Deal or no deal?
The Guardian has details other media don’t:
“Iran hasn’t reached a final conclusion about the agreement,” Foreign Ministry spokesman Esmail Baghaei said, according to state media. “We will announce it when we reach a conclusion.”
The Iranian foreign ministry spokesperson, Esmail Baghaei, said large parts of the text under negotiation had been finalised but Iran would not compromise on its red lines
Tasnim, the semi-official Iranian news agency, wrote that “until a potential understanding is announced by Iran, any news from Trump on this matter should be dismissed”.
A diplomat briefed on the talks said that the deal had largely been agreed to several weeks ago but that there was still a “50% chance” that it will collapse. “There are a lot of potential spoilers,” the diplomat said.
Financial markets believe that Trump’s 39th announcement (per CNN) of an imminent deal since March 23 will be his last.
A deal now would be timely. Read below.
BTW, in today’s FT:
A regime insider said the war had fundamentally reinforced the leadership’s belief that military power, rather than diplomacy, remains the ultimate guarantor of security.
“More than ever before, we have concluded that building trust is a meaningless strategy,” he said.
“Only strength can serve as a deterrent, not arguments in international forums about our rights. The enemy must be convinced of our capabilities and must never be allowed to miscalculate again. Iran is demonstrating in practice that it is prepared to go further than its adversaries.”
CONSUMER WATCH
From the Bank of America Institute:
Consumer spending remains resilient, with little sign that higher gas prices have dented momentum yet. In May, Bank of America total aggregated credit and debit card spending per household increased 5.1% year-over-year – the largest gain in nearly four years – following the 4.8% YoY rise in April.
While higher YoY gasoline spending is contributing to this strength, total spending excluding gas still rose 3.9% YoY in May, only a small easing from 4.0% YoY in April.
Seasonally-adjusted (SA) spending per household rose 0.1% month-over-month (MoM) in May, following a 0.5% increase in April. This follows gains of 0.6% and 0.9% MoM in the prior two months.
If you stopped reading after BofA’s first 4 words, or after the +5.1% YoY growth rate, you are missing the reality.
- May’s YoY data is against the worst month last year:
- The seasonally adjusted monthly trend was weakening since February but crashed in May at +0.1% in nominal dollars. This is cum-gas. BofA does not provide the MoM ex-gas data but it is clearly down in May and almost flat since February, again in nominal terms.
- My proxy for retail sales inflation (0.35x CPI-Durables + 0.65x CPI-Nondurables) is up 0.9% MoM in May after +1.1% in April and 2.1% in May. Applied to BofA SA data, we get real sales down -0.8% in May after -0.6% in April. Last 2 months annualized: –8.7%.
- On a YoY basis, retail inflation was +6.4% in May after +5.3% in April and +4.0% in March. Real sales are thus down -1.3% YoY in May after -0.5% in April.
BofA’s narrative adds: “Beneath the remarkably robust overall spending picture, are there any signs of weakness in consumer behavior? Largely, the answer appears to be “no.””
Remarkable indeed!
The bank adds that “higher-income households saw stronger growth of 5.4% YoY”.
With my inflation proxy, that is down 1.0% YoY. So even the wealthiest are retrenching in real terms.
After the May 14 release of the official retail sales data, I wrote that real sales were down 0.5% MoM in March and down 0.6% in April, in line with BofA’s card data using my inflation proxy.
On May 25, Walmart released its Q1’26 sales ending in April (all YoY):
- Comp sales ex fuel: +4.1% vs +4.5% in Q4’25
- Transactions ex fuel: +3.0% vs +1.6% in Q4’25
- Average ticket ex fuel: +1.1% vs +2.8% in Q4’25
The US largest retailer’s sales were slowing with average ticket up only 1.1% when management said that “like-for-like inflation was +4.4% ex-fuel in Q1”. When WMT released its Q1’25 average ticket growth of 2.8% it said that inflation was “effectively flat or slightly deflationary”.
Notice the huge change in real growth rates? The large decline in real sales?
Per BofA data, the weakness got worse in May.
These are retail sales, essentially goods consumption. Hopefully, services will sustain total consumer spending. Note also that CPI inflation can differ from PCE inflation (different weights, substitutions).
But the recent trends in real demand are not good and certainly not in the mainstream narratives.
Obviously, lower oil prices post a possible deal with Iran would help and provide hope that there has not been too much damage already.
Yesterday, the Atlanta Fed reported that its wage growth tracker was +3.5% in May, down from +4.3% one year ago.
Meanwhile, CPI inflation accelerated from +2.4% to +4.2%.
