UBS on yesterday’s PPI data:
Whilst Bernanke took centre stage, macro data showed the
increasing problems we face. Producer prices rose by 9.2% y/y, the highest by
quite a margin since July 1981 when U.S. interest rates were still at 15.5%.
the same stage retail sales growth, which is not adjusted for price changes,
slowed to just 0.1%. This stagflation mix will I believe get worse as high
energy prices turn whole economic models such as the free trade doctrine of
comparative advantage, on its head, reversing globalisation.
–UBS Macro Derivatives Sales Daily–
Wednesday 16/7/08 London
To reiterate, the last time Producer prices were this high, the Fed had rates up in the double digits — not at 2% . . .