June 11th, 2025 - Volume 11 (2025) Missive 91 (Wednesday)

• Durable goods prices contract despite tariffs

• Food prices volatile but softer

• Service prices too stable to be taken seriously

We’ll defer mostly to the charts today outside of the fact that we’ll mention that the overall rate of CPI for the month of May, 0.1 percent, was lower than consensus estimates of around 0.2 percent. More so, going into today’s release, that estimate was considered by many as ‘reaching’ as most had yet again expected tariffs to run afoul of all predictions. Outside of appliance prices, however, durable goods prices overall (this would be the subset that tariffs would have the most direct impact) showed little in the way of price pressure on the consumer level as they contracted 0.1 percent overall for the month of May. Volatility in consumer durable goods prices, of course, have had a tremendous impact on the behavior of Fed Funds of course these past few years and it appears that they are not done with the Fed yet; not by a long shot. Overall, today’s report highlights the fact that much larger economic fundamentals are at play in the U.S. economy, namely that of surplus productivity which is procuring extremely high levels of inventories and cheapening labor, both of which are significant tenants of deflation. The Fed will ultimately succumb to the pressure and drop rates by a large amount but not before long-term Treasury prices fall much further first, much further.

Durable goods prices contracted for the fourth time in six months despite the tariff angst.