US Producer Prices Rise at Fastest Pace Since November 2022
The producer price index increased 6.5% from a year earlier, the most since November 2022, according to Bureau of Labor Statistics data out Thursday. It advanced 1.1% from April.
A core measure of prices that excludes food and energy increased 4.9% from a year earlier. (…)
“Most of the increases were directly tied to higher costs for fuels and natural gas, but goods prices outside of energy jumped in May as supply chain stress bleeds into other materials and components,” Ben Ayers, a senior economist at Nationwide, said in a note.
“With fuel prices fading so far in June, this may be the peak for producer price inflation but the aftereffects for consumer prices are likely to linger over the remainder of 2026,” he said. (…)
Food prices, meanwhile, rose 0.6%, the most in three months. Grocery costs have been moving higher thanks to a combination of factors including bad weather, the war and tariffs. Fertilizer materials costs were up 28% from a year earlier.
A measure of inflation pressures earlier in the production process — the cost of processed goods for intermediate demand excluding food and energy — rose from April by the most since 2021. Plastic resins and materials, a key input for a vast array of consumer goods, surged 14% on the month.
Several components of the PPI are also of particular interest because they feed into the the Fed’s preferred inflation gauge, the personal consumption expenditures price index. (…)
“May’s PPI details suggest upstream cost pressures are building. Goods categories are growing much slower than industrial categories, meaning costs haven’t yet reached the consumer — potentially pointing to continued price sensitivity by shoppers. Elsewhere, higher transportation costs, driven by fuel and capacity constraints, are rising, as are inputs into production processes.”
The report also provided updates on two other emerging sources of inflation pressures: data centers and defense production. The prices of electronic components and accessories fell from April for the first time in more than a year, but were still up nearly 27% from May 2025.
At the same time, prices associated with government purchases for defense were up almost 15% from a year earlier. Census Bureau figures published last month showed defense-related capital goods orders surged in April to the second-highest level on record, with economists citing replenishment of munitions destroyed in the Iran war as one possible driver.
Also:
PPI goods’ final demand surged 2.8% MoM, the largest one-month advance on record, lifting the YoY rate to 10.4%, the highest since October 2022.
PPI services’ final demand inflation remained high at 4.9% YoY.
PPI ex-food, energy, and trade services was +0.8% MoM, +5.1% YoY.
Goldman Sachs: “The PPI components relevant for PCE were slightly stronger than our expectations. Based on details in the CPI and PPI reports, we estimate that the core PCE price index rose 0.31% in May (vs. our expectation of 0.28% before the PPI release), corresponding to a year-over-year rate of +3.38%.”
Many pundits rejoiced seeing that Wednesday’s CPI-Goods was somewhat muted. This Bloomberg piece explains the lags:
A gauge of wholesale prices of plastic resins and materials jumped by 14% to an almost four-year high last month as the Iran war choked off supplies of key components. For producers like Shawn Gross, whose Corry, Pennsylvania-based company supplies molded parts used in automotive and heating systems, the squeeze is reaching a breaking point.
“We are going to need to pursue the price increases with our customers more aggressively,” said Gross, chief executive officer of Viking Plastics. “What the world needs to understand is there is going to be a real impact that is not even yet felt.”
Plastics are everywhere — from snack packaging to refrigerator parts — and about 98% of it is made of fossil fuels. One reason why US consumers haven’t felt the full impact of the war-driven price increases in petrochemicals like polyethylene that are used in everyday products is because costs move slowly through supply chains.
Gross, whose suppliers include Dow Inc. and clients include Ford Motor Co., is at the center of it all. Prices for some polyethylene inputs used by Viking have risen more than 40% this year, he said.
Producers like Dow have already pushed through price hikes to businesses that convert plastic resins into packaging and other products. As those costs are passed from one company to the next, higher prices ultimately make their way to consumers.
“You need to get the dollars and cents out of the customer, and that’s going to trickle into the price of vehicles being higher,” Gross said. “It’s going to be every industry.” (…)
Some buyers are receiving only about 70% of the resin they need, he said, while lead times for certain materials have stretched from one to three months. Fresh-food packaging — for products like produce, bakery goods, meat and cheese — will get hit first.
If shortages persist, shoppers could begin seeing gaps on shelves by August and September, he said.
“We are anticipating further inflation in a number of non-food categories as higher resin costs start to flow into cost-of-goods,” Chief Financial Officer Gary Millerchip said during the retailer’s quarterly earnings call. “Particularly if oil prices remain at elevated levels, it’s likely to see some increases in items that have sort of plastic components or polyester or cotton because of the impact of higher resin costs.”
Inflation you say?
- Amazon 1997 IPO: 2.9x revenues.
