Paul Donovan discusses the significant confusion and incoherence in US administration statements regarding the Gulf war and its economic consequences, particularly concerning oil and tariffs. He highlights the surprising resilience of US consumer spending despite rising costs, while expressing skepticism about the reliability of certain economic surveys due to issues like partisan bias and low response rates.
Summarized by Podsumo
The US administration exhibited conflicting statements regarding Iran's actions in the Strait of Hormuz and President Trump's contradictory economic stances on oil exports versus calls for emergency rate cuts.
The Iranian government consistently pledges to close the Strait of Hormuz and talks of $200 oil, creating ongoing geopolitical uncertainty.
US consumer spending shows resilience, absorbing higher tariffs and a 29% rise in gasoline prices, partly facilitated by a 1.5 percentage point decline in the household savings rate.
President Trump is threatening new tariffs on goods from 60 countries, including the EU, China, and the UK, which could immediately impact the 'affordability crisis' through shifts in public perceptions.
Skepticism is raised about the usefulness of key economic surveys like the March Michigan Consumer Sentiment Survey (due to extreme partisan bias) and the Jolt survey (due to a shockingly low response rate) for accurately gauging inflation perceptions and labor market health.
"Confusion perhaps tipping over into incoherence."
"Uncertainty about US policy probably exceeds that of uncertainty about Iranian policy at this stage."
"For the most part, what people say about inflation and what they do when shopping are very different things."