Egg prices are widely attriubted to the culling of flocks due to outbreaks of avian flu. While there is more than a little controversy regarding the need for the extent of the culling, I have not seen anyone dispute that egg prices were elevated primarily because of the culls.
We can easily extrapolate that chicken prices have been similarly impacted, and reduced availability of chicken is going to increase demand for beef, pork and ham via a substitution effect.
I will note that this morning's PPI print shows a 21% drop in producer prices for eggs during March, and that producer prices are printing deflation in all major categories (energy, food, goods, and services). Factory gate prices are generally a leading indicator for consumer prices, and so the drop in the PPI indicates there is a deflationary impulse which will emerge in the CPI in April and May.
How clearly that impulse is expressed with energy and commodities markets being roiled in April by market turmoil over the Liberation Day tariffs is an unknown. April is going to be a rough month for forecasting.
From the economic perspective, however, the relevant data point is that the cull occurred. The cull and the magnitude of the cull are what drive the economic ramifications, and that happens regardless of the actual severity of the avian flu put forward as justification.
Yes, “interesting times” - and they’re just beginning! I’ll bet no economist has an answer for what results from this data combined with the as-yet unknown effects from the tariffs. Plus, we don’t know if there will actually be any new tariffs or if all of the other countries will renegotiate or back down - even China! What geopolitical events will result from the threat of tariffs, what reshuffling of political alliances? And if DOGE is successful in downsizing government to the extent I consider desirable, how will that factor into the macroeconomic equation? It feels like we’re in uncharted territory here.
Peter, I appreciate you being on the cutting edge of bringing us new data and analysis. I especially appreciate your level-headed, fact-based reasoning that sees the possibility of trends but doesn’t jump the gun about them. You’re the best!
May they stay interesting, rather than become "Very Interesting" times due to an Iranian EMP or China-Taiwan conflict or even "more Interesting" activities across the globe or outer space.
Good summary, Peter Nayland Kust, let us hope for no more "Red Flags" but I'm sure there are a few surprises out there.
To a degree, all times are "interesting". There are always unknowns that can radically alter the trajectory of events. That's true in our personal lives as well as for the country as a whole.
What is most notable about the consumer price inflation data as well as the huge question marks surrounding the Liberation Day tariffs is that the signals are not clear. We have energy price deflation in the same month when energy prices were demonstrably rising. We have egg prices printing only disinflation in the CPI but this morning we saw major deflation in the PPI for egg prices.
We have in the March CPI print a clear picture of deflation and disinflation, and very little inflation in March. We do not have a clear indication of how much of that will extend into April and beyond, and what indicators we do have are getting overwhelmed by tariff-driven shifts on oil and commodities futures prices.
Which means instead of "Red Flags" we're at increased potential for "Black Swans."
China is in a difficult situation both economically and geopolitically.
Contrary to what their own media promotes and what corporate media here would have us believe, their 29-month long decline in producer prices means there is not a lot of demand for Chinese goods globally. The minimal levels of consumer price inflation they have had for that same time frame indicates that Beijing's efforts to stimulate domestic consumption have largely failed.
China needs to generate either exports or domestic consumption to reinvigorate their deflating economy, and they are failing to do either. This was before Donald Trump started a trade war with punitive tariff rates.
Trump's historical pattern is he wants to make a good deal. When China is ready to commit to an enforceable trade deal and can put forward substantive terms in that regard, the expectation is that Trump will be receptive, as that has been his pattern in the past.
Xi just has to figure out how to move forward with that sort of negotiating without looking like he's captitulating.
Any thoughts to lingering food price pressure due to actions like killing a bunch of chickens for bird flu?
Egg prices are widely attriubted to the culling of flocks due to outbreaks of avian flu. While there is more than a little controversy regarding the need for the extent of the culling, I have not seen anyone dispute that egg prices were elevated primarily because of the culls.
We can easily extrapolate that chicken prices have been similarly impacted, and reduced availability of chicken is going to increase demand for beef, pork and ham via a substitution effect.
I will note that this morning's PPI print shows a 21% drop in producer prices for eggs during March, and that producer prices are printing deflation in all major categories (energy, food, goods, and services). Factory gate prices are generally a leading indicator for consumer prices, and so the drop in the PPI indicates there is a deflationary impulse which will emerge in the CPI in April and May.
How clearly that impulse is expressed with energy and commodities markets being roiled in April by market turmoil over the Liberation Day tariffs is an unknown. April is going to be a rough month for forecasting.
Culling 166 million birds since 2022 against 67 human cases (1 death) seems a little egregious…almost as if we learned nothing from COVID.
It does seem excessive.
From the economic perspective, however, the relevant data point is that the cull occurred. The cull and the magnitude of the cull are what drive the economic ramifications, and that happens regardless of the actual severity of the avian flu put forward as justification.
Yes, “interesting times” - and they’re just beginning! I’ll bet no economist has an answer for what results from this data combined with the as-yet unknown effects from the tariffs. Plus, we don’t know if there will actually be any new tariffs or if all of the other countries will renegotiate or back down - even China! What geopolitical events will result from the threat of tariffs, what reshuffling of political alliances? And if DOGE is successful in downsizing government to the extent I consider desirable, how will that factor into the macroeconomic equation? It feels like we’re in uncharted territory here.
Peter, I appreciate you being on the cutting edge of bringing us new data and analysis. I especially appreciate your level-headed, fact-based reasoning that sees the possibility of trends but doesn’t jump the gun about them. You’re the best!
Yes, welcome to "Interesting Times."
May they stay interesting, rather than become "Very Interesting" times due to an Iranian EMP or China-Taiwan conflict or even "more Interesting" activities across the globe or outer space.
Good summary, Peter Nayland Kust, let us hope for no more "Red Flags" but I'm sure there are a few surprises out there.
To a degree, all times are "interesting". There are always unknowns that can radically alter the trajectory of events. That's true in our personal lives as well as for the country as a whole.
What is most notable about the consumer price inflation data as well as the huge question marks surrounding the Liberation Day tariffs is that the signals are not clear. We have energy price deflation in the same month when energy prices were demonstrably rising. We have egg prices printing only disinflation in the CPI but this morning we saw major deflation in the PPI for egg prices.
We have in the March CPI print a clear picture of deflation and disinflation, and very little inflation in March. We do not have a clear indication of how much of that will extend into April and beyond, and what indicators we do have are getting overwhelmed by tariff-driven shifts on oil and commodities futures prices.
Which means instead of "Red Flags" we're at increased potential for "Black Swans."
Lets just hope that President Trump makes peace, not war!
I think he’s keeping the Chinese off balance, since they think they have him “all figured out.”
China is in a difficult situation both economically and geopolitically.
Contrary to what their own media promotes and what corporate media here would have us believe, their 29-month long decline in producer prices means there is not a lot of demand for Chinese goods globally. The minimal levels of consumer price inflation they have had for that same time frame indicates that Beijing's efforts to stimulate domestic consumption have largely failed.
China needs to generate either exports or domestic consumption to reinvigorate their deflating economy, and they are failing to do either. This was before Donald Trump started a trade war with punitive tariff rates.
Trump's historical pattern is he wants to make a good deal. When China is ready to commit to an enforceable trade deal and can put forward substantive terms in that regard, the expectation is that Trump will be receptive, as that has been his pattern in the past.
Xi just has to figure out how to move forward with that sort of negotiating without looking like he's captitulating.
You got that right, Xi can have a big moment for a deal with Trump, will he?
If I knew that, I would have more to say about what the outcomes of the tariffs will be! ;)