                               April to peak (month)          Since Jan.

Final demand less food and energy:       +1.73 (May, 2019)              +0.17

pumps/compressors:                               +3.82 (May, 2019)              +0.57

mining mach & equipment:                    +7.52 (April, 2019)            +0.03

construction machinery & equipment:   +5.75 (April, 2019)            +0.04

metal-forming machine tools:                +3.77 (Feb.,2019)              +0.77

But it would be reasonable to counter that four manufacturing sectors are too few to show anything conclusively. So here are results for nine more whose early inflation numbers were stronger than that of the core final demand super-category. Every single one has experienced an inflation slowdown since January, and except for railroad equipment and possibly oil and gas field machinery, all involved several orders of magnitude.

                                                                  April to peak (month)       Since Jan.

agricultural machinery & equipment:        +4.18 (April, 2019)          +0.04

tools, dies, jigs, fixtures, molds:                +2.82 (Feb., 2019)           +0.51

industrial material handling equipment:    +3.83 (May, 2019)          +0.22

oil and gas field machinery:                      +1.99 (March, 2019)       +1.01

household appliances:                               +4.53 (Feb., 2019)          +1.39

lawn & garden equipment:                        +2.19 (May, 2019)          +0.13

truck trailers:                                             +6.96 (May, 2019)          +0.81

aircraft:                                                      +2.20 (May, 2019)         +0.52

railroad equipment                                    +2.76 (March, 2019)      +2.67

For good measure, a slowdown is also occurring for metals-using industries where price increases have been relatively weak since the metals tariffs were imposed, as apparent from the table below: 

                                                                 April to peak (month)    Since Jan.

metal-cutting machine tools:                     +1.75 (May, 2019)        +0.69 

passenger cars:                                          +1.20 (Oct., 2018)         -0.30

heavy trucks:                                             +1.22 (Jan., 2019)           0.00

light trucks:                                                +2.43 (Nov., 2018)       -1.72

motor vehicle parts:                                   +0.71 (April, 2019)      +0.31

travel trailers & campers:                          +2.24 (March, 2018)    +0.42

Switch over to “intermediate demand” goods and you find a broad-based, often dramatic inflation deceleration as well – even though price increases in this super-category have accelerated!

                                                                 April to peak (month)    Since Jan.

core intermediate demand:                       +1.11 (May, 2019)         +1.26

metal containers:                                      +5.01 (May, 2019)         +2.95

fab wire products:                                  +11.49 (March, 2019)     +0.23

non-fluid power valves:                          + 4.01 (May, 2019)        +0.98

bolts, nuts, screws, rivets, washers:        +7.98 (April, 2019)        -0.43

fabricated structural metals products:     +5.10 (May, 2019)        +2.18

hardware:                                                 +5.10 (May, 2019)       +0.49

heating equipment:                                  +6.99 (May, 2019)       +1.85

fluid power equipment:                           +4.54 (May, 2019)       +1.33

mechanical power transmission equip:   +3.73 (May, 2019)      +0.40

A/C & refrigeration equip:                     +4.16 (April, 2019)     +1.37

ball and roller bearings:                          +5.85 (March, 2019)   +2.96

The first Trump China tariffs weren’t imposed until early July, so the sample size is smaller. And as previously noted, it’s relatively difficult identifying their precise effects because the list of tariff-ed sectors uses an industry classification system different from that used by BLS to monitor price changes, and the China content of these products can vary significantly. In addition, the group of tariff-ed goods have grown since then, the level of levies differs widely, and the original duties for many have been increased (not to mention the suspension of this major increase for several months earlier this year.  For the exact phases of the U.S.-China trade war until the latest – May 10 – Trump tariff increase, see here.).

But on this policy front, too, the exact same recent wholesale inflation slowdown is apparent as documented above for metals and metals-using industries. And for goods in the core intermediate demand super-category, the China tariff-affected goods have also seen produce price inflation slow as price inflation for the super-category has sped up. The only exceptions are the transformer category (where the inflation levels have been very low in absolute terms and the speed-up marginal) and possibly the oil and gas field machinery sector (where the monthly inflation rates for the two periods seem to be about the same_. Here, again, are the results for the entire August, 2018-May, 2019 period (covering the full duration of the China tariffs in toto), and for the post-January period.

                                                                              Aug.-May            Since Jan.

core intermediate demand goods:                     -1.85 percent       +1.26 percent

aircraft engines and engine parts:                    +1.32 percent       +0.35 percent

ball bearings:                                                   +4.23 percent       +2.96 percent

electric generators:                                          +2.41 percent       +0.18 percent

medical, surgical & personal aid devices:      +0.94 percent         -0.05 percent

core commodity final demand:                      +1.12 percent          0.00 percent

industrial heating equipment:                        +3.50 percent        +1.85 percent

oil and gas drilling platform parts:                +1.84 percent        +1.01 percent

farm machinery and equipment:                   +2.29 percent           0.00 percent

paper-making machinery:                             +2.92 percent         +0.88 percent

electricity transformers:                                +0.61 percent         +0.70 percent

X-ray and electro-medical equipment:         +0.35 percent          +0.12 percent

It might be an exaggeration to say “If you blinked, you missed tariffs-led inflation in the wholesale economy.” But as the above figures make clear, for now, it’s not much of an exaggeration.

Making News: New National Interest China Trade War Op-Ed Posted…& More!

Tags

aluminum, Brietbart.com, China, consumers, imports, inflation, John Carney, Making News, steel, tariffs, The National Interest, Trade, trade war, Trump, Yahoo News

I’m pleased to announce the publication of my latest op-ed article.  Posted by The National Interest today, it presents a trove of data – including from the latest U.S. monthly trade report – showing that even though the outcome of the current U.S.-China trade talks is anyone’s guess, economic disengagement between the two countries is already underway.  Moreover, the process has sped up lately under President Trump.  Here’s the link.

The article was also re-posted on Yahoo.com.

Also, it was great to see Breitbart.com‘s John Carney quote my views in his latest post debunking widespread claims that the Trump tariffs on steel and aluminum, and on products from China, have already stoked raging consumer price inflation.  Click here to read.

And keep checking in with RealityChek for news of upcoming and recent media appearances, and other developments.

 

(What’s Left of) Our Economy: Signs That No Tariffs-Led Inflation is the New Norm

Tags

aluminum, Bureau of Labor Statistics, China, consumer price inflation, inflation, metals tariffs, steel, tariffs, Trade, {What's Left of) Our Economy

With inflation in the United States still running below the Federal Reserve’s target lately, it’s been difficult enough for tariff fear-mongers to claim that President Trump’s levies on metals and on many Chinese-made goods are setting prices throughout the economy – or even in directly affected sectors – on fire. Yesterday, with a new month’s worth of consumer price data from the Bureau of Labor Statistics, it’s become practically hopeless.

In fact, the big takeaway is that these March data closely resemble February’s. The only significant evidence of steel and aluminum tariffs-led inflation is found in canned fruits and vegetables – where it’s far from airtight – and in large household appliances, which include large laundry machines which have faced their own additional set of tariffs since early 2018. When it comes to products impacted notably by the China tariffs, the price changes are once more all over the board – which strongly indicates that the tariffs themselves haven’t been in the inflation driver’s seat.

As usual, the first table in these monthly consumer inflation analyses presents the price changes for metals-using products. They deserve pride of place for now because they’ve been in effect for more than a year, and because it’s easy to identify metals-using products.

