Retail Sales And PPI Support Our StagDeflation Call

2025-05-19 13:30:00 ET

Summary

• Retail sales control group printed weak for April, coming in at negative .2% vs. expectations of positive .3%. The control group figure is critical, as that is the number that feeds through to GDP growth for the quarter.
• In addition, PPI was negative .5% vs. expectations of positive .2%. CPI and PPI imply that PCE core come in at .2% and roll down slightly to 2.6% Y/Y.
• We continue to believe the US economy is in StagDeflation, as the key leading indicators of inflation, the money supply and oil, both point to deflation, as both are strongly negative Y/Y.

Originally published on May 17, 2025

Retail sales control group printed weak for April, coming in at negative .2% vs. expectations of positive .3%. The control group figure is critical, as that is the number that feeds through to GDP growth for the quarter. In addition, PPI was negative .5% vs. expectations of positive .2%. CPI and PPI imply that PCE core come in at .2% and roll down slightly to 2.6% Y/Y. Importantly, PCE-R (real time inflation using market prices for rents vs. the flawed BLS methodology) is now tracking at 1.9%, which is even below the Fed’s arbitrarily low 2% target....

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