That ties well to a similar finding inside the University of Michigan’s consumer data, discussed above. Inside that survey, consumers are routinely asked how much they expect prices to rise in the next 12 months. Their response this time around was a whopping 4.9%, up from 4.3% last month and the third time in as many months that inflation expectations jumped by more than half a percentage point — a record losing streak for that particular line-item. Meanwhile, consumers now expect prices to rise 3.9% per year over the next 5 years, the highest level for that estimate since 1993.

With all those inflation fears swirling around in the dark, you might have expected the market to stub its toe on last week’s Consumer Price Index (CPI) and Producer Price Index (PPI) data. Fortunately, though, both releases were surprisingly tame: The CPI was one-tenth of a percent below expectations on both the headline and the core, while PPI was even more benign (at 0.0% on the headline and 0.2% for core).^5,6

It probably goes without saying that the main reason that markets have to contend with any inflation angst in the first place is tariffs, and if you look hard enough you can start to imagine that you’re seeing evidence of a real, honest-to-goodness impact peeking through the fog. For example, two notable product categories within Thursday’s PPI where gains were more pronounced than the headline were fruits (which were up 4%), and vegetables (up 6%), That’s tangible evidence of price growth in two categories that might be among the first to see some heat if tariff proposals stick. In CPI, apparel and major appliances (as well as goods prices more broadly) also seem to loosely fit that definition.

It's worth remembering that analyzing inflation data at the individual product-by-product level is fraught with pitfalls (does anyone truly believe, for example, that egg prices will continue to rise at the 50%-plus rate reported in Thursday’s PPI release indefinitely? Peter Cottontail would be insolvent before Easter...). Still, there’s growing concern — and now perhaps, some actual evidence — that the various tariff regimes being proposed are beginning to create real feedback loops that the economy will have to contend with.

For the time being the argument remains academic. At a minimum, any tilting at inflationary windmills (imaginary or otherwise) inside last week’s CPI and PPI reports that we might be tempted to indulge in has yet to translate into a meaningful shift in expectations for this week’s meeting of the Federal Reserve’s (the Fed) rate-setting committee. And that’s important, because Fed policy will likely return to greater focus if tariff talk endures, inflation worsens, or growth stalls.

It seems almost a no-brainer that progress along at least one of those three paths is likely to develop. If it’s inflation and tariffs, expect growing calls for the Fed to remain on the sidelines for even longer; if it’s collapsing economic growth, expect the opposite. If it’s both, well, that might be the biggest laundry basket of all lurking in the hallway for all of us to stub our collective toes on.

What to watch this week

This week’s economic calendar will be dominated by Wednesday’s interest rate decision from the Fed. The outcome of the meeting is only slightly less certain than it was a month ago, with futures prices still suggesting virtually zero chance of a cut this week and approximately a one-in-four chance that the Fed will do anything other than sit on its hands in May. That means the press conference and Q&A session will probably be the only place to expect any Fed-related fireworks this week.

Monday’s retail sales data for February probably deserves second billing. Economists will be watching closely for signs that the U.S. consumer is pulling back even further than January’s big decline already suggested they are. Of particular interest to the “recession in near” crowd will be so-called control group sales, a category that feeds directly into the Bureau of Economic Analysis’s estimate of gross domestic product. You might remember that a surprisingly large January trade deficit caused first-quarter GDP growth estimates to absolutely tank two weeks ago. Monday’s release will hint at whether the U.S. consumer stands willing and able to bail the U.S. economy out of a hole. Again.

We’ll also get our first two regional Fed manufacturing reports for March, Empire State Manufacturing Index on Monday and the Federal Reserve Bank of Philadelphia’s Manufacturing Business Outlook on Thursday. In addition to the inflation-relevant prices paid/prices received indexes inside both releases, economists will be looking for evidence that any tariff pre-buying that might have artificially inflated new order activity so far this year has started to wane. Similar analysis will take place following Tuesday’s industrial production and capacity utilization report (although that release can be significantly impacted by things like weather in the short-term, making it somewhat less reliable as an input).

On a standalone basis, Thursday’s Index of Leading Economic Indicators (LEI) from The Conference Board will be worth a look. As reported a few weeks ago, the LEI and its underlying data finally sounded the “all-clear” last month after a long period spent warning that a slowdown was approaching. Recent weakening in stocks, consumer spending and souring business and consumer confidence seem likely to pressure the models back toward levels that might indicate trouble. As always, I’ll be looking at the yawning gap between leading and coincident indicators and scratching my head to understand it.

Housing data will also factor in this week’s economic mosaic. Tuesday’s housing starts and permits seem likely to provide deeper perspective on the weather this month than they might offer on housing inventories, but it is what it is. Look for a more nuanced (and weatherproofed) view from Monday’s homebuilder sentiment index from the National Association of Homebuilders. Of particular interest in that report will be things like how much the recent decline in mortgage rates has improved the home-buying public’s mood and the extent to which builders are still having to rely on incentives and discounts to move homes. For a purely transactional view, have a look at Thursday’s existing home sales release. With spring selling season just getting underway, it's easy to imagine the long-moribund resale market as facing an inflection point in one direction or the other.

Finally, Friday brings the colorfully-named “quadruple witching day” — that quirk of the calendar that occasionally finds futures and options on both single-issue and index-based assets expire all at once. In the past, witching days carried a lot of potential for distortion as traders rolled into (or out of) old positions and into (or out of) new ones. These days those impacts seem somewhat more muted, but when markets are becoming increasing volatile — as they are today — such financial engineering can have an exaggerated impact on things like total volume and the direction of trading. But as long as they don’t create panic (or euphoria), it’s probably reasonable to assume any impacts to be short-lived. Still, it’s worth remembering that Friday’s activity might feel a little exaggerated for reasons that have very little fundamental meaning.