PPI Review - Tariffs & Disinflation
Demand, substitution, currency and level effects lead to disinflation
This morning’s September producer price index unexpectedly fell relative to August for both the headline and core. The weakness in producer prices, led by a 1% month on month drop in the trade series, is consistent with a view we have held since the early days of the Trump trade war. Tariffs are disinflationary.
Tariffs cause a transitory level shift h…