Chinese Inflation Shipped

Macro Perspectives: Thu 10 Jun 2021

We have a big inflation report out today, and it's going to be hot (again). Yet, the market that should be reflecting the increasingly dangerous inflation outlook, Treasuries, have been moving higher, not lower.

That means interest rates have been moving lower, not higher.

As you can see in the chart below, 10-year yields closed below 1.50% for the first time since March 3rd...

Just in case we think the interest market is perhaps telling us that the hotter inflation data should start petering out, let's take a look at what's happening in China, where the products are made that we will be buying in the many months ahead…

Tuesday night, China reported the hottest prices for producers in 13 years...

And when the producers get those final products on a ship, you can see in the next chart, what has happened to freight container prices coming from China...

So, if you are lucky enough to get your product on a ship, you're paying nearly three times as much to get it to the US, compared to a year ago. To be sure, these prices, along with rising wages, will be passed through to consumers.