Before zeroing in on the canned stuff, it’s worth mentioning that I found one more data point yesterday morning – inflation numbers for laundry equipment specifically. Some of these products could be the machines used by commercial cleaning operations as opposed to households, but they do sharpen the picture some. In addition, keep in mind that, since so many of the products affected by the metals and China tariffs are food products, the “core inflation” control group figures I’m using measure price changes minus energy – as opposed to the most widely use core data, which strip out both food and energy.

But back to the steel- and aluminum-related figures: Here they are for the February-March, 2019 period (the latest monthly numbers), and for last April to the present (the stretch during which the metals tariffs have been in place), as well as the year-on-year numbers for last April and this March (which provide some indication of trends over time). As usual, the results for tariffs-affected products (e.g., canned foods) are presented along with those of control goods (e.g., non-canned foods) to glean further insights into the tariffs’ effects.

                                 Feb.-March      Since April      y/y April            y/y March

core inflation:        +0.17 percent   +1.93 percent   +2.01 percent   +2.05 percent

fresh fruits             +1.56 percent   +3.55 percent    -0.43 percent   +4.25 percent

& vegs:

fresh fruits:            +1.21 percent   +0.65 percent   +1.38 percent   +1.37 percent

fresh vegetables:    +1.97 percent   +6.98 percent   -2.50 percent   +7.66 percent

processed fruits      +1.57 percent   +1.68 percent   -0.44 percent   +2.72 percent

& vegs:

canned fruits          +1.74 percent    +5.20 percent   -0.14 percent   +6.01 percent

& vegs:

canned fruits:         +3.02 percent    +4.99 percent   -1.60 percent   +8.60 percent

canned vegs:          +1.26 percent    +4.63 percent  +1.00 percent   +5.04 percent

soups:                     -1.33 percent     -0.16 percent    -0.38 percent   +0.54 percent

malt beverages       -0.62 percent    +1.77 percent   +0.84 percent   +1.84 percent

at home:

alcoholic                +0.20 percent    +1.34 percent   +2.17 percent   +1.46 percent

beverages away:

non-frozen, non-    -0.15 percent    +3.30 percent    -0.52 percent    +3.03 percent

-carbonated non-

alcoholic drinks:

carbonated drinks: +0.69 percent    +5.44 percent   +0.04 percent    +5.44 percent

juices & non-         +0.02 percent    +4.17 percent    -0.26 percent    +4.01 percent

alcoholic drinks:

new cars/trucks:    +0.46 percent     +1.13 percent    -1.61 percent    +0.74 percent

motor vehicle        +0.25 percent     +2.08 percent    -0.74 percent    +1.79 percent

parts:

appliances:             -0.76 percent     +2.80 percent   +0.27 percent    +4.83 percent

major appliances:   -2.02 percent     +4.59 percent   +1.55 percent    +8.80 percent

laundry                   -1.02 percent    +0.65 percent  +10.00 percent    +2.80 percent

equipment:

non-electric            -0.76 percent      -0.59 percent    -1.45 percent     -1.56 percent

cookware & tableware:

tools, hardware,     -0.63 percent      +0.86 percent   +0.19 percent    +1.22 percent

outdoor equipment:

The various fruits and vegetables results make a reasonable case that companies in those sectors have been able to pass along some hefty price increases for canned products to consumers. Specifically, except for the April year-on-year changes, all of the figures for canned fruits and canned vegetables show considerably faster price increases than for fresh fruits and vegetables, and even for their processed counterparts (some of which go into frozen or jarred, not canned, products).

It’s true that fresh produce prices as a whole have generally been rising much faster than core prices. But in their canned form, their prices take another big jump up – strongly indicating that something about the canning matters greatly. Moreover, even though the inflation rate in fresh vegetables is leaving in the dust that for fresh fruits, the canning effect is very apparent for fruits as well, especially over time.

It’s also true that the canning effect is much less pronounced for other food groups – like soups and beverages. But here the data is less definitive, largely because these inflation figures also include products sold in forms other than metal cans. And as observed in previous posts, the markets for these products tend to differ significantly as well – which inevitably impacts pricing power.

Yet this March, a generalized “metals-effect” argument once more falls apart upon examining the price trends in non-food products, whether for motor vehicles and their parts; household cookware and tableware; and tools, hardware, and outdoor equipment. Obviously other developments, and perhaps many other developments are playing bigger roles.

The glaring exception is in those double-tariffed laundry machines. Even here, however, that new laundry equipment category I just found reveals major year-on-year price deceleration between last April (ten percent) and this March (2.80 percent). And the March monthly prices were weak across the board in appliances.

The China tariffs continue to present an even more complicated picture for at least three reasons. First, for the following consumer products, last October was the first full month they were in effect. Second, the goods on the U.S. Trade Representative’s list for those levies are categorized using the different classification system than that used by the Bureau of Labor Statistics to gauge prices. As a result, the match-ups are far from exact. And third, the China-specific price effects for different products can be differ dramatically – according to the scale of the Chinese presence in a particular product market.

Nonetheless, here’s the China data for February-March, since last October, and for October and March year-on-year.

                                   Feb.-March         Since Oct.        Oct. y/y           March y/y

core inflation:          +0.17 percent    +0.99 percent   +2.02 percent    +2.05 percent

food:                        +0.28 percent    +1.45 percent   +1.21 percent   +2.12 percent

frozen/freeze-          +1.18 percent     -0.72 percent    -0.46 percent    -0.59 percent

dried prepared  foods:

fish/seafood:             -1.04 percent     +0.79 percent   +2.82 percent  +2.70 percent

processed fish/          -0.51 percent     +0.40 percent   +1.46 percent  +2.76 percent

seafood:

frozen fish/seafood:  -0.46 percent    +0.78 percent    -0.15 percent   +3.29 percent

fruits/vegs:                +1.57 percent    +3.43 percent    -0.32 percent   +3.91 percent

fresh fruits/               +1.56 percent    +3.71 percent    -0.38 percent   +4.25 percent

vegetables:

fresh fruits:               +1.21 percent    +2.51 percent    -1.40 percent   +1.37 percent

fresh vegs:                +1.97 percent    +5.07 percent   +0.81 percent   +7.66 percent

processed                  +1.57 percent    +2.37 percent    -0.06 percent   +2.72 percent

fruits/vegs:

frozen fruits/vegs:    +0.76 percent   +0.25 percent     -2.72 percent   -1.26 percent

non-carbonated/        -0.15 percent   +1.91 percent     +1.23 percent  +3.03 percent

non-frozen juices/drinks:

personal care             -0.27 percent   +0.64 percent     +1.52 percent  +1.25 percent

products:

household                  -0.04 percent   +0.74 percent    +0.69 percent   +1.46 percent

furnishings:

recreation goods:       -0.74 percent   -1.55 percent     -3.51 percent    -7.28 percent

men’s sportswear:      -1.04 percent   -2.54 percent    +1.47 percent   +1.98 percent

women’s                   +2.90 percent   +0.35 percent     -5.08 percent   -1.55 percent

sportswear:

computers,               +0.54 percent    -1.17 percent     -4.09 percent   -3.30 percent

peripherals, etc.:

window/floor           +0.44 percent    -1.96 percent    +0.74 percent   -1.83 percent

coverings:

furniture &              +0.17 percent    +1.38 percent    +1.26 percent   +3.27 percent

bedding:

appliances:               -0.76 percent     -0.58 percent    +4.82 percent   +4.83 percent

major appliances:    -2.02 percent      -0.34 percent   +8.08 percent   +8.80 percent

laundry equipmt:     -1.02 percent     -5.05 percent  +10.00 percent   +8.76 percent

misc appliances:      -0.29 percent     -1.33 percent    +3.25 percent   +2.56 percent

non-electric             -0.76 percent     -0.49 percent     -0.51 percent    -1.56 percent

cookware/tableware

tools/hardware        -0.63 percent    +1.27 percent     +0.39 percent   +1.22 percent

