Deflation averted for now as consumer and producer prices recover in July, signal strong third quarter:
http://dailytorch.com/2020/08/deflation-averted-for-now-as-consumer-and-producer-prices-recover-in-july-signal-strong-third-quarter/
The Producer Price Index and Consumer Price Index have both recovered dramatically in the month of July, each growing 0.6 percent amid increased demand for oil and gasoline, according to the Bureau of Labor Statistics (BLS). About one-third of the producer price jump and one-quarter of the consumer price increase, BLS says, comes from increased gasoline consumption and higher fuel prices as millions of Americans get back to work and are hitting the roads. In the past three months alone, more than 10 million jobs have been restored as states are slowly reopening. Oil, which dropped below zero in April, has now safely recovered to over $42 a barrel and crude oil inventories are finally slowly clearing out after reaching record highs earlier this year. After the second quarter set a record on the downside as the Gross Domestic Product contracted 32.9 percent, the rebound both in producer prices and in consumer prices, which also grew 0.6 percent in June, coupled with the jobs gains, promises that the third quarter will set a record on the upside. Further fueling the economic recovery, the U.S. dollar relative to foreign trade partner currencies has finally corrected off of record highs after financial institutions and central banks had flooded into U.S. treasuries and dollar-denominated assets amid the flight to safety this spring and early summer. All of which bodes extremely well for the third quarter that began in July. Deflation is averted — for now as daily Covid cases have stabilized. But will the economy just start contracting again later in the fall when virus cases begin rising again?
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