Author: Philip J Palin

Strong August Retail

Posted on by Philip J Palin

US retail sales increased in August, even more than expected. See chart below. Bloomberg initially characterized the outcomes with, “consumers are still spending even as tariffs boost the cost of some goods, sentiment remains subdued and the labor market shows signs of faltering. Though wage growth has cooled, many workers’ pay gains continue to outpace inflation, and others, particularly the wealthy, are benefiting from a stock market rally.” This sort of demand velocity should be sufficient to continue recent high volume flows.

Flows Fluctuate

Posted on by Philip J Palin

First half 2025 US import volumes were choppy but higher overall (see green line on the chart below through end of July). Since a record-setting March, inbound flows have slowed but remain at historically high levels. According to the global shipping analyst Descartes, “In August 2025, U.S. container imports reached 2,519,722 twenty-foot equivalent units (TEUs)—the second-highest monthly total this year. Volumes were 3.9% below July but 1.6% above August 2024.”

The first half surge has been reasonably explained as importers attempting to build inventory before increased tariff rates hit hardest. A second half trough in imports is predicted — and may have started. Descartes observes that in August, “China-origin imports eased to 869,523 TEUs, down 5.8% from July and 10.8% below August 2024.” Seven out of the top ten US ports experienced July to August declines in container volumes unloaded, with an overall national slowdown of just over four percent month to month.

Prices being paid for imports have increased. But so far prices have lagged tariff-related cost increases. According to the Yale Budget Lab as of early September the average effective tariff rate had reached 17.4 percent. But average end-user prices for these imports have increased at something closer to four percent (here). Given the size of these flows, rapidly shifting action/reaction, and policy volatility precise measures should not be expected. But the direction of travel is clear enough and the longer average tariff rates remain this high the more likely price increases will accelerate. In some cases — examples include coffee and some car parts — prices are already up by double digits (more and more and more and more).

While long-duration increased costs will eventually be followed by increased prices, the full impact on demand is difficult to anticipate. For price sensitive consumers spending will obviously be further constrained. But almost half of US consumption is generated by the wealthiest ten percent (here and here). How will those with the most discretionary income shift their purchasing patterns?

In the chart below the red line is the import price index since the Great Recession. Between 2011 and 2014 significant price increases did not significantly reduce demand. But most of this price increase was for fuel-related imports, then even more essential than today for meaningful participation in earning or spending. The post-pandemic price increase for imports shown was much more broad-based, but accompanied by temporary increases in incomes and savings. Will a broad-based increase in 2025-2026 import prices — without significant increases in discretionary incomes — suppress purchases of imports and overall US consumption?

The demand response depends on how high the price goes on which products for how long. For a quarter-century I have been an enthusiastic fan of Starbucks green tea Frappuccinos: “non-fat, no whip, no classic, ten scoops of matcha” (instead of the normal five). I considered the large size (venti) an expensive indulgence at $5, but I still bought it about once a week, sometimes more. Recently Starbucks began charging a dollar for each extra scoop (here and here). I have exercised my discretion. I no longer buy it. I have not found a replacement product. My credit score recently dropped one point because of a sustained decline in spending (not just at Starbucks). How much is matcha a metaphor for other discretionary consumption expenses? We are about to find out.

In my experience high volume, high velocity supply chains are resilient to most disruptions and even considerable destruction, except for sustained destruction of demand — whatever the cause.

Tariffs: Three Microeconomic Analogies

Posted on by Philip J Palin

Several recent tariff-related conversations have ended-up mostly focused on presumptive motivations for radical shifts in US tariff policy. Supply chain executives want to discern the why behind the what to better frame their own tariff-related decisions. If they can better understand where these tariffs are trying to take us, these executives hope they can develop more resilient supply chain strategies.

I have offered previous explanations of the still emergent tariff policies (here and here and here). But in recent weeks I found supply chain executives much more receptive to a microeconomic framing of these policies.

