QI TAKEAWAY — Buckle up for the start of the next round of survey data starting with today’s Empire State data out of New York. The inflationistas are poised to pounce on any sign that delivery times and prices paid are not abating culminating with Friday’s flash PMI from Markit. Persistence in these metrics has the power to push up yields at the long end of the curve.
  1. Per BofA data, spending for those making below $50,000 is up 32% over a 2-year period, roughly double that of those making above $125,000; spending in low-income zip codes, per Opportunity Insights, has also been juiced by stimulus, up 15.3% from January 2020
  2. The Cass Freight Cost Index, if it sticks to a normal seasonal trend, will be up 27% YoY in Q2 before slowing to around 10% YoY in Q3 as base effects wane; a downturn in transport costs would alleviate the inflation scare, given the index leads core goods CPI inflation
  3. The current labor shortage adds to inflation concerns, with the potential to exacerbate pre-existing supply chain disruptions and juiced stimulus spending; however, extension of the current unemployment benefits is unlikely to pass, given Senator Joe Manchin’s pushback