- One of the arguments as to why the US economy has remained strong despite the “experts” continuously calling for an apocalypse has been consumer demand.
- However, the long-term uptrend in consumerism is starting to show some cracks, as indicates by a couple key market indicators of boxed beef and Starbucks.
- McDonald's has become a hybrid between Starbucks and boxed beef, with the strategy to get away from a lower priced menu leading to a quarterly earnings miss as well.
This week we are seeing the release of the latest round of US inflation numbers, with April’s Producer Price Index (PPI), released Tuesday, coming in at 0.5% as compared to the expected 0.3% and previous 0.2%. This put the year-over-year at 2.2% versus the previous 2.1%, igniting the usual debate in financial media over what the next move by the US Federal Open Market Committee will be with interest rates[i]. April’s Core PPI (PPI excluding energy and food) came in at 0.5% versus the expected 0.2%. It will be interesting to see what the April Consumer Price Index (CPI) numbers come in at, with the pre-release average guess sitting at 0.4% and year-over-year (y/y) at 3.4%. Average guesses on the Core CPI were 0.3% and 3.6% (y/y). As usual, I get more entertainment than information from these government numbers, with the real story already in front of us in the form of a few consumer staple markets: Starbucks, boxed beef, and McDonalds.