While President Trump’s approach to tariffs is informed and executed by many others, it is his personal understanding, vision, and enthusiasms that deliver the most reliable “motivational framework” for this administration’s tariff policy. The President’s particular experience in real estate development, branding, and measuring success have significant influence how much higher baseline tariffs are being conceived and deployed. Three sources of microeconomic leverage are key: 1) product differentiation, 2) premium pricing, and 3) cash flow. Here’s the gist of each:

Product Differentiation: President Trump’s father, Fred, was a successful housing developer in Brooklyn, Queens, Staten Island, Norfolk (Virginia), and elsewhere. Fred’s company constructed, sold, and rented thousands of homes and apartments subsidized by the Federal Housing Administration. Late in the Depression a Brooklyn newspaper called Fred Trump, “the Henry Ford of the home building industry,” developing mass market products at mass market pricing. Over time Fred Trump owned and operated sufficient low and middle income housing and related commercial properties to generate many millions in cash flow. Donald Trump perceived that even better profit margins and more cash flow could be generated serving the aspirations of higher income consumers with real estate that reflected those aspirations. While the father continued to operate in the outer boroughs, his son focused on developing upscale hotels, residences, and offices in Manhattan and diverse formats worldwide. In Midas Touch (2011), Mr. Trump wrote, “building a brand may be more important than building a business.”

Premium Pricing: A luxury brand effectively tethered to the aspirations of a sufficient number of affluent consumers can command profound pricing power. The average purchase price per square foot in Manhattan is roughly $1600, while in Staten Island the average is under $500. A prestige residence in the right Manhattan neighborhood can be priced at $4000 SF and much more. Why build Ford Model A’s when you can sell Pierce-Arrows? The investment costs may be double or triple, but the return on investment can be ten-times or better. In 2024 a $1 million initiation fee was charged for membership in the Mar-a-Lago Club. The Trump Organization has developed nineteen golf properties with similar business models.

Cash Flow: Positive cash flow is a fundamental measure of financial health for any person or enterprise. The more cash flow, the more opportunity for debt-financed growth , self-financed growth, and/or profit taking. In mid-August 2025 President Trump emphasized, “They found last month, as you saw, $25 billion of excess cash flow. They say, where did it come from? I said, I’ll tell you where it came from. It came from a place called tariffs…” (more and more).

In many ways President Trump views baseline tariffs as initiation fees for outsiders to “join” the US economy. (The reciprocal and sectoral tariffs involve additional motivations.) The United States is the ultimate high-end retail destination. US consumers have more and consistently spend more of their disposable income compared to any other large economy (here and here and here). For those with something to sell, the United States is a good place to operate. Charging this “non-resident membership fee” improves US government cash-flows — at a time when the US government’s debt load needs the extra cash. Mr. Trump also tends to view trade deficits as the macroeconomic equivalent of microeconomic negative cash flow. Adam Smith and David Ricardo would disagree. This worldview has nothing in common with what motivated the Bretton Woods system of international trade emerging from the second world war.

President Trump’s motivations for baseline tariffs are much more consistent with mercantilist worldviews of 16th Century Venetians or Queen Elizabeth I of the not-yet-United Kingdom or even of her successor King George III. This original mercantilism could never have nurtured the sort of economic growth experienced over the last two centuries. It is, however, possible — risky but not unreasonable — to deploy the comparative advantage of US consumption patterns in an effort to improve US government revenues and even reclaim some domestic manufacturing capacity and jobs. Pay the non-resident membership fee or buy a residence (i.e., build a US factory) to set up your sales table in this very rich bazaar. (President Trump is also inclined to use reciprocal tariffs as a means of sanctioning “members” that he perceives are behaving unclubbably; see India.)

Will this comparative advantage survive this sort of deployment? So far, higher-income US consumers are continuing to spend (here and here and here). Middle and lower income consumer spending has become more constrained, but not yet enough to tarnish the transactional glitter. Current comparative advantage in large part depends on continued spending by, at least, the top one-fifth of US households. The top quintile’s capacity and confidence to spend is not unrelated to the economic health of the remaining 80 percent. Staples inflation, the dollar’s exchange rate, wage increases, and job stability will all have an influence on that “excess cash flow” celebrated by the President . The 2025 end of the year holiday season will be a significant test of how well US consumer spending persists. Will the US economy’s “product differentiation” remain sufficiently exceptional to justify premium pricing and maximize positive cashflow? If so, supply chain executives should treat this as their strategic context for most of 2026 and well-beyond. If not, I have no predictions (yet) for what is most likely to come next.

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On August 29 the US Court of Appeals for the Federal Circuit found that current baseline tariffs and some reciprocal tariffs are illegal (here and here and here and here). If this decision is not overturned by the Supreme Court, current policy and processes are likely to become even more complicated. But I perceive the President’s existing motivations will persist as long as he views tariff revenue as positive cashflow. As a result, other methods will be found to charge similar and related “membership fees”.

