UBS On-Air: Paul Donovan Daily Audio 'Real real rates'
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US July producer price data are due. Producer prices better represent corporate pricing power than consumer prices. (Consumer prices are a combination of the pricing power of retailers, and the power of imagination in devising owners’ equivalent rent.) This means the real fed fun
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The desk interprets the forthcoming US consumer price inflation data as potentially misleading, particularly when considering that a material portion of the index reflects inflated housing costs not borne by average consumers. Per the full note from UBS, this results in a headline number that increasingly misrepresents economic realities, especially against a backdrop of rising income inequality and political factors influencing inflation expectations. Notably, the consensus forecast calls for only a marginal uptick in headline inflation in the coming report, yet a more localized view reveals that nearly half of metropolitan areas are experiencing lower inflation rates, indicating a divergence from widespread assumptions. The evolving landscape of consumer inflation sentiment reinforces a cautious stance on traditional metrics used to gauge spending power, which may be less applicable given these discrepancies.
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