Michael Luke: Milford Asset Management expert on what the new US inflation data means for the economy

US inflation held steady in July, with consumer prices rising 2.7 percent - depite the ongoing concerns around import tariffs.

Figures are better than economists feared, but underlying pressures make the Federal Reserve's next move unclear.

Milford Asset Management's Michael Luke explained further.

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Episode Transcript

Speaker 1 (00:00):
Heather duper c La. It's all on. The nurses have
just announced they're going to strike as well. They're going
to be striking on the second and the fourth of
September and it will involve fourteen thousand nurses. Don't tell
me this isn't coordinated. Do not tell me this isn't coordinated.
Sixteen pas six. Michael, look, Milford Acid Management is with
us A Michael hey Ever, I guess we've got the

(00:20):
US inflation data for July out last night. Good news
or bad news for the economy over there.

Speaker 2 (00:26):
Well, we would call that inflation data mixed, but it
was better than some had fared given tariffs, and we
did see the US shear market runly on the back
of it last night. Now, look at the numbers. Overall
inflation stayed steady at two point seven percent. However, core inflation,
which strips out woldtail items like energy, now that was
high and expected up zero point three percent in July

(00:48):
and up three point one percent compared to last year.
So while reported inflation data was steady, underlying inflation pressures
in the US are growing, with businesses done to pass
on tariff flated costs, and we have to remember a
large proportion of those tariffs only came into effect this month,
so there's still is a risk that core inflation continues

(01:09):
to build throughout the year in the US as businesses
increase prices on tariff goods.

Speaker 1 (01:16):
So with inflation looking I suppose we could say relatively tame,
are we going to start to see cuts in the
rates there?

Speaker 2 (01:23):
Well? After the data, markets are now seeing a ninety
five percent chance of a FED rate cut next month,
up from eighty five percent the day before, So investors
think it's pretty certain that they'll cut rates next month.
With July inflation relatively steady and a weekening job market,
so there are now two to three FED rate cuts
expected this year, which requires tariffs to not have a

(01:46):
large impact on inflation or for the FED to cut anyway.

Speaker 1 (01:49):
Now we've got the reporting season kicking off here tomorrow.
What should we be watching?

Speaker 2 (01:55):
Well, while the US earning season is winding down here
in New Zealand, we're just about to stay art when
New Zealand companies are going to report their results for
the past six months as well as given outlook on
the future, and generally we expect results are going to
be pretty soft given the tough economic environment. However, the
real focus for investors will be on whether company outlooks

(02:15):
show signs of improvement or not. Now first up tomorrow
as Vista Group. They sell cinema software all around the world,
and we think they could post a bit of a
mixed result if the cinema is still under a bit
of pressure and a weaker US dollar impacting their revenue.
By the main focus for them will all be about
whether they've got strong customer demand or not for their

(02:36):
new cloud products.

Speaker 1 (02:37):
Yeah, brilliant and which earnings of the market going to
be watching.

Speaker 2 (02:41):
Well next week starts with a two milk on Monday,
which is always an interesting result with their share price
known to move sharply up or down. Now they sell
infant formula into China, which can be a difficult market
to follow and always creates a bit of uncertainty going
to results. And then the other one i'd call out
is just Bark, which will report next Wednesday. Now that

(03:03):
will be an interesting result after them selling their data
center business yesterday, and I think the real focus for
investors will be on whether their earnings and their core
business have stabilized or not, as well as what they
do with the dividend and whether they cuss it and
by how much good stuff.

Speaker 1 (03:20):
Michael, thanks for running us through at Michael Luke Milford
Asset Management.

Speaker 2 (03:23):
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