Thijme Schriek @DrWily: "- 𝗧𝗵𝗲 𝗣𝗿𝗼𝗱𝘂𝗰𝗲𝗿 𝗣𝗿𝗶𝗰𝗲 𝗜𝗻𝗱𝗲𝘅..."

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- 𝗧𝗵𝗲 𝗣𝗿𝗼𝗱𝘂𝗰𝗲𝗿 𝗣𝗿𝗶𝗰𝗲 𝗜𝗻𝗱𝗲𝘅 𝗙𝗔𝗟𝗟𝗦, 𝗕𝘂𝘁 𝗛𝗼𝘄? - Now, so far, inflation hasn't skyrocketed, even though many expected this after Trump unleashed tariffs and a new immigration policy. Both are, in essence, inflationary, so expecting prices to rise makes a lot of sense. However, today we got news that producer prices were actually down, so what is going on? Well, let's look into it! - 𝗧𝗵𝗲 𝗗𝗮𝘁𝗮 - First, let's look at the data released by the Labor Department. Quote: "The producer price index, which captures inflation in the supply chain before it hits consumers, showed that wholesale inflation decelerated in August after advancing 0.7% in July. Wholesale services prices fell 0.2% from July on smaller profit margins at retailers and wholesalers, which might be a sign that those companies are absorbing the cost of President Donald Trump's sweeping taxes (tariffs) on imports." Overall, this is a somewhat unusual situation. Any well-respected economist would tell you that tariffs are inflationary. So at the moment, some of the fans of protectionism are claiming that Trump's tariffs actually won't harm the economy and are a good idea. But, to be honest, all of this is a bit more complicated than most would expect. Tariffs affect the economy as a whole and can lead to many different outcomes, and none of them are good. It is possible that many producers are not passing on tariffs, resulting in lower profit rates, or that foreign suppliers are discounting goods to maintain their market share. These are all claims made by Bill Adams, chief economist at Comerica Bank, and he could be right. However, with imports coming into the US remaining relatively steady after a massive spike and the labor market falling apart at a record pace, I think there could be another answer. Tariffs are inherently inflationary, while a slowdown in consumer spending due to higher prices is overall deflationary and harms economic growth. Now, if these two forces are about as strong, then we could see a perfect balance of supply and demand. Due to this, prices won't really rise or fall, but we do see lower or even negative economic growth. Profits will go down, margins will be worse, and unemployment will increase due to sluggish job growth and more layoffs. And we could be facing this scenario due to the tariffs and a much stricter immigration policy. - 𝗛𝗼𝘄𝗲𝘃𝗲𝗿... - Currently, it is too early to determine exactly what is happening; the economy is in disarray due to Trump's approach to politics. During his first presidency, we already saw this, but now he kicked it up a notch. So really, we need more data, because this dip in the producer price index could be a one-off; we have seen this quite often in the past, after all. However when it comes to the labor market there is clearly something wrong, for months now US job growth has been abysmal. Currently, inflation data, the producer price index, the labor market, and the outcomes of the current trade war are crucial for understanding whether the economy is performing well or not. So I will keep an eye on this, especially now that the most recent inflation print of 2.9% showed prices escalating again. Sources: finance.yahoo.com/news/u-producer-prices-unexpectedly-fell-124246648.html tradingeconomics.com/united-states/inflation-cpi tradingeconomics.com/united-states/imports tradingeconomics.com/united-states/producer-prices www.bea.gov/news/2025/us-international-trade-goods-and-services-july-2025#:~:text=With%20this%20release%2C%20second%2Dquarter,billion%20in%20the%20second%20quarter. tradingeconomics.com/united-states/exports finance.yahoo.com/personal-finance/banking/article/august-cpi-breakdown-consumers-feel-the-heat-of-accelerating-inflation-181129388.html If you liked this short post, FOLLOW my profile for more; if you agree with my investing philosophy, COPY my portfolio to join the ride! My Performance speaks for itself! ✅ +40% in 2024! ✅ Well-diversified portfolio! ✅ Long-term mindset! ✅ Low-risk score of only 4! Be sure to copy my portfolio! $GOLD $SPX500 $BTC $ETH $NSDQ100

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