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Input from the Chief Economist of Cornerstone Macro - Nancy Lazar

The Trend Report – Saturday, May 15, 2021

Key statistics she informed the audience this morning: Higher than expected consumer price index (CPI) and the producer price index (PPI).

  • The economy is heating up and is very strong.

  • Demand greater than supply.

  • Production lagging behind demand.

  • CPI at 4.2% - highest since 2008 (Bureau of Labor Statistics)

  • Month/Month -Used cars up 10%, transportation services up 2.9%, airline fares up 10.2%. lodging away from home up 7.6% and food up 0.4%.

  • Income growth allowing demand due to an increase in core income.

  • The producer price index up 6.2% year-over-year. This is the largest jump on record.

  • The supply side of the economy should catch up and contain some of these price increases in the back half of 2021.

Key Commodities:

  • Lumber – up 336%

  • Corn – up 127%

Home Demand:

  • COVID pulled housing forward into 2020 and now 2021.

  • Data does show lumber production is starting to catch up and prices should ease over the next six months.

  • Multinational companies have been shifting into China for the last 20 years. That will begin to slow for the following reasons:

    • China’s growth trajectory is shifting down in part because they want it to shift down. Why - they understand their changing demographics and they want to avoid excesses. Expect slower growth trends in China.

    • The CCP is demanding control over data and this is pushing interest away.

    • There is a strong push to purchase Chinese products and are actively attempting to dissuade the consumption of outside products. They want to support their domestic products.

Macro Report May Update from ITR

The US economy is poised to grow, with no obvious barriers to enduring ascent coming from the consumer status or the business-to-business side of the economy. This is clearly a time in the cycle when calculated risks are warranted. To be sure, we have not forgotten about inflation, deficits, higher interest rates, and an overvalued stock market. But those are future problems that are not expected to stand in the way of rise through 2023.

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