It’s been a turbulent week in the financial world, full of twists and turns that have left many investors on edge. The Federal Reserve’s refusal to budge on interest rates has rattled the nerves of those hoping for a pivot. With higher-than-expected CPI and PPI numbers, the specter of inflation looms large. The sudden uptick in short-term metrics suggests that the disinflation narrative may have run its course. Lackluster retail sales and manufacturing figures paint a grim picture, but a hefty dose of Congressional spending might just be the lifeline we need to stave off a full-blown recession. On the horizon, concerns about the EV sector, the soaring prices of gold and Bitcoin, and troubling signs in commercial real estate are causing waves of unease in the market.

This week’s discussion will focus on the following key areas:

• The CPI spikes – Is inflation on the prowl?

• The PPI surges – A harbinger of inflation?

• Weak retail sales and faltering manufacturing – Recession fears?

• EV industry woes with Fisker spiraling down FSR. Insights from Unicus Research ahead of the curve.

• Record highs for gold and Bitcoin – A deeper dive into the implications.

• Declining warehouse jobs as a telltale sign for commercial real estate.

Commendations to DKI Intern, Andrew Brown, for his stellar contributions to the weekly insights. In just a short span, he’s proven to be a valuable asset, consistently delivering quality analytics that keep us informed and engaged.

Ready for another rollercoaster ride through the grim economic landscape? Let’s plunge into the details:

The latest data reveals that February’s Consumer Price Index (CPI) hit 3.2% year-over-year and 0.4% month-over-month. These figures, exceeding expectations and the previous month, indicate a notable rise. The Core CPI, omitting food and energy, stood at 3.8% annually and 0.4% monthly, well above the targeted 2%, driven primarily by surging services costs.

The narrative of disinflation appears to have lost steam for now.

Insight from DKI: The optimism surrounding disinflation has waned, signaling ongoing inflationary pressures. The Fed’s struggle to tame this persistent uptrend hints at a prolonged period of upward price movements, preparing us for the mantra of “higher for longer.”

Producer Price Index (PPI) figures for February showed a 1.6% rise year-over-year, a respectable outcome. However, the monthly uptick of 0.6% surpassed expectations at double the anticipated rate of 0.3%. While a 0.6% jump may seem modest, annualizing it unveils a worrying 7.4% trajectory. Similar to the CPI scenario, a stall in disinflation is observable here.

Spotting an abrupt acceleration at the finish line.

Insight from DKI: The PPI serves as a forward-looking gauge for inflation, hinting at potential future pricing shifts. The recent uptick in production costs could foreshadow impending consumer price hikes. This resurgence in producer prices contradicts earlier predictions of easing inflation, reinforcing the notion of “higher for longer.”

Retail sales, plagued by three negative months out of the last four, showcased a 0.6% increase over the previous month, surpassing the prior period’s decline but falling short of forecasts. Notably, the rebound in goods sales appears bolstered by escalating gas prices. In a disconcerting development, the Empire State Manufacturing Survey stumbled by 19 points into negative territory at -21, marking a considerable slowdown.

The final flourish owes much to the surge in gas costs.

Insight from DKI: The uptick in monthly inflation rates, spurred by higher consumer spending amid price hikes, alongside a slump in manufacturing indicators, flags potential stagflation risks. While excessive Congressional spending may artificially inflate GDP, staving off an immediate recession, the current economic data suggests a hesitant Fed unwilling to slash rates. Predictions for a June rate cut are already being tempered by market sentiments.

As highlighted by Unicus Research, EV manufacturer Fisker appears to be hurtling towards its second bankruptcy. A onetime Tesla competitor, Fisker, led by Henrik Fisker, who had a hand in designing the Model S, went public post-SPAC merger in October 2020. However, the company has grappled with software glitches, power failures, braking issues, and even self-opening hoods. With the National Highway Traffic Safety Administration probing concerns and consumers resorting to lawsuits over warranty support, the stock seems destined for a nosedive.

This narrative speaks for itself.

Insight from DKI: Unicus’ foresight on the challenges facing the EV industry underscores a broader issue. Despite pouring billions into eco-friendly initiatives, EV manufacturers are besieged by scalability woes, reliability challenges, cash flow woes, and infrastructure deficits. Of the 43 EV firms that went public between 2020 and 2022, five have already succumbed to bankruptcy or acquisition, with 18 facing imminent cash flow dilemmas.