Third Quarter Is Quarter of Risk From Tariffs: Morgan Stanley's Mike Wilson

US producer prices stagnated, primarily driven by declining services costs, while Economist Slok notably observed a 'lift off' in US goods inflation. Concurrently, Goldman Sachs highlighted oil inventory builds as the most significant factor influencing crude prices.

Analysis

The latest economic data presents a divergent inflation picture, complicating the macroeconomic outlook. US producer prices have stagnated, a headline figure driven primarily by a notable decline in services costs. However, this disinflationary signal from the services sector is directly contrasted by Economist Slok's observation of a 'lift off' in goods inflation, suggesting inflationary pressures are re-emerging in a different part of the economy. This split between goods and services inflation introduces significant uncertainty. Separately, in the energy markets, Goldman Sachs has identified oil inventory builds as the single most critical variable for crude prices, indicating that supply-side data will be a key determinant of future price direction and volatility.

Key Decisions for Investors

• Monitor upcoming inflation reports closely, as the divergence between declining services costs and rising goods inflation creates uncertainty for the Federal Reserve's policy trajectory.
• Consider the opposing inflation trends when evaluating sector-specific exposure; disinflation in services may benefit certain consumer-facing industries, while rising goods inflation could compress margins for manufacturers and retailers.
• For those with exposure to the energy sector, pay heightened attention to weekly oil inventory data, as Goldman Sachs' commentary suggests these reports will be a primary catalyst for crude price movements.