The resurgence of trade tensions between the United States and China has far-reaching implications for the world economy. One major topic of debate is the impact of tariffs on US inflation, and whether the Trade War could alter the Fed’s chosen course of action. In this short research note, we explore the impact of the new round of tariffs on US PCE and PPI inflation. This is the second of a four-part focus on the US, China and Trade war implications.
Real retail sales grew 4.7% year-over-year in July worldwide, maintaining the strong momentum of recent months. Retail volumes exceeded equilibrium consumption (the level of spending consistent with stable inflation) by about 0.5%, continuing to exert upward pressure on consumer prices. As expected, global inflation accelerated in July (+3.4% annualized), and in most major economies is now approaching long-term inflation expectations.