INDICATOR: April Import and Export Prices and Small Business Optimism
KEY DATA: Imports: +0.2%; Nonfuel: -0.1%; Exports: +0.2%; Farm: -1.5%/ NFIB: +1.7 points
IN A NUTSHELL: “Inflation is tame and small businesses are exuberant, so why should the Fed do anything?”
WHAT IT MEANS: Yes, right now it is all about the trade war – and it should be. To quote Edwin Starr’s famous lyrics: “War, huh, good god, What is it good for, Absolutely nothing…” But hey, when you are the president, you can do pretty much what you want, especially when Congress doesn’t object. At the same time, we have the economy and right now, there really are few imbalances. On the inflation front, there is not much. Import prices rose solidly in April, but only because energy costs continued to surge. Excluding energy, prices were actually down. Indeed, in the last twelve months, nonfuel import prices fell seven times and rose by more than 0.1% only once. Over the year, they were off nearly one percent. So much for price pressures from imports. Outside of energy, the only other major sector where prices are increasing is in food. Non-petroleum industrial supplies and materials, capital goods, vehicles and consumer goods costs are declining. On the export side, the farmers, who will be bashed once again by retaliatory tariffs, are already suffering from declining prices.
Meanwhile, small businesses remain on a high. The National Federation of Independent Businesses reported that confidence rose again in April with just about every segment improving. Firms are hiring and making plans to expand. If things are good at the small business level, it is hard to believe that the economy is anything but in solid shape.
MARKETS AND FED POLICY IMPLICATIONS: Fed Chair Powell doesn’t have to meet the press for another five weeks, which is good because the political pressures to cut rates is being ratcheted up while at the same time, inflation is stable and the economy continues to move ahead decently. Basically, there is little reason for the Fed to do anything and the assumption would normally be that they would stand pat. But this is not a normal world where economics is the driving force for monetary or fiscal policy. First we had a tax cut when the economy was already in good shape and now we have calls for a rate cut when the economy is also in good shape. I can understand the tax cut: Politicians have attention spans that exist until their next election, which usually is not very long. But Fed members are not supposed to look toward the next election. For the Fed members, I want to proffer a quote from Thomas Paine, The Crisis: “THESE are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman. …”
Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm.
© 2025 Newsmax Finance. All rights reserved.