LOOK AHEAD: US Macro: PPI (Wed) and CPI (Thu) Inflation
US PPI inflation is released on Wednesday before CPI inflation on Thursday, an unusual ordering that should see core PCE implications dialled in after the CPI release rather than the usual wide range waiting for specific PPI details. PPI will be watched more closely than usual this month after a far stronger than expected jump in last month’s July report fired a warning short over tariff-based cost pressures starting to feed through. That included a 0.6% M/M increase in our preferred core series of PPI ex food, energy & trade services, which strips out items such as the then booming portfolio management & investment advice category following the strength in equity markets. It's too early to gauge an accurate sense of analyst expectations for August.
CPI inflation on Thursday will then be the last major release ahead of the Sep 17 FOMC decision. Consensus looks for core CPI at 0.3% M/M after the 0.32% M/M in July, another monthly increase comfortably above a pace consistent with 2% inflation. August should in theory start to see the largest tariff impacts along with September and possibly October. Returning to July’s report, core goods inflation was softer than expected, at a still solid (by core goods standards) 0.2% M/M for a second month running but about half that of 0.4% expected by analysts. Instead, non-housing core services surprised higher. The latter was a “dangerous” development in the words of a usually dovish Chicago Fed’s Goolsbee (’25 voter), who speaking after Friday’s payrolls report is still undecided on a September cut whilst looking for August inflation data “to get more information”.
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TARIFFS: Japan Tariff "Deal" Rates May Not Be Reflected In Executive Order
Here is the Google translate of the Kyodo report (link)
- "(Kyodo News, Washington) A White House official said on the 6th that the US will impose an additional 15% tariff on Japan as part of new "reciprocal tariffs " that will come into effect in the early hours of the 7th (afternoon of the 7th Japan time). This will be a different tariff rate from what Japan explained in the agreement."
- The latter part of the paragraph appears to be causing the confusion here. It may be referring to the fact that Japan's understanding in the "deal" that items which had a tariff rate greater than 15% before the "deal" would just maintain their existing tariff rates, with items under 15% now being tariffed at 15%. But Trump's Executive Order imposing the tariffs doesn't make that clear and implies that all of the above would see 15% tariffs added to existing tariffs.
TARIFFS: Kyodo Report Appears To Refer To Existing US-Japan Tariff "Deal"
It seems the Kyodo report referred to earlier by Bloomberg ("US TO IMPOSE ADDITIONAL 15% TARIFF ON JAPAN IMPORTS: KYODO") is not referring to an additional "new" tariff, but merely a White House confirmation of the previously announced "deal" under which the reciprocal tariff rate on Japanese goods due to take effect Thursday would be 15%. Though it's still somewhat unclear - and while USDJPY has started to come back, it has maintained most of its 0.2% rise in the dollar's favor on the back of the original headlines.
- This is the entire Bloomberg article: "The US plans to impose an additional 15% tariff on Japan, regardless of existing tariff rates, as part of reciprocal tariffs set to be imposed on various countries and regions, Kyodo News reports, citing an unidentified White House official. The 15% tariff will come on top of existing tariffs, the Kyodo report says"
TARIFFS: US To Impose Additional 15% Tariff On Japan: Kyodo
Bloomberg citing Kyodo:
- "US TO IMPOSE ADDITIONAL 15% TARIFF ON JAPAN IMPORTS: KYODO"
- "US TARIFF ON JAPAN TO COME ON TOP OF EXISTING TARIFFS: KYODO"
- "KYODO CITES WHITE HOUSE OFFICIAL ON TARIFFS"
