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Producer Price Index and Fruits and Vegetables

The jump in the PPI from an expected 0.3% rise to an actual 0.9% is about as bad news as the President of the United States could get.   Unfortunately, it's getting a lot worse, the month on month increase in price to consumers of fruits and vegetables is nearly 39% in July...

The first figure was long expected, but the scale of the rise surprised, which means that producers are now starting to pass on to their clients the tariff costs.   That was always going to happen and it is now.

The price of fruits and vegetables is the natural consequence of two factors, both political; the tariffs on imported fruits and vegetables from Mexico (35%) and Kenya (25%) and Brazil (50%), the hit there is instantaneous (note: Brazil and Kenya are the largest exporters of coffee to the US).   These avocados that used to cost $2.00 are now $2,60.   In addition, the raids by ICE have increased the cost of domestic fruits and vegetables...because many farmers are unable to find the workforce (aka ICE raids on farms in California and Florida).    Finally, let's not forget the cost of what Americans call French fries…90% of potatoes used for French fries came from Canada.  

Never mind the Bureau of labour Statistics, the numbers out of private and public sources are all bad for the US economy.  it gets worse, US exports have collapsed.   Consumers (the vast majority of exported US goods are finished goods) are boycotting American made goods, starting with Tesla but the list is long.  It gets worse, because once the suppliers find new sources of goods, shifting back to US manufactured goods can take years.

When the off-licences see that the sale of US wines and liquor is down, they simply order less, and don't replace the stock.   It's not only Canadians and Mexicans (aKa USA's largest export markets for finished goods) its everywhere.  It was always going to take a while for the impact of the American President's action to be baked into the cake.   

Note:  Expect new rounds of tariffs in early september…Trump will want to "improve the balance of trade" by further restricting imports.  


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