& outdoor equipment:

household               +0.83 percent    +1.24 percent    +1.79 percent    +3.33 percent

cleaning products:

televisions:              -4.20 percent   -10.91 percent   -17.95 percent   -19.28 percent

misc video equip:    -0.03 percent    +4.41 percent     -3.87 percent    +1.79 percent

pets & pet               +0.26 percent    +1.76 percent    +0.91 percent    +2.81 percent

products:

sporting goods:      +1.00 percent    +3.04 percent    +1.71 percent    +0.25 percent

photo equipment     -0.05 percent    -1.29 percent      -4.94 percent    -5.70 percent

& supplies

sewing machines/   +2.51 percent +12.51 percent     -2.08 percent  +10.32 percent

fabrics:

motor vehicle          +0.25 percent   +1.27 percent    +1.25 percent    +1.79 percent

parts:

tires:                        +0.15 percent   +2.28 percent    +0.03 percent    +1.08 percent

stationery/               +0.28 percent   +4.53 percent     -6.48 percent     -0.01 percent

gift wrap:

Even in sectors with a prominent Chinese presence, like apparel of consumer electronics, any kind of price-hiking tariff effect is elusive, at very best. In fact, in virtually all the products below, inflation has been decidedly weaker than in the core control group, and deflation is apparent in many.

Comparing the two year-on-year figures does reveal some accelerating inflation (or weakening deflation). This is especially clear in the food-related categories (including the broad food control group) and in some non-food segments (like household furnishings, men’s and women’s sportswear, computers and peripherals, furniture and bedding, stationery, sewing machines and fabrics). But softening prices can be seen in recreational goods, sporting goods, personal care products, window and floor coverings, televisions, miscellaneous appliances, and several others.

Since these tariffs-related price data began coming in, I’ve been saying that although inflationary effects haven’t yet shown up, they could always appear in the coming months. Roughly a year after the metals tariffs have been in place, it’s now time to start suggesting that the no tariff-led inflation situation is becoming the New Norm.

(What’s Left of) Our Economy: A Deep Dive Doesn’t Find Any Tariff-Led Consumer Inflation, Either

Tags

aluminum, China, consumer prices, inflation, Labor Department, metals, tariffs, Trade, {What's Left of) Our Economy

I decided to do something special for my regular analysis of the new U.S. consumer inflation figures (for February) and what they say about President Trump’s tariff-centric trade policies. Mainly because we now have four months worth of data on the prices of goods sectors where imports from China are common, it’s become possible to take the best stab yet determining whether the Trump levies are hammering American households by making these products much more expensive.

The verdict? Some tariffs-led inflation here can be detected, but the statistics are still too imperfect, and the time-frame examined still too short to justify any firm conclusions.

At the same time, it remains clear that Mr. Trump’s metals tariffs, which have now been in place for eleven data months, have had little if any impact per se on consumer buying power.

Let’s examine the steel- and aluminum-related figures first, since there are many fewer products involved. Here are the data for the January-February period, and for April to the present (the stretch during which the metals tariffs have been in place), as well as the year-on-year numbers for April and February (which provide some indication of trends over time). As usual, the results for tariffs-affected products (e.g., canned foods) are presented along with those of control goods (e.g., non-canned foods) to glean further insights into the tariffs’ effects.

But here’s another new wrinkle: Rather than use the most popular “core inflation” measure for the biggest control group, I’m going to use a different measure: all items minus energy. The reason? The standard core inflation gauge strips out food and energy, because price changes in those categories are so volatile that they’re thought to distort the picture of fundamental inflationary or deflationary forces influencing the economy.

Yet many metals tariffs-affected products are food products. So for our purposes, the core group needs to be more narrowly drawn – and in this case, is comprised of all items minus only energy.

                                       Jan.-Feb.        Since April       April y/y          Feb. y/y

core CPI:                   +0.15 percent   +1.76 percent  +2.01 percent   +2.07 percent

fresh fruits                 +0.72 percent   +1.95 percent   -0.43 percent   +2.34 percent

  & vegs:  

fresh fruits:                 -0.27 percent    -0.55 percent  +1.38 percent   -0.53 percent

fresh vegs:                 +1.86 percent   +4.92 percent   -2.50 percent  +5.76.percent

processed fruits         +1.42 percent   +0.11 percent   -1.29 percent  +0.88 percent

  & vegs:

canned fruits              +2.12 percent  +3.07 percent   -0.14 percent  +3.99 percent

  & vegs:

canned fruits:             +2.48 percent   +1.91 percent    -1.60 percent  +3.09 percent

canned vegs:              +2.23 percent   +3.70 percent   +1.00 percent  +4.66 percent

soups:                         +0.39 percent  +1.19 percent     -0.38 percent   -0.57 percent

malt beverages           +0.73 percent  +2.41 percent    +0.84 percent  +2.64 percent

  consumed at home:

alcoholic                     -0.26 percent   +1.14 percent   +2.17 percent   +1.36 percent

   beverages consumed away:

non-frozen, non-        +0.98 percent   +3.46 percent   -0.52 percent   +3.52 percent

  -carbonated non-

  alcoholic rinks:

carbonated drinks:      -0.19 percent   +4.72 percent   +0.04 percent   +5.04 percent

juices & non-             +0.98 percent   +3.46 percent    -0.26 percent   +3.52 percent

  alcoholic drinks:

new cars & trucks:     -0.24 percent    +0.66 percent   -1.61 percent   +0.29 percent

motor vehicle             -0.09 percent    +1.83 percent   -0.74 percent   +2.12 percent

  parts:

appliances:                 -0.94 percent   +3.44 percent  +0.27 percent    +6.80 percent

major appliances:       -0.56 percent   +6.86 percent  +1.55 percent  +11.08 percent

non-electric               +0.25 percent    -0.59 percent   -1.57 percent    +1.69 percent

  cookware & tableware:

tools, hardware,         +0.72 percent  +1.49 percent   +0.19 percent   +1.98 percent

outdoor equipment:

Something that becomes clear right away – the food price changes shown here demonstrate that they really are volatile. For example, from January to February, fresh fruits and vegetables prices together rose by 0.72 percent. The previous month, they fell 0.19 percent. Fresh vegetables prices have been on an even wilder roller-coaster – up 1.86 percent on month in February, down 1.66 percent on month in January. And unfortunately, this volatility can reduce the value of the year-on-year results.

The canned foods price volatility is impressive, too. Between January and February, the prices in the canned fruits, canned vegetables, and canned produce overall categories all rose more than two percent. But between December and January, the price of the first of these fell by 1.59 percent, the price of the second rose by just 0.45 percent, and the price of the third dipped by 0.05 percent.

