High inflation comes back?

February 8-14, 2025

Big news. Inflation in the US has risen sharply. CPI (consumer inflation index) +0.5% per month. This is a repeat of the largest increase since June 2022, and price growth has accelerated in recent months:

US PPI (Industrial Inflation) Index (+3.5% per year) – 2-year high:

Data on the full volume of industrial goods also increased (let me remind you that when calculating the PPI index, final goods in the technological chain are used):

January’s figures (2.4%, 1.5% in December 2024) are approaching the PPI index. And this, as we have repeatedly noted, means that American producers can no longer compete with imports.

Macroeconomics. Norway’s GDP excluding offshore oil production is -0.4% per quarter. Not counting Covid, this is the worst dynamics

in 16 years:

UK business investment -3.2% quarterly, 8-year low excluding Covid dip:

Industrial production in Italy -7.1% per year, 23rd negative in a row and the weakest figure in 13 years (omitting the Covid dip):

Overall for the eurozone -2.0% per year, 20th minus in a row:

Dutch manufacturing output down 4.4% per year, 18th consecutive negative:

Norway PPI +18.1% y/y, highest in over 2 years:

It is not surprising that US Vice President Vance is teaching Western Europeans how to live at the traditional security conference in Munich. They are clearly no longer able to cope on their own.

In Japan, PPI (+4.2% per year) is at its highest in 20 months:

Chinese lending in January hits all-time high:

US retail sales of control goods (excluding cars, gasoline and building materials) -0.8% per month, excluding Covid fluctuations, this is a 6-year low:

Note that the overall drop in sales in the US was almost one percent in January compared to December (-0.9), with a forecast of around 0.

Main conclusions. Political events this week were clearly more striking than economic ones. Although the US inflation data would have been global hits at any other time, Trump’s call to Putin and subsequent events clearly outweighed even that.

But we must evaluate the economic component and we cannot help but note that the crisis in the US has made a new breakthrough. Trump demands investments, using the tariff instrument for this purpose, among other things. But this will only increase the already growing prices, and who and why will invest in a stagnating economy is not very clear.

No, of course, you can do what we call import substitution. But doing this in a country where half of demand is based on emissions, and the prices of imported goods are much lower than those produced domestically is a strong move. In general, as we have explained many times, the current economic model of the future of the American economy does not exist. But there is no model either.

And the prices of individual goods are growing faster than the official inflation indices. For example, gold, its price has confidently broken through $2900 per ounce:

Some will say, well, gold is gold! Well, okay, but here is natural gas, which had a 2-year peak in price:

In general, the weather is as predicted, and therefore we can confidently wish our readers a fun weekend after Valentine’s Day, and then a not too stressful work week!