{"id":1436,"date":"2019-01-11T10:08:55","date_gmt":"2019-01-11T15:08:55","guid":{"rendered":"http:\/\/naroffeconomics.com\/?p=1436"},"modified":"2019-01-11T10:08:57","modified_gmt":"2019-01-11T15:08:57","slug":"december-consumer-prices-and-real-earnings","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1436","title":{"rendered":"December Consumer Prices and Real Earnings"},"content":{"rendered":"\n


<\/strong><\/p>\n\n\n\n

KEY DATA:<\/strong> CPI: -0.1%; Excluding\nEnergy: +0.2%; Gasoline: -7.4%\/ Inflation-Adjusted Hourly Earnings: +0.5%; Over\nYear: 1.1%<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u00e2\u20ac\u0153Inflation continues at a pace that should\nmake the Fed happy, but accelerating wage gains remain a threat.\u00e2\u20ac\u009d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  While parts of the government\u00e2\u20ac\u2122s data mill are\nshut down, the Bureau of Labor Statistics keeps churning some key numbers.  Consumer Prices declined in December, led,\nnot surprisingly by a sharp drop in energy costs. <\/em><\/strong> Excluding energy, consumer costs rose at a\nmoderate pace.  <\/em><\/strong>Over the year, the\ncore index, which excludes food and energy, increased at a 2.2% rate, slightly\nabove the Fed\u00e2\u20ac\u2122s 2% target.  Looking at\nthe non-energy components, inflation pressures are building in a number of\nareas.  Food costs, which had jumped in\n2017 but stabilized last year, look like they could be back on the rise.<\/em><\/strong>  The drive to eat healthier is becoming much\nmore expensive as fish and seafood costs are jumping.  My biggest concern is that my bellowed cake\nand cupcake prices are skyrocketing. \nTime to diet again.  Eating\nout is also becoming much more expensive, as is the cost of shelter.<\/em><\/strong>  And the flattening in medical costs may be\ncoming to an end.  So, while\nconsumer inflation is not accelerating significantly, there seem to be\nunderlying trends that indicate we could see the rate rise as we go forward.<\/em><\/strong><\/p>\n\n\n\n

The tight labor market continues to push up wages,\nwhich rose sharply in December<\/em><\/strong>.  They jumped\nby over 3% from the December 2017 level. \nWith overall consumer costs declining, inflation-adjusted (real)\nearnings improved quite solidly.  Over\nthe year, they broke back over the 1% level for the first time in over two\nyears. <\/em><\/strong> Since energy prices are\nrebounding, that may not hold.  Still,\nwhen spending power is rising by only 1% and with the savings rate trending\ndownward, it is hard to see how spending can hold up.  <\/p>\n\n\n\n

MARKETS AND\nFED POLICY IMPLICATIONS:<\/strong>  Chairman\nPowell baffles me.<\/em><\/strong>  He talks\nabout the economy as if it is in good shape, but then indicates that continuing\nthe rate normalization process may or may not continue.  Growth is still good and inflation is at or\nabove the Fed\u00e2\u20ac\u2122s target.  So, what is his\nproblem? <\/em><\/strong> You can say that the\nsharp drop in the equity markets is a sign of impending doom, or you can argue\nas I have that the decline simply corrects for some irrational exuberance.  If the markets are signaling a recession\nahead, then slowing or ending the normalization process makes sense.  If the volatility was more emotional as well\nas a normal correction from excessively optimistic expectations, then it\ndoesn\u00e2\u20ac\u2122t make sense to slow the rate hikes.<\/em><\/strong>  Since the Fed\u00e2\u20ac\u2122s own estimates are for at\nabout 2.3% growth this year, which is above the members\u00e2\u20ac\u2122 estimate of trend\ngrowth, what is the problem?  As I said,\nI just don\u00e2\u20ac\u2122t get it.  The next\nFOMC meeting where a hike might occur is not until March 19-20.   Unless the government shut down and the\ntrade war seriously harm growth, I don\u00e2\u20ac\u2122t see why an increase shouldn\u00e2\u20ac\u2122t happen\nat that meeting, if the Fed really is basing its decisions on economic data.<\/em><\/strong>     <\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: CPI: -0.1%; Excluding Energy: +0.2%; Gasoline: -7.4%\/ Inflation-Adjusted Hourly Earnings: +0.5%; Over Year: 1.1% IN A NUTSHELL:  \u00e2\u20ac\u0153Inflation continues at a pace that should make the Fed happy, but accelerating wage gains remain a threat.\u00e2\u20ac\u009d WHAT IT MEANS:  While parts of the government\u00e2\u20ac\u2122s data mill are shut down, the Bureau of Labor Statistics … Continue reading December Consumer Prices and Real Earnings<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1436","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1436","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1436"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1436\/revisions"}],"predecessor-version":[{"id":1437,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1436\/revisions\/1437"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1436"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1436"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1436"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}