And these products are where the strongest signs of metal tariffs-led consumer price inflation are found. So take the price acceleration revealed by the year-on-year data with a grain of salt. (No pun intended.). Also revealing: When you look at the cumulative price changes since the first metals tariffs were imposed (the post-April figures), some of these canned food categories exhibit stronger-than-core inflationary trends (the canned produce groupings and the drinks categories – which unfortunately also include many products packaged in glass and plastic bottles and cardboard containers) but some exhibit weaker pricing (like soups and alcoholic beverages consumed away from home – which also include many non-canned products). So there’s also abundant evidence that prices are mainly driven by something other than the metals in cans.

As for other products that use steel and aluminum, appliance prices keep increasing ever faster – but of course inflation in those categories has also been influenced by a separate set of tariffs imposed a year ago on large household laundry machines. The pricing trends for motor vehicles, automotive parts, non-electric cookware and tableware, and the tools and hardware categories, are decidedly mixed – which again undercuts tariff-centric interpretations of their inflation rates.

And now for the China tariffs’ effects. In part this post has been delayed because I actually went through the list of tariff-ed consumer (and other) goods published by the U.S. Trade Representative’s office in mid-September. The groupings of these products still often match up poorly with the groupings used by the Labor Department to track consumer pricing trends. Moreover, in many of these cases (especially the food products), imports from China are pretty modest. But the groupings aren’t entirely off, so I concluded these numbers are worth presenting.

What you see are the data for the latest month (February), for the post-September period (since October was the first full month these levies were in effect), and for October and February on a year-on-year basis. And as with the metals tariffs figures, the main control groups (like items minus energy) are presented as well.

                                     Jan.-Feb.          Since Oct.         Oct. y/y           Feb. y/y

core CPIU:              +0.15 percent   +1.76 percent   +2.01 percent   +2.07 percent

food:                        +0.40 percent   +1.17 percent   +1.21 percent   +1.96 percent

frozen/freeze-          +1.56 percent   +0.47 percent    -0.46 percent   +0.95 percent

  dried/prepared

  foods

fish/seafood:            +0.79 percent   +1.85 percent   +2.82 percent   +4.44 percent

processed fish/         +0.41 percent   +0.92 percent   +1.46 percent   +5.21 percent

  seafood

frozen fish/              +0.78 percent   +1.24 percent    -0.15 percent    +3.67 percent

  seafood

fruits/vegs:               +0.86 percent   +1.83 percent    -0.32 percent   +2.03 percent

fresh fruits/               +0.72 percent   +2.11 percent   -0.38 percent    +2.34 percent

  vegetables

fresh fruits:                -0.27 percent   +1.29 percent   -1.40 percent    -0.53 percent

fresh vegs:                +1.86 percent   +3.05 percent   +0.81 percent   +5.76 percent

processed                  +1.42 percent   +0.79 percent   -0.06 percent   +0.88 percent

  fruits/vegs:

frozen fruits/             +0.81 percent   -0.51 percent    -2.72 percent    -2.41 percent

  vegetables

non-carb,                  +0.98 percent   +2.06 percent   +1.23 percent   +3.52 percent

  non-frozen juices/drinks:

personal care            +0.55 percent   +0.91 percent    +1.52 percent   +1.87 percent

  products:

household                +0.31 percent    +0.78 percent    +0.69 percent   +1.49 percent

  furnishings:

recreation                 -0.86 percent    +0.53 percent     -3.51 percent    -1.38 percent

  goods:

men’s                       +3.27 percent     -1.52 percent    +1.47 percent   +4.10 percent

  sportswear:

women’s                   -2.51 percent     -2.47 percent     -5.08 percent   -5.91 percent

  sportswear:

computers,                -0.94 percent    -1.70 percent     -4.09 percent    -3.95 percent

  peripherals, etc.:

window/floor            -1.97 percent    -2.39 percent    +0.74 percent    -3.53 percent

  coverings:

furniture &               +1.20 percent   +1.22 percent    +1.26 percent   +2.36 percent

  bedding:

appliances:                -0.94 percent    +0.17 percent   +4.82 percent    +6.36 percent

major                         -0.56 percent    +1.83 percent  +8.08 percent  +11.03 percent

  appliances:

misc appls:                -0.85 percent     -1.04 percent  +3.25 percent    +4.38 percent

non-electric              +0.25 percent    +0.27 percent   -0.51 percent    +1.69 percent

  cookware/tableware:

tools/                        +0.72 percent     +1.91 percent  +0.39 percent    +1.98 percent

  hardware &

  outdoor equip:

household                 +0.13 percent    +0.41 percent  +1.79 percent    +2.94 percent

  cleaning products:

televisions:                 -3.23 percent   -7.01 percent  -17.95 percent   -20.18 percent

misc video                 +0.71 percent  +4.45 percent    -3.87 percent    +1.53 percent

  equipment

pets &                       +0.55 percent   +1.50 percent   +0.91 percent   +2.84 percent

  pet products

sporting                     -1.90 percent    +2.02 percent   +1.71 percent   +0.30 percent

  goods

photo equip               -2.26 percent     -1.24 percent    -4.94 percent    -4.12 percent

  & supplies

sewing                      +1.82 percent    +9.76 percent    -2.08 percent   +6.10 percent

  machines/

  fabrics

motor vehicle            -0.09 percent    +1.03 percent   +1.25 percent   +1.86 percent

  parts:

tires:                         +0.25 percent     +1.66 percent   +0.03 percent   +0.91 percent

stationery/                +1.60 percent     +4.24 percent    -6.48 percent    -0.22 percent

  gift wrap

Again, the short duration of these tariffs means that even the post-October and year-on-year results should be treated with major caution. And the prevalence of faster-rising food prices is clear from the table as well (although the modest level of tariff-ed imports from China further undermines the claim that trade deserves significant blame). Another complication that explains many of the diverging metals-related results, too: Different products operate in very different markets with highly distinctive features – including demand. Just look at the sportswear categories – where by most measures, pricing for men’s products is moving in exactly the opposite direction as pricing for women’s products.

The bottom line seems to be that, for price changes starting in October, only five of these 23 categories show increases above the core inflation rate, while 18 show below it. And one of those high inflation products was the major appliance category that’s also been affected by the washing machine tariffs.

Yet for year-on-year inflation rates, between October and February, the story looks very different. Price rises sped up (or price drops slowed down) in 18 of the categories, with greater price weakening characterizing the other five.

That’s why I believe that it’s still most responsible to adopt a wait-and-see approach to evaluating the China tariffs – along with the short time frame involved and the uncertainties over categorization. For the impact of the longer-lasting metals tariffs, however, claims of trade war-wreaked devastation just look even more and more far-fetched with each passing month.

(What’s Left of) Our Economy: A Valentine’s Day Bust for Tariff Alarmists

Tags

aluminum, inflation, Labor Department, manufacturing, metals, metals-using industries, PPI, Producer Price Index, producer prices, steel, tariffs, Trade, wholesale prices, {What's Left of) Our Economy

If trade alarmists and tariff fear-mongers were hoping for a Valentine’s Day gift from Thursday’s producer price inflation report, they’re now nursing broken hearts. For the new numbers from the Labor Department continue the string of official data releases showing that President Trump’s trade curbs on imports of metals and various goods from China have generated no significant inflationary pressure in the economy overall. Indeed, there’s only the scantest evidence that they’ve created upward price pressure even in the products most directly affected.

As has been the case for months for this Producer Price Index (PPI) data – along with the statistics on consumer prices – the most reliable figures are the Trump tariffs on steel and aluminum imports, because they’ve been in place since March. But when it comes to the producer price results – which look at the economy from the wholesale sector’s standpoint – it’s worth examining the China-related data as well, since the first tariffs on producer goods from China were imposed in July. (P.S.: Keep in mind that the new statistics, which bring the story up to January, incorporate an annual set of revisions that in this case impact the seasonally adjusted numbers going back to 2014).

Prices for steel remain elevated through, January, but increases have lost noteworthy momentum. True, they rose sequentially in January by 0.50 percent and their initially reported monthly decline of 0.63 percent in December was revised to a 0.18 percent dip. Moreover, steel prices have risen by 11.02 percent since April – the first full month they were in effect. By contrast, the super-category in the PPI report in which they’re placed – processed goods minus foods and feeds – saw its prices decline by 0.55 percent during that period.

But most of the steel price increases took place over the summer. Since September, they’re down 1.20 percent. That’s not nearly as big a fall-off as for their super-category overall (where prices were off by 3.83 percent during this period). But it’s a decrease nonetheless.

Upon moving to aluminum prices, however, the notion that tariffs have been mainly behind these high and still rising prices breaks down completely – because aluminum pricing trends have been so completely different.

Whereas wholesale steel prices increased on-month in December, wholesale aluminum prices fell – by an unrevised 0.40 percent. Both metals registered a 0.50 percent sequential price rise in January.

But aluminum’s period of strong pricing power was considerably shorter than steel’s, and ended in June. And since that month, they’re down by 6.40 percent. That’s almost double the price slump experienced by its core processed goods super-category (the same as steel’s) – 3.37 percent. So something other than tariffs clearly has been driving the price movements of these metals on the wholesale level.

Important divergences also appear in the data for metals-using industries. Last month, for example, we found that prices for sectors like pumps, compressors, and related equipment; mining machinery and equipment; construction machinery and equipment; and metal-forming machine tools, rose faster on month than prices in their super-category – final demand goods minus food and energy.

In January, these trends continued for construction machinery and that machine tools sector. But the new monthly increases for other metals-using sectors, like agricultural machinery and equipment (0.21 percent), metal-cutting machine tools 0.30 percent), industrial materials handling equipment (0.17 percent), and machine tool parts and mold-making equipment (flat), were considerably weaker, and completely in line or softer than the latest monthly price increase for the core final demand goods category (0.26 percent). That’s significant given recent solid output growth for the entire manufacturing sector, and especially the durable goods industries that rely heavily on metals as inputs.

Nonetheless, increases pushed through earlier in the year helped most metals-using sectors produce price hikes on a January-to-January basis considerably stronger than that for the core final demand goods super-category (2.40 percent).

Switch over to “intermediate demand” goods and you find mixed results, too. Big annual price hikes have been seen in sectors like metal containers, fabricated wire products, and certain kinds of valves (for January, 5.58 percent, 15.56 percent, and 5.77 percent, respectively). These increases all exceeded that for their core intermediate demand super-category (0.97 percent). Yet they were all lower than the December figures (6.46 percent, 16.42 percent, and 6.03 percent). (The intermediates super-category figure was 3.29 percent for that month.) So some inflation momentum has been lost.

Since the metals tariffs were imposed, prices of metal containers have risen 2.01 percent, prices of fabricated wire products have risen 10.16 percent, and prices of those valves are 2.82 percent higher. All these inflation rates are much faster than that of the intermediate demand super-category (where prices overall fell 0.55 percent during that period). But as with the annual figures, they vary considerably, with the wire products sticking out like an especially sore thumb.

The first Trump China tariffs weren’t imposed until early July, so the sample size is smaller. But the case for tariff-led wholesale inflation on this front is just as weak as in the metals-related sectors.

The evidence for tariffs-led producer price inflation is much weaker for goods imported from China – perhaps because the levies haven’t been in place for nearly as long as the metals tariffs. The table below shows the PPI changes for some of the leading products found on the Trump administration’s initial China tariff list. They were imposed on July 6, so the numbers show the cumulative price changes since August. (Note: Because the administration’s Trump announcement used a different classification system than that used in the PPI reports, the below data don’t match up exactly with that tariff list. But the following goods are all at the least main parts of the items on the Trump list, or vice versa. The same holds for the super-category figures used, as with metals tariff-related products, for comparison’s sake.)

                                                                                  Aug.-Dec.            Aug.-Jan.

core processed goods for intermediate demand:   -0.88 percent       -2.50 percent

aircraft engines and engine parts:                         +0.04 percent      +0.44 percent

ball bearings:                                                         +1.01 percent     +1.24 percent

electric generators:                                                +1.61 percent     +1.66 percent

medical, surgical & personal aid devices:            +0.34 percent      +0.93 percent

core commodity final demand                              +0.64 percent      +1.13 percent

industrial heating equipment:                               +1.79 percent      +2.41 percent

oil and gas drilling platform parts:                              0 percent              0 percent

farm machinery and equipment:                           +2.26 percent      +2.55 percent

paper-making machinery:                                     +0.31 percent      +0.52 percent

electricity transformers:                                        +0.12 percent      +0.68 percent

medical, surgical, and personal aid devices:         +0.33 percent      +0.93 percent

X-ray and electro-medical equipment:                  +0.12 percent     +0.37 percent

In a phrase, these results are all over the place – strongly indicating that the tariffs have not been the leading cause of their price changes. The only consistent pattern suggesting a notable tariff effect emerges after comparing the August-December and August-January results. In the core intermediate demand grouping, prices dropped at a faster pace between the two periods. But for the China-related goods, they rose, albeit at different rates.

In the core final demand grouping, prices rose at a faster pace for the super-category, and for all the specific goods within it except for oil and gas drilling platform parts. Interestingly, though, the acceleration for two other sectors – farm machinery and equipment and paper-making machinery – was slower than for the super-category as a whole. In addition, during the latest, August-to-January, period, prices for no less than five of the seven sectors rose more slowly than for the super-category for a whole – again signaling the strong influence of non-tariff factors.

America’s globalist elites haven’t lost credibility solely or even mainly because of trade policy. But that’s surely been part of the mix. And if they want to start regaining some, they might think about admitting that facts really do matter, and that scarcely any of them support their tariff fear-mongering.

(What’s Left of) Our Economy: Tariffs-Led Inflation, Where are You?

Tags

aluminum, China, consumer price index, CPI, inflation, Labor Department, metals, metals-using industries, producer prices, steel, tariffs, Trade, Trump, {What's Left of) Our Economy

If you’re a baby-boomer or a fan of old sitcoms, you know the show Car 54, Where Are You? It came to mind as I was examining the new consumer price inflation data that came out of the Labor Department this morning. Because these consumer price index (CPI) should make the country’s tariff-mageddon-mongers ask, in an equally plaintive tone, “Tariffs-led inflation where are you?” That is, the results at best offer scarcely any evidence that the Trump trade levies are eating away much at American shoppers’ buying power.

As usual, let’s first look over the statistics for metals-using industries, because they’ve been dealing with tariffs on steel and aluminum since late March, when they were first imposed. The table below compares price changes for their products with price changes for overall “core inflation” (which excludes food and energy prices, supposedly because they’re volatile for reasons that have little to do with whatever overall upward or downward general pricing pressures are shaping the economy). For good measure, I’ve included related products in an effort to distinguish between price changes due to fluctuating metals costs, and price changes due to costs of other materials or substances in the product in question – e.g., fresh produce and canned produce.

And as RealityChek regulars will notice, I’ve not only included autos and parts here, but added appliances and some other metals-using goods.

As for the dates, they cover the latest monthly price changes (through January), the changes from April (the metals tariffs’ first full month) through January, the year-on-year changes for April, and the year-on-year changes for January. The last two are probably the best measures of whether the impact of the trade curbs has been intensifying – for better or worse.

                                      Dec.-Jan.       Since April         y/y April           y/y Jan.

core CPI:                  +0.24 percent   +1.67 percent   +2.12 percent   +2.15 percent

fresh fruits                 -0.19 percent   +0.07 percent   -0.43 percent   +1.25 percent

& vegs:

fresh fruits:                +1.14 percent   -0.28 percent   +1.38 percent   -0.74 percent

fresh vegetables:         -1.66 percent  +3.01 percent    -2.50 percent  +3.64 percent

processed fruits           -0.88 percent   -0.64 percent   -1.29 percent    -0.46 percent

& vegs:

canned fruits:              -0.05 percent   +0.94 percent   -0.14 percent   +0.70 percent

& vegs:

canned fruits:              -1.59 percent    -0.56 percent    -1.60 percent   +0.35 percent

canned vegs:              +0.45 percent    +1.44 percent  +1.00 percent   +1.11 percent

soups:                         +0.34 percent    +0.80 percent   -0.38 percent   -0.81 percent

malt beverages           +0.07 percent    +1.66 percent  +0.84 percent  +2.23 percent

at home:

alcoholic                      -0.04 percent    +1.34 percent  +2.17 percent  +2.25 percent

beverages away:

non-frozen, non-         +1.32 percent    +2.45 percent   -0.52 percent  +1.80 percent

-carbonated non-

alcoholic rinks:

carbonated drinks:       +2.08 percent   +4.92 percent  +0.04 percent  +5.53 percent

juices & non-               +1.84 percent   +3.39 percent   -0.26 percent  +3.31 percent

alcoholic drinks:

new cars & trucks:       +0.22 percent   +0.93 percent   -1.61 percent +0.06 percent

motor vehicle               +0.33 percent   +1.92 percent   -0.74 percent +2.12 percent

parts:

appliances:                   +1.36 percent   +4.56 percent   +0.27 percent +6.43 percent

major appliances:         +0.99 percent  +7.47 percent  +1.55 percent  +9.66 percent

non-electric                  +0.67 percent   -0.84 percent   -1.57 percent  +3.59 percent

cookware & tableware:

tools, hardware,            +0.98 percent  +0.77 percent  +0.19 percent  +1.57 percent

outdoor equipment:

The two sets of year-on-year figures do reveal some evidence of hotter inflation in metals-using products between April and January. Also apparent, however, is accelerating inflation in several of the non-canned versions of these products. As has been the case in previous months, prices change for all sorts of reasons; tariffs are only one and nothing indicates that, generally speaking, they stand out.

The evidence is more mixed for other food sectors that offer lots of canned products, like soups and beverages. The trouble is, they also offer lots of products in other kinds of containers or packages. So tariff alarmists can point to the beverages as examples of prices rising at a faster annual pace since the metals levies were imposed. But when it comes to soup, prices have been falling at a faster pace.

Moreover, if the metals tariffs have been so important, why is January year-on-year inflation for all three of the canned products so much lower than January year-on-year overall core inflation?

Moving away from foods, faster inflation can also be seen in automotive products, appliances, cookware and tableware, and tools and hardware. But as with some of the food categories, the January-January inflation rate for the tools section is below that for the economy’s “core” overall, and appliance prices also have been affected by a separate set of tariffs slapped on large household laundry machines last February. So consumer prices are still rising strongly for these goods, although it’s hard to see why year-old washing machine tariffs or ten-month old metals tariffs would be major factors behind the big December-January increases shown above.

In recent previous posts on consumer price data and the Trump tariffs, I’ve been providing information on products that will be affected by levies on imports from China. But the more I think about it, the less confident I am that the effects can be accurately gauged at this point. For one, the first full month of tariffs on goods from China came in August. The amount was relatively small ($34 billion). The first full tariff month for another $16 billion worth of Chinese import categories came in September, but none of the products in either tranche belonged in the consumer categories. (Because they were producer goods – the kinds of parts, components, and materials that go into consumer and other products –  confident about measuring their effect on U.S. producer prices – the next set of which come out tomorrow.)

A major set of tariffs containing many consumer goods levies was announced in mid-September, but they only went into effect late that month, so only four months worth of data for those products is available. And plaguing analysis of any of these price statistics, they’re issued using a classification system that’s different from that used in the list of tariff-ed Chinese goods. In a fair number of cases they line up; in most cases, they don’t, and finding satisfactory matches is challenging.

So as I see it, more patience is needed before a useful verdict on the China tariffs can be delivered. But metals tariff-led inflation clearly remains mythical – which of course only strengthens the case for President Trump’s determination to overhaul American trade policy.

(What’s Left of) Our Economy: Tariffs-Led Inflation Remains a Manufactured Crisis

Tags

China, inflation, metals, metals tariffs, producer prices, tariffs, Trade, trade war, wholesale, {What's Left of) Our Economy

Economy followers who are fans of facts have ample reason to be grateful that the partial federal government shutdown has left the Labor Department open. As a result, the Bureau of Labor statistics can keep churning out data showing that the next valid claim of tariff-led damage to the U.S. economy that’s supported by authoritative statistics will also be the first. And today’s producer price numbers (for December) are the latest case in point.

The Department’s producer price index (PPI) measures price changes at the wholesale level, and neither the results for products heavily affected by President Trump’s metals tariffs or by his tariffs on goods from China show any evidence of contributing to inflation that will at some point be passed on to consumers.

Let’s start with metals-using products supposedly vulnerable to the U.S. levies on imports of steel and aluminum, which began to be imposed in late March. As with the situation as of last month, steel itself continues to demonstrate strong pricing power on an annual basis, starting with a 7.4 percent increase in April that’s since soared to 18.5 percent in December.

Even so, on a monthly basis, steel prices have actually fallen on net since August (by 0.36 percent), and dropped by 0.63 percent on month in December. So its price momentum seems to be cooling significantly – and possibly at an accelerating rate.

Further, much weaker pricing power – and therefore inflation – can be seen in various goods that use lots of steel. On the one hand, the December figures still showed robust price increases in products like pumps, compressors, and related equipment; and mining machinery and equipment. Wholesale inflation was 4.1 percent in the former on month in December, and 8.5 percent in the latter. By contrast, in the super-category in which both products are found (“final demand goods”), yearly wholesale inflation was only 2.5 percent in December.

Switch over to “intermediate demand” goods and you find big annual price hikes in sectors like metal containers (6.5 percent), fabricated wire products (16.4 percent), and certain kinds of valves (six percent). Yearly December inflation in that super-category was three percent.

But as in steel itself, the latest monthly figures are generally much lower – e.g., since August, 1.57 percent cumulatively for pumps, compressors, and related equipment; -0.55 percent for metal containers; 0.12 percent for fabricated wire products; and 2.32 percent for the valves.

Mining equipment is a conspicuous exception: Its prices were up 6.21 percent from August through December. But it was a strange exception, since all of the increase took place from October to November.

And the tariff alarmists still need to account for all the steel-using goods where wholesale inflation has been weak for the entire year and looks to be going nowhere: machine tools; oil and gas field machinery; agricultural machinery; motor vehicles; motor vehicle parts; ships; railroad equipment.

It’s true that the markets for all these producer goods vary tremendously, as does their dependence on steel. But that’s the point: Tariffs are only one of many trends and developments that influence their prices.

As for aluminum, its pricing momentum has slowed considerably – from 11.9 percent on an annual basis in April, to 6.3 percent in December. And since August, aluminum wholesale prices are off by fully 3.20 percent.

The first Trump China tariffs weren’t imposed until early July, so the sample size is smaller. But the case for tariff-led wholesale inflation on this front is just as weak as in the metals-related sectors.

Here are the PPI changes for some of the leading products found on the Trump administration’s initial China tariff list. They were imposed on July 6, so the numbers show the cumulative price changes since August. (Note: Because the administration’s Trump announcement used a different classification system than that used in the PPI reports, the below data don’t match up exactly with that tariff list. But the following goods are all at the least main parts of the items on the Trump list, or vice versa.)

aircraft engines and engine parts: 0.04 percent

industrial heating equipment: 1.15 percent

oil and gas drilling platform parts: 0.46 percent

farm machinery and equipment: 2.26 percent

paper-making machinery: -0.13 percent

ball bearings: 1.01 percent

electric generators: 1.85 percent

electricity transformers: 0.35 percent

medical, surgical, and personal aid devices: 0.33 percent

X-ray and electro-medical equipment: 0 percent

As with the metals-using products, some strong price increases are apparent. But so are some very weak increases, a flat-line, and a price drop. So it’s tough to argue that the tariffs have been make-or-break in the wholesale pricing sphere. I’ll keep tracking the China angle with unusual alacrity, though, since the number of tariff-ed imports expanded greatly later in 2018.

Lastly, there are the tariffs on large household laundry machines. Their retail prices keep increasing strongly, as shown in the latest (December) consumer price data – though not as strongly as in the immediate aftermath of the product-specific tariffs slapped on their imports in late January.

But at the wholesale level, inflation has been much weaker lately – a 0.84 percent monthly December increase for “household appliances” (the laundry equipment isn’t broken out), but only a 1.61 percent advance since August, and a comparatively meager 3.7 percent increase year-on-year. Call me a cynic, but it looks like consumers have been paying much more for these products this past year mainly because the retailers have been making a killing, not because of tariff hikes.

(What’s Left of) Our Economy: Can We (Finally) Start Deflating the Tariffs-Led Inflation Claims?

Tags

aluminum, China, China tariffs, inflation, metals, metals tariffs, metals-using industries, steel, tariffs, Trade, Trump, {What's Left of) Our Economy

Good luck to you if you’re looking for signs of tariffs-led inflation in yesterday’s U.S consumer price data from the Labor Department.

It’s not that goods that used tariff-ed products (either steel and aluminum, or inputs from China) or that are tariff-ed themselves (final products from China) haven’t become more expensive since the relevant levies were imposed. It’s that the prices of many goods completely unaffected by the tariffs have gone up as well – and in many cases, faster than those that have been affected by the trade curbs. So there’s no evidence that the tariffs themselves have had any notable impact.

In fact, these latest figures (bringing the story up through December) underscore how many forces and developments influence price changes.

A great example is provided by canned fruits and vegetables – presented below in the table showing price changes over various key periods of time (including for the post-March tariff period) for metals-using products. Their costs of course include the cost of either the aluminum or the type of steel used in their cans. When you look at the numbers for most of these time frames, it’s clear that the prices of these foods have risen faster than the overall rate of what’s called “core inflation” – the inflation rate minus the costs of food and energy, which are considered too volatile price-wise to yield an accurate understanding of what economists regard as the nation’s underlying, most fundamental, inflationary performance.

Interestingly, the prices for canned fruits and vegetables have increased much faster during these periods than the prices of food overall. So what’s driving the big price increases in these canned foods must be the cans, right – and presumably what they’re made of? Not if you look closely.

For the real problem is clearly vegetables. Both month-to-month and clearly for the entire year, fresh vegetable prices have soared. Largely as a result, the prices of canned vegetables have jumped unusually strongly, and significantly boosted the numbers for the overall canned fruits and vegetables category.  

The special role being played by vegetable prices is also clear from looking at the trends in food prices – which aren’t included in the core inflation number. Except for December, these prices have risen considerably more slowly than those prices in the core grouping, or in the economy as a whole. 

If you’re still skeptical, look at the price trends for several other food products that often come in cans – like beverages of all kinds, and soup. There’s simply no consistent pattern of their increasing faster than core inflation over any time period. 

Similarly, although the prices of metals-using auto parts have risen more robustly than core inflation, the prices of metals-using vehicles have risen much more weakly. In fact, from December, 2017 to December, 2018, they’ve fallen in absolute terms. So something, or somethings, other than metals prices and tariffs count for much more in the total prices of these goods.

                                     Nov.-Dec.       Since April        y/y April           y/y Dec.

core inflation:            0.21 percent   +1.39 percent   +2.12 percent   +2.22 percent

overall inflation:       -0.06 percent  +1.09 percent   +2.43 percent   +1.95 percent

food:                         +0.37 percent  +0.98 percent  +1.39 percent    +1.58 percent

fresh fruits & vegs:  +1.94 percent  +1.82 percent   -0.45 percent    +1.75 percent

fresh fruits:              +1.33 percent    -1.73 percent  +1.35 percent     -0.73 percent

fresh vegetables:      +2.63 percent   +6.05 percent   -2.53 percent    +4.63 percent

processed fruits        +0.67 percent    -0.64 percent   -0.59 percent    +0.87 percent

& vegs:

canned fruits            +1.48 percent    +0.99 percent   -0.07 percent    +3.12 percent

& vegs

canned fruits:           +1.44 percent    +1.39 percent   -1.50 percent    +2.29 percent

canned vegs:            +1.30 percent    +1.12 percent   +1.04 percent   +4.18 percent

soups:                      +2.49 percent    +2.28 percent     -0.54 percent   -1.43 percent

malt beverages         -0.04 percent    +1.82 percent    +0.84 percent   +1.87 percent

consumed at home

alcoholic bevs          -0.04 percent     +1.34 percent    +2.17 percent   +2.25 percent

consumed away

juices & non-         + 0.13 percent     +1.77 percent     -0.25 percent  +2.51 percent

alcoholic drinks

carbonated drinks:  +0.41 percent     +3.01 percent     +0.03 percent  +4.07 percent

non-frozen, non-     +0.18 percent    +1.37 percent       -0.53 percent  +1.46 percent

carbonated non-

alcoholic drinks

new cars & trucks:        0 percent     +0.78 percent      -1.62 percent    -0.24 percent

auto parts:              +0.42 percent     +1.58 percent      -0.74 percent   +2.20 percent

Tariffs on goods from China have been in effect for fewer months than the metals tariffs. And since July, they’ve been imposed in phases, which were followed by a decision by President Trump to delay increases in a big tranche as part of the latest cease-fire in the trade conflict with China. So the data is less definitive. But thus far, at least, the prices of the goods below – which represent some of the main imports from China subjected to tariffs by the first rounds of these levies, which were imposed in July – have mainly rising more slowly than the rest of core inflation sectors. (The sportswear numbers are dicey, since such apparel is not broken out from the rest of the category as such. So the figures below represent results from a women’s apparel category that includes sportswear.)

                             Nov.-Dec.          Since Aug.        Aug. y/y           Dec. y/y

core inflation:   +0.21 percent   +0.73 percent    +2.19 percent   +2.22 percent

furniture:          +0.55 percent   +0.90 percent     -0.66 percent   +1.68 percent

auto parts:        +0.42 percent   +0.82 percent    +0.39 percent    +2.20 percent

tires:                 +0.98 percent  +1.50 percent      -1.64 percent    +1.29 percent

appliances:       -0.33 percent   +1.25 percent     +2.31 percent    +4.74 percent

sportswear:       -0.89 percent   -2.14 percent       -0.86 percent    -1.33 percent

As for appliances, their out-performance is due largely to a separate set of tariffs imposed on large household laundry equipment starting in February. As shown below, however, even in this case, price increases are starting to moderate. That’s clear from the decline in the year-on-year figure between February and December, and from very slow price increase recorded between November and December.

                                 Nov.-Dec.        Since Feb.          Feb. y/y           Dec. y/y

core inflation:       +0.21 percent   +1.67 percent   +1.86 percent   +2.22 percent

appliances:            -0.33 percent   +3.41 percent   +0.25 percent   +4.74 percent

major appliances: +0.19 percent  +11.59 percent   -4.22 percent   +9.02 percent

I know that I may be starting to sound like a broken record on the (negligible) impact of tariffs on the American economy so far. But until globalization cheerleaders in politics and business, and their mouthpieces in the Mainstream Media, start telling the story accurately, I’ll keep correcting the record.

(What’s Left of) Our Economy: Yes, We (Still) Have No Tariffs-Led Inflation

Tags

China, consumer price index, consumer prices, inflation, metals tariffs, tariffs, Trade, Trump, washing machines, {What's Left of) Our Economy

As with yesterday’s producer price data, good luck to anyone trying to find significant tariff-led inflation in the U.S. economy in today’s consumer price numbers (for November), whether on the metals front or the China front. Because it’s still not showing up. There’s one clear exception (household laundry machines), which has been hit with its own product-specific levy since early February, but where doubts still persist about whether the resulting pricing power can stick. Some inflation is also apparent in motor vehicle parts.

Here’s the raw data, first for metals-using consumer goods where – bizarrely – powerful inflationary pressure are already being reported. For comparison’s sake, I’ve also included the statistics for overall “core” inflation (“core CPIU” in government lingo), which strips out volatile food, energy, and housing prices. And for fruits and vegetables, I’ve presented the numbers for these products in their canned and un-canned processed forms, to reveal whether the prices for the steel and aluminum cans in which the former come are driving price trends, or whether other factors have been more important.

                                Oct.-Nov.       Since April        y/y April           y/y Nov

core CPIU             0.14 percent   +0.77 percent  +1.19 percent   +1.51 percent

processed fruits    -0.31 percent   -1.30 percent   -0.36 percent    -0.22 percent

& vegs

canned fruits         -0.42 percent   -0.48 percent   -0.07 percent   +0.69 percent

 & vegs

canned fruits         -0.07 percent   -0.05 percent   -1.52 percent   +0.67 percent

malt beverages     +0.30 percent  +1.78 percent  +0.84 percent   +1.61 percent  

 at home 

alcoholic               +0.25 percent  +1.38 percent  +2.17 percent   +2.60 percent

  beverages away

juices & non-         0.45 percent   +1.64 percent    -0.25 percent   +1.73 percent

-alcoholic drinks

non-frozen, non-    -0.27 percent  +1.19 percent    -0.53 percent   +0.79 percent

  carbonated non-

  alcoholic drinks

non-alcoholic         -0.02 percent  +2.72 percent   +0.03 percent   +3.04 percent

  carbonated drinks

new cars & trucks -0.01 percent   +0.77 percent    -1.62 percent    -0.29 percent

motor vehicle       +0.35 percent   +1.15 percent    -0.74 percent    +2.13 percent

  parts 

The main conclusions emerging from this first table? Between October and November, prices have been weaker than the overall core inflation rate for some products (canned fruits and vegetables, new motor vehicles, and three non-alcoholic drinks categories) and stronger in fewer products (beer and other malt drinks consumed at home, alcoholic beverages consumed in bars and restaurants, and motor vehicle parts). That development alone strongly indicates that metals prices are only one influence on the prices of metals-using products, and likely not the main influence.

Further evidence for the relatively low importance of metals prices, and therefore tariffs? Over the latest data month, prices for canned fruits and vegetables have fallen slightly faster than those for all processed fruits and vegetables, but prices for canned fruits have fallen more slowly. So it’s hard justify foisting lots of blame on the cans.

In addition, care is needed in interpreting all the drink statistics. In the first place, as noted in previous RealityChek posts on consumer prices, the beer and non-alcoholic drinks figures don’t distinguish between products sold in bottles from products sold in cans. And the alcoholic beverages numbers don’t even distinguish among beer, wine, and spirits, on top of combining canned products numbers with the results for products sold in bottles and other kinds of containers (although not much wine and spirits seems to come in cans).

A major spread also emerges from the numbers since April – the first full month when any metals tariffs had been imposed. The price increase for automotive parts is relatively strong, and the hikes for all drink categories are especially robust. These indicate that demand for drinks of all kinds has been up significantly during this period, but the data are complicated again by the failure to distinguish drinks sold in cans and in other packages. And most of these trends are clear and complications are clear from the two year-on-year statistics.

Less information about the impact of China tariffs can be gleaned from the new consumer price report, because the first of these levies was only imposed in early July, and most of these were slapped on producer, not consumer goods. But some of these products contain a great deal of producer goods like steel or electronic components, and the figures for two of them are presented below – including the latest monthly results, the price changes since July, and the July and latest year-on-year data. And tariff-led inflation of any kind…just isn’t.

                              Oct.-Nov          Since July          July y/y            Nov y/y

core CPIU         +0.14 percent    +0.34 percent  +1.48 percent    +1.51 percent

tools, hardware  -0.24 percent     -0.31 percent   -0.07 percent     -0.12 percent

  et al

video/audio       +0.14 percent    +1.06 percent   -0.79 percent     -0.38 percent           equipment

But there is one product for which tariff-induced price hikes are clear, and that’s those separately tariff-ed household laundry machines. Here are the data for October-November, since February (shortly after they began, and year-on-year for February and November.

                                    Oct.-Nov.       Since Feb            Feb y/y            Nov y/y

core CPIU               +0.14 percent  +0.74 percent   +0.91 percent   +1.51 percent

laundry equipment +2.97 percent +18.25 percent    -7.61 percent  +15.52 percent

Of course, the steel levies have no doubt contributed to the elevated prices, too. Even here, though, it’s interesting that despite a big October-November price jump, the year-on-year increase in November prices is somewhat lower than that for February. Also, even with the big new monthly surge, washing machine prices remain at four-and-a-half-year lows. In other words, as with steel and aluminum, these goods were flooding the U.S. market and sold at prices having little to do with any free market forces, much less free trade.