Steady Demand

Posted on by Philip J Palin

This morning the Bureau of Economic Analysis reported that real (inflation adjusted) Personal Consumption Expenditures increased 0.3 percent in July. Please see chart below.

According to the BEA, “Personal income increased $112.3 billion (0.4 percent at a monthly rate) in July, according to estimates released today by the U.S. Bureau of Economic Analysis. Disposable personal income (DPI)—personal income less personal current taxes—increased $93.9 billion (0.4 percent) and personal consumption expenditures (PCE) increased $108.9 billion (0.5 percent) [nominal not real]. Personal outlays—the sum of PCE, personal interest payments, and personal current transfer payments—increased $110.9 billion in July. Personal saving was $985.6 billion in July and the personal saving rate—personal saving as a percentage of disposable personal income—was 4.4 percent.”

Bloomberg’s coverage opened with this framing, “US consumer spending rose in July by the most in four months, indicating resilient demand in the face of stubborn inflation…. The advance was boosted by income growth and driven by goods.”

Yesterday (Thursday) morning the BEA released a regularly scheduled revision of its second quarter US GDP estimate, adjusting the rate of growth to 3.3 percent compared to the originally estimated 3.0 percent. Second quarter business investment was, in particular, much stronger than the flash report, up 5.7 percent in the revision versus 1.9 percent in the original.

Also on Thursday the Department of Labor reported a declining number of both initial and continuing nationwide jobless claims. According to the Department’s summary, “In the week ending August 23, the advance figure for seasonally adjusted initial claims was 229,000, a decrease of 5,000 from the previous week’s revised level. The previous week’s level was revised down by 1,000 from 235,000 to 234,000. The 4-week moving average was 228,500, an increase of 2,500 from the previous week’s revised average. The previous week’s average was revised down by 250 from 226,250 to 226,000.”

“The unemployment rate has been relatively stable because layoffs are low,” Nancy Vanden Houten, lead U.S. economist at Oxford Economics told Reuters. “Going forward, slower labor force growth will also hold down the unemployment rate, masking some of the potential fissures in the labor market.”

A significant number of Americans have money to spend and are spending it. The estimated inflation rate on goods declined in July (and was even slightly deflationary). Services inflation is considerably higher. But, so far, slowly increasing demand for services has hit new all time highs every month since April.

Huge flows of stuff are moving. But shipment numbers are down. Imports are widely thought to have peaked early and are now expected to deteriorate. Freight flow is likely to tread water — and occasionally sink a bit below the surface — for the next several months. Transpacific flows will be especially slow. Tariff-related troubles will continue to complicate both flow velocities and costs (here and here).

In a high volume, high velocity contemporary demand and supply network, such as that serving US, the sort of steady pull demonstrated by the chart below will usually be fulfilled with increasing efficiency at reduced capacity and, often, with increased concentration of capacity. The result is robust — but marginally less resilient — capacity. When and where capacity concentrations continue to function, network adaptability should be significant. When and where capacity concentrations begin to fail, the risk of catastrophic network failure is also significant.

Systemic Continuity

Posted on by Philip J Palin

In September 2015 I published an online primer for Supply Chain Resilience. In August 2025 I reviewed and — very slightly — updated this decade-old content. No corrections were needed. No oversights required gap-filling. For my purposes, the principles and patterns set out then still apply today. My revisions consisted entirely of more recent data that confirmed trajectories projected ten years before.

I am pleased. I am also surprised.

For dynamic complex adaptive systems — such as supply chains — ten years is a very long time. Given the shocks and stresses of these particular ten years, I would not have been surprised by some systemic shifts prompted by, let’s say, a murderous pandemic that suddenly and significantly altered the volume and velocity of global product and financial flows.

Instead, networks of demand and supply mostly responded to shock and stress by doubling-down on core characteristics (such as modularity, scalability, clustering, concentration, and betweenness). When and where system operators made decisions coherent with these characteristics, the network almost always responded constructively — even creatively (one example).

Where and when flows failed to effectively adapt there was almost always a pattern of human decision-making (or fear and non-decisions) inconsistent with principles of network fitness (here’s an example and here’s one more). As usual, we have met the enemy and it is us. In Gaza fear and non-action by many suppliers has been an understandable if still consequential choice. Until recently too many executives were waiting for so-called “tariff clarity” to make a choice for them. “The best way to predict the future is to create it.“

This is encouraging. The supply chain results of the last decade demonstrate the potential for realistic, evidence-based principles informing perceptions, choices, and actions.