- Google 2004 IPO: 8.5x revenues.
- Facebook (now Meta) 2012: 17.9x revenues
- SpaceX 2026 IPO: 93.6x revenues.
Trump administration delays opening of Gordie Howe bridge on eve of ribbon cutting
The opening of the Gordie Howe International Bridge between Windsor, Ont., and Detroit was postponed indefinitely at the behest of the Trump administration, one U.S. and one Canadian industry source said, just a day before the long-delayed span’s planned Friday ribbon cutting.
The U.S. industry source said the American government slammed the brakes on the opening because Commerce Secretary Howard Lutnick and Pete Hoekstra, Washington’s ambassador to Canada, want to first negotiate a deal to help Michigan’s Moroun family, the billionaire owners of the existing Ambassador Bridge, mitigate their losses from competition by the new, publicly owned bridge.
The Globe and Mail agreed not to name the sources because they were not authorized to disclose the information.
The Canadian federal government agreed to pay the full $6.4-billion price tag for the structure in 2012 after the Michigan legislature refused to chip in under lobbying from the Morouns. Ottawa will be repaid with toll revenue from the bridge, which is jointly owned by Canada and Michigan.
Earlier this year, U.S. President Donald Trump threatened to stop the bridge from opening and said Canada should give the U.S. government “at least one half” of the asset. Mr. Trump’s threat came shortly after Matthew Moroun, chairman of the company that owns the Ambassador Bridge, donated US$1-million to a pro-Trump campaign group and reportedly met with Mr. Lutnick.
The Gordie Howe is meant to speed traffic over the busy international crossing and trade route, providing direct access between highways – avoiding the current route through Windsor streets on the approach to the Ambassador, which opened in 1929 – and offering more extensive cargo screening facilities.
The U.S. industry source said the opening of the Gordie Howe was scheduled after Michigan Governor Gretchen Whitmer spoke with Susie Wiles, Mr. Trump’s chief of staff, and believed she had the White House’s sign-off. Mr. Lutnick, who learned of the planned ribbon-cutting on Monday night while attending a New York Knicks game with Mr. Trump at Madison Square Garden, was caught off-guard by the news, the source said.
The source, who was briefed by the Trump administration, said someone from the administration contacted Canadian Intergovernmental Affairs Minister Dominic LeBlanc to demand the bridge not open.
Mr. Lutnick and Mr. Hoekstra have been working on a deal with the Morouns to ensure the Ambassador doesn’t lose all of its toll revenue to the Gordie Howe, the person said, and they want to conclude the agreement before the rival bridge opens. Some potential ways to do this would be to fix tolls at particular levels to avoid Gordie Howe outcompeting the Ambassador, or divert specific types of traffic – like Nexus travellers, for instance – to the Ambassador, the source said. (…)
Ms. Wright, who was en route to El Paso, Tex., has driven trucks over the Ambassador Bridge, sometimes up to three times a week, for 26 years. She called the 97-year-old span a “piece of junk.” The duty free road is littered with pot holes that damage her vehicle. Most weeks she spends hours in delays. (…)
Inderjeet Singh, a trucker taking a brief break at a park bench outside the Esso, said he waited over eight hours at the Ambassador Bridge on Wednesday. There was a problem with the load, and the lineup for inspections was backed up.
Mr. Singh also wants to pay cheaper rates to cross into Detroit. The Gordie Howe has set its tolls at about half those of the Ambassador. (…)
Mr. Trump first took an interest in the Gordie Howe in February, complaining on his Truth Social platform that Canada owns the bridge and will collect its toll revenue, even though Ottawa paid to build the span and the ownership is shared with Michigan.
The New York Times, citing unnamed government officials, reported that Mr. Moroun had lobbied Mr. Lutnick just hours before Mr. Trump’s post. Campaign finance disclosures show that Mr. Moroun gave US$1-million to the MAGA Inc. political action committee the previous month. (…)
How often do we read White House spoke persons tell us that
- “he is an unrelenting warrior fighting exclusively for the forgotten men and women of America against entrenched political interests”
- “the first duty of the American government is to protect American citizens”
- “he is fighting to ensure the federal system serves the public rather than self-interested elites”
- “a president who refuses to back down to special interest groups or congressional obstruction”
1 thought on “YOUR DAILY EDGE: 12 June 2026: Watch the US Consumer!”
Iran’s government can’t pay the regular army without oil exports. It should be aware of the implications of an order by a Roman emperor: “Pay the army and to Hell with the rest”.
The regular army must be intensely jealous of the business empire of the Revolutionary Guard military. A military coup by unpaid army officers is a distinct possibility.