Mounting pressure

Today we have important economic data being published in the US: The PCE and GDP growth for the first quarter. In terms of the GDP number, It may not reflect yet the impact of tariffs on the economy, but the stage is being set for a slowdown, which should help the PCE to show a lower reading, and allow the Fed to act. But it’s not hat simple; In the chart below you can see the slowdown in container volumes from China in the port of LA. It shows an expectation of almost 40% less volume than a year ago. That should slow the economy down, but it may create goods scarcity (supply shock) and that can push prices higher, so we can have not only an auto induced recession, but it can be paired with higher prices and become stagflation, which is a very uncomfortable place to be. The Fed is not expected to act when the FOMC meets next week, but they will be monitoring these data points, because by June they might be forced to do something if the fears of slowdown are confirmed. Pressure is mounting.

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