{"id":1499,"date":"2019-04-10T11:32:39","date_gmt":"2019-04-10T15:32:39","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1499"},"modified":"2019-04-10T11:32:39","modified_gmt":"2019-04-10T15:32:39","slug":"march-consumer-prices-and-inflation-adjusted-earnings","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1499","title":{"rendered":"March Consumer Prices and Inflation Adjusted Earnings"},"content":{"rendered":"\n

KEY DATA:<\/strong> CPI: +0.4%; Ex-Food and\nEnergy: 0.1%; Gasoline: +6.5%; Food: +0.3%\/ Real Earnings (Monthly): -0.3%;\nOver-Year: +1.3% <\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cFor the most part, inflation remains tame.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  About the only thing that could get the Fed to\nraise rates would be a jