While we remain very much in the inflation-will-be-higher-for-longer camp, we also see it coming off the boil a bit over the next few months.
At first blush, support for the latter is found in the latest data.
Note below that the only increase in consumer spending in May for goods (dark bars) occurred in energy and food. On a real basis (inflation adjusted), only household durables saw an increase in the goods space (HT BCA Research):
Now, while that’s good news with regard to inflation pressures, one might say it screams recession. But one would be missing the green bars above, which measure spending on services. They increased by $72 billion in May, while goods spending decreased by $44 billion…
But wait! That last line brings the inflation worry (inflation of services costs, that is) right back to the fore, right? Yep!! That’s why I said “a bit” off the boil…