This is discouraging. The last ten years also demonstrate a recurring human tendency to respond to shock and stress with delusions of control rather than creative collaboration (with reality and each other). There are too often patterns of human choice making bad situations even worse.

There are many different ways to articulate principles of network behavior ranging from poetry (De rerum natura) to management narratives (The Power of Resilience) to calculus and statistical probability (Network Science).

Specific to Supply Chain Resilience, here I will offer:

  • Large-scale, high-volume, high velocity networks emerge over-time with recognizable recurring tendencies.
  • One such tendency is increasingly concentrated capacity.
  • Bad things happen. Catastrophic potential increases as network capacities become more concentrated.
  • Human choice can mitigate over-concentration.
  • Human choice can constructively respond to consequences of over-concentration.
  • Human choice can exacerbate the consequences of over-concentration.
  • Effective mitigation and response depend on collaborative, strategic, and operational relationships among high proportion supply chain stakeholders (please see Rules,Games, and Common-Pool Resources or almost anything inspired by Elinor Ostrom).
  • Research, mapping, and planning related to Supply Chain Resilience can contribute to mitigation and response when these activities are understood primarily as outreach functions to facilitate collaborative, strategic, and operational relationships. Research, mapping, and planning not deeply connected to relationship-building will be Dead-On-Arrival.
  • Transactional networks of stakeholders (such as business-to-business suppliers) can inform and effectuate Supply Chain Resilience choices. Self-interest, mutual and otherwise, is often a meaningful factor in relationship building.
  • Sustained and successful collaboration around coherent Supply Chain Resilience strategies and operations depends on shared confidence in the intention, competence, and likely behavior of a critical mass of stakeholders involved.

These are classic principles regarding reality — far beyond supply chains. Centuries of evidence demonstrates that adoption and application of these principles can be quite uneven. Happy collaborations are all alike, every unhappy collaboration is unhappy in its own way (with apologies to Tolstoy).

Happy collaborations are the outcome of consistent, mission-achieving, mindful, risk-informed, other-aware mutual investments made day after day. Approaching the close of her Nobel Prize Lecture, Elinor Ostrom argued, “… a core goal of public policy should be to facilitate the development of institutions that bring out the best in humans. We need to ask how diverse polycentric institutions help or hinder the innovativeness, learning, adapting, trustworthiness, levels of cooperation of participants, and the achievement of more effective, equitable, and sustainable outcomes at multiple scales.”

Robust but softening demand

Posted on by Philip J Palin

According to the Bureau of Economic Analysis, “Personal income decreased $109.6 billion (0.4 percent at a monthly rate) in May… Disposable personal income (DPI)—personal income less personal current taxes—decreased $125.0 billion (0.6 percent) and personal consumption expenditures (PCE) decreased $29.3 billion (0.1 percent). Personal outlays—the sum of PCE, personal interest payments, and personal current transfer payments—decreased $27.6 billion in May. Personal saving was $1.01 trillion in May and the personal saving rate—personal saving as a percentage of disposable personal income—was 4.5 percent.” Compared to April, reductions in spending were especially pronounced for purchase of vehicles (-49.3%), gasoline (19.8%), and eating out (10.6%).

Peter Cardillo, Chief Market Economist with Spartan Capital Securities told Reuters, “Personal income is disappointing. We were looking for an increase of about 0.3%, so now it’s negative. We were looking for a weak personal spending number, but again negative. These two indicators raise the possibility that the economy has slowed in the second quarter and may be headed for negative economic activity.” Headline inflation Year-Over-Year was slightly higher than — 2.3 percent versus 2.2 percent in April — but still fairly tame. Reuters called it “benign”.

Since December demand has softened. I will even suggest it is flattening. Demand remains, however, quite robust. It is too soon for me to call a sustained downward turn (consider the slopes in this decade long picture of real PCE).

Before the pandemic expenditures on Food-At-Home rather tightly tracked wage/salary patterns. During the pandemic (especially 2020-2021) this correlation broke down as much less was spent on Food-Away-From-Home and many other spending categories. But real — inflation-adjusted — spending on groceries has continued well-above pre-pandemic patterns even as constraints on other spending categories have dissipated and food inflation prompted widespread complaints. Please see chart below.

