Author: Kevin Drum

Yesterday was CPI day, which means today is PPI day. Here is the producer price index through March:

Since last June, headline PPI has risen at an annualized rate of 0.7%. Core PPI has risen at an annualized rate of 2.6%.

Both the headline and core PPI rates are considerably lower than the CPI rates. Since lower producer prices eventually feed through to consumer prices, it means there's still downward pressure on CPI. In addition, the shelter index will begin to drop later this year. Unless there's another energy spike, CPI is likely to drop to 2-3% by the end of summer.

UPDATE: I am forgetful these days. Here's the PPI for the dreaded services sector, down almost to zero.

Welp, the Fed has changed its mind:

Fed staff projected that the economy would enter a "mild recession" later this year....That's a shift from recent months, where staff just expected slower growth and "some softening" in the labor market — conditions that would allow the economy to dodge a recession.

They've finally put the whole delusion of a "soft landing" behind them. Give it another couple of months and maybe they'll admit that "mild recession" is just wishful thinking too. I wonder if that will finally be enough to get them to quit raising rates?

As for me, I continue to believe in what used to be conventional wisdom:

• The Fed started tightening in May 2022, when it first announced an interest hike bigger than a quarter point.
• The steep increases since then have not yet had a significant effect.
• The best evidence suggests it takes about a year for interest rate increases to hit the broader economy.
• This means we should expect the economy to run into a pretty big headwind in a couple of months.

I hope I'm wrong. But this sure seems like the way things have worked in the past, and I can't think of any reason this time will be different. We had a non-monetary bout of inflation that would have mostly gone away on its own, but the Fed treated it like a normal bout of monetary inflation. We are about to pay the price for this mistake.

I was diddling around this afternoon and came across this:

Business formation dipped at the very beginning of the pandemic but then spiked enormously in the summer of 2020. It went up and down a bit and then stabilized in 2021 at a noticeably higher rate than before the pandemic.

I'm not sure what accounts for this, but it got me curious about business formation on an industry basis. Here it is:

Utilities!?! Business formation in the utilities sector is currently more than double its rate before the pandemic. I really don't know what accounts for that.

Note that this is just new business formation. It doesn't include businesses that have closed, so it's not a measure of the net number of businesses. Still, it's kind of interesting.

Boaters out on the Grand Canal at the palace of Versailles.

Yesterday the judge in the Dominion lawsuit against Fox News, Eric Davis, learned something new:

Fox Corp. had asserted since Dominion filed its lawsuit in 2021 that Rupert Murdoch had no official role at Fox News....But on Easter Sunday, Fox disclosed to Dominion’s attorneys that Murdoch also is “executive chair” at Fox News.

Davis was clearly disturbed by the disclosure, coming on the eve of the trial. “My problem is that it has been represented to me more than once that he is not an officer,” the judge said....In response, Carter said he believed Murdoch’s title at Fox News was only “honorific.”

There is no such thing as "honorific." Legally, Murdoch is either an officer of Fox News or he isn't. He is.

Today, it got worse:

The judge overseeing Dominion Voting Systems’ lawsuit against Fox News said on Wednesday that he was imposing a sanction on the network and would very likely start an investigation into whether Fox’s legal team had withheld evidence, scolding the lawyers for not being “straightforward” with him.

The rebuke came after lawyers for Dominion, which is suing for defamation, revealed a number of instances in which Fox’s lawyers had not turned over evidence in a timely manner.

....He also said he would very likely appoint a special master to investigate Fox’s handling of discovery of documents and the question of whether Fox had inappropriately withheld details about Rupert Murdoch’s role as a corporate officer of Fox News.

I am thrilled that this lawsuit is turning into such a shitshow for Fox. It's exactly what they deserve.

*I am paraphrasing.

The Washington Post reports that consumers are still feeling battered by inflation:

Although inflation has slowly cooled from last summer’s highs, price pressures continue to feel like an uphill battle for consumers, politicians and policymakers alike. Many say recent strides have been too spotty to offer much relief, even as annual price growth has slowed from 9.1 percent to 5 percent.

It's actually better than that. Since June of last year the price level has risen 2.4%. That's a 3.2% annual rate. For the average person, this is indistinguishable from the "normal" rate of 2%.

So why does inflation still seem so troublesome? The answer is simple: that 3.2% figure is a combination of 7.2% for food and 2.6% for everything else. This increase in the supermarket, where shoppers are really paying attention, overwhelms everything else.

Added to that is our preoccupation with whatever individual food happens to be in shortest supply. Right now the big story is eggs, and news outlets are still running stories about the egg crisis even though the price of eggs has fallen for the past two months:

Still, the price of eggs is up by a third over the past year, and that has a bigger impact on most people's perceptions than a blog post telling them that overall inflation has been running at 3.2% for the past nine months.

I forgot to include supercore inflation in this morning's post. Here is CPI excluding food, energy, and shelter:

BLS released its March inflation numbers today, and they ticked down nicely from February:

Core inflation is still stubbornly high, which BLS attributes largely to increases in the shelter index. This is fairly artificial, and should decrease substantially once their measure of shelter inflation catches up to the current day.

(And in case you care, year-over-year inflation was 5.0% for the headline rate and 5.6% for the core rate.)

Blue slips are back in the news after the Biden administration thought it had a consensus candidate for a judgeship in Mississippi, only for it to be blocked at the last minute by a Republican senator. Let's listen in:

Republicans abandoned the blue-slip process for appeals court judges after gaining control of the Senate in 2015, allowing them to rapidly confirm scores of Donald J. Trump’s judicial nominees over Democratic objections. But the practice was retained for district court judges, and Mr. Durbin has been reluctant to jettison it, fearing Republicans would retaliate by bringing the confirmation process to a standstill.

“You always have to ask, ‘What would they do in response?’” Mr. Durbin said in an interview. “There are an infinite array of possibilities to slow down the United States Senate. Anyone can stop the train for any reason.”

Let me get this straight. Republicans abandoned blue slips completely for appellate judges when Trump was president and then proceeded to fill the circuit courts with right-wing picks. Nothing happened.

Today, Dick Durbin is reluctant to abandon blue slips for one district court judgeship because Republicans might retaliate: "There are an infinite array of possibilities to slow down the United States Senate," he explains.

Out of that infinite array, did Democrats use any of them to slow down the tsunami of Trump judges? Why not? Does this array even exist? And why do Democrats even care about slowing down the Senate since Republicans control the House and no business is going to be transacted anyway?

Republicans have been playing games with blue slips for decades and Democrats have never retaliated, apparently in hopes that Republicans will someday come to their senses and start behaving decently. What will it take to finally disabuse them of that notion?