There was some concern over stagflation given last night’s US GDP data; QoQ GDP grew at 1.6%, which is a low number, below consensus, and you can eyeball that slowdown from the graph below.

But personal consumption was a lot stronger (2.5%) and “core”, focusing on domestic consumption and investment was at ~3%, which is between “fine and quite warm”.

PCE core price inflation over the quarter was hot, running at a 3.7% seasonally adjusted annualised rate.

So no stagflation here, in that growth is still strong, but definately still inflationary.

Ernie Tedeschi (former Chief Economic Advisor) tells us not to get too worked up over it, and that focusing on the YoY change makes the uplifted in the quarter look less alarming, as opposed to focusing on the 1QSAAR (which is the same as the above graph top right).

We get the monthly PCE deflator tomorrow, so there’ll be more to say, but essentially, both economic activity and inflation are too strong, and that’s pushing up bond yields everywhere.

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