For me this divergence between the wage/salary slope and the FAH expenditure slope reflects a consumer still predisposed — and able — to spend on personal preferences. Sustained reconvergence of these slopes will reflect a potentially significant economic phase-transition. If both slopes experience sustained declines, that will signal meaningful and wide-spread economic stress. But that’s not what we see yet. The red line will be updated on July 15 through the end of the second quarter.

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July Update: Well, the two slopes have not yet converged, but second quarter outcomes have further narrowed the gap. This narrowing is, however, due mostly to wage increases rather than declining consumer expenditures. Please see chart below. Still, future direction is worth watching even if not — yet — a flashing red light and barely even a yellow warning sign (corner ahead). Contemporary supply networks respond with considerable speed to shifts in demand signals — for both good and ill.

Consistent Spending Habits?

Posted on by Philip J Palin

Compared to March 2025, during the month of April US consumers earned a bit more, spent a bit more, saved more than in recent months, and spent less on a wide array of durable goods. Despite still robust demand (see first chart below) — and uncertainties related to supply — the year-over-year PCE price index was up only 2.1 percent overall and 2.5 percent excluding food and energy.

Several observers interpreted these results as related to tariff turmoil. For example, Reuters reported, “Spending was supported by outlays on services, mostly housing and utilities, healthcare as well as restaurants, hotels and motel stays. But goods spending softened amid cutbacks on purchases of motor vehicles and parts, clothing and footwear as well as recreational goods and vehicles. Pre-emptive buying of goods ahead of Trump’s sweeping import tariffs helped to push spending higher in the prior month.”

According to the Bureau of Economic Analysis in April 2017 US consumers expended $11,752.7 billion on goods and services. Adjusting for inflation and calculated in constant 2017 dollars, in April 2025 US consumers expended $16,173.4 billion on goods and services. (See table below.) This is just about one-fifth more (again, inflation adjusted).

Given this significant increase in spending, pre-pandemic versus post-pandemic, and tariff-related uncertainties, I would not have been surprised to see a shift in the mix of goods and services being consumed. Instead, the available data demonstrates remarkable continuity. In the table below the US consumer’s shopping cart for durable goods, non-durable goods, and services is reported and compares 2017 versus 2025. Very different moments in time, very similar spending habits.

Deep Pockets

Posted on by Philip J Palin

According to the US Census Bureau (Department of Commerce), “Advance estimates of U.S. retail and food services sales for April 2025, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $724.1 billion, up 0.1 percent from the previous month, and up 5.2 percent from April 2024.”

Bloomberg reported on some of the perceived behavioral shifts, “Growth in US retail sales decelerated notably in April, reflecting consumers pulled back spending on cars, sporting goods and other categories of imported goods amid concerns about rising prices from tariffs.” Many media reports reflect this concern regarding tariff-related price increases. It is a plausible claim. Personally I am not as certain regarding the mix of consumer motivations.

It is interesting that spending at food service and drinking places was up 7.8 percent from April 2024. Apparently, many folks were not averse to increased discretionary spending. The red line on the first chart below reflects continued strong grocery store purchases. The very slight decline from the March all-time-high might mostly reflect the increased number of meals eaten out.

April retail inventory numbers (see second chart below) do not suggest significant consumer-facing stockpiling. Even the opposite could be reasonably discerned — at least given the ratio of inventories to sales. Inventories may be fatter upstream. But at the consumer level, April sales were stable and inventories declined.

One usually credible observer headlined, “Retail Sales Muted in April as Front-Loading Fatigue Sets-In.” Entirely possible, but consumer satiation could also be hypothesized. The US is now four years into consumer spending climbing higher. Even without the early post-pandemic bounce, this spending boom has been remarkable. In April 2022 US consumers spent just a bit over 660,000 million dollars. Last month we spent just over 724,000 million dollars (not inflation-adjusted). Since 2022 I have not increased my personal spending by one-tenth (plus). Have you?

Last weekend the United States and China decided on a 90-day pull-back from mutual no-flow tariff rates.

On Tuesday Doug McMillon, chairman and CEO of Walmart explained, “Our short and longer-term opportunities are clear. The immediate challenge is obviously navigating the impact of tariffs here in the US… I want to thank President Trump and Secretary Bessent for the progress made recently. We’re hopeful that it leads to a longer-term agreement between the US and China that would result in even lower tariffs. We will do our best to keep our prices as low as possible. But given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins.” A bit later the CFO added, “There are certain items, certain categories of merchandise that we’re dependent upon to import from other countries, and prices of those things are likely going to go up, and that’s not good for consumers.” Otherwise Walmart was reporting a stellar first quarter.

I perceive a US economy and related consumer behavior with remarkably robust spending habits. Enormous value is being generated. Enormous value is being offered. Enormous value is being exchanged. Somewhere between ten and twenty percent tariff-rates the flow of value will shudder hard and on some product categories basically stop. The higher the percentage, the quicker and more complete the stop. The more stops, the more collateral damage to everyone along the flow network. It is good that the maximum rates have been lowered for the next 90 days. June is not far away. We can see the future from here. The details may still be a bit obscure. New details may yet emerge. But the lay of the land is clear enough (more).

Demand Shock or Supply Shock?

Posted on by Philip J Palin

Wednesday morning on Bloomberg Surveillance (see video link below), Frances Donald, chief economist with the Royal Bank of Canada, highlighted the potential risk of “… dysfunctions in the supply chains that leads to more problematic developments this year.” She emphasized, “… when you start to mess with supply and demand dynamics within supply chains, when you have ships that stop coming to shore, it is not a one month fix. Sometimes it can take months or years to recalibrate supply and demand.” In response to one question, Ms. Donald offered that there will be supply shortages in the United States based on what has happened over the last month — made better or worse by what is still ahead.

I spent the last ten days in Europe. I expected to be asked to explain or even justify US policy.  Not really.  The Europeans with whom I met understand what is happening and why.  They are amazed at the self-harm being done, but are not in denial regarding what has happened — thus far.  I am still processing what I heard last week.  But here’s a “concise” take-away that I have circulated with some of my discussion partners.

Demand will still decide.  Products will be produced (or not) and flow (or not) depending on expressions of effectual demand.  Where demand can return costs-plus, there will still be flow.  When and where demand cannot return that plus, there will not be flow. Ten percent higher tariff-related costs will not, alone, shift flows much. Twenty-percent?  Probably depends on the product.  Forty-percent?  Well, we (Europeans) will sell much more to other places and people… and probably much less overall.  Americans have been very robust consumers.  We will miss them.  

So far, I have certainly received more nuanced characterizations. But no one fundamentally disagrees with this reductionist summary.

I have not yet heard back from one German business leader who asked all of us around the table, “Are we in denial? Have we decisively shifted into an autarkic global reality, but are emotionally unable to read the writing on the wall?  Or are we carefully watching foolish posturing that still has a chance of being substantively reversed and we want to reward — and rewarded by –the reversal?  Will we know by the end of this year?” 

No one volunteered an answer to these questions.  Everyone I could see pursed their lips.

US Demand Persists in March

Posted on by Philip J Palin

According to the Bureau of Economic Analysis, “Personal income increased $116.8 billion (0.5 percent at a monthly rate) in March… Disposable personal income (DPI)—personal income less personal current taxes—increased $102.0 billion (0.5 percent) and personal consumption expenditures (PCE) increased $134.5 billion (0.7 percent). Personal outlays—the sum of PCE, personal interest payments, and personal current transfer payments—increased $136.6 billion in March. Personal saving was $872.3 billion in March and the personal saving rate—personal saving as a percentage of disposable personal income—was 3.9 percent.”

Bloomberg summarized, “US consumer spending jumped in March while a key measure of inflation decelerated…” US consumers spent more on almost every major category of goods and services, with a big surge in automobile purchases (see first chart below). Suspicion also surged that the principal tail-wind for this increased consumption is widespread expectation of tariff-related price increases. Freight volumes and values were well off January bottoms and consistent with same-month results over the last decade (with the dramatic exception of March 2020). April flash-results have not — yet — been in free-fall (here and here and here). Bloomberg called the March outcomes “a welcome reprieve before tariffs are expected to broadly drive up prices.”

Below I display a couple of long-tailed charts. The blue line tracks total inflation-adjusted Personal Consumption Expenditures. The red line tracks real PCE for Food-at-Home. There are many indicators (here and here) suggesting consumer confidence is low, moving lower, and expectations are for choppy or worse economic conditions ahead. The surge in automobile purchases can be interpreted as reflecting these expectations. My personal assessment of what’s ahead — if current tariff policies persist — shares this pessimism. But despite all the turmoil, uncertainty, and very real challenges, through the end of March robust demand continued to pull robust flows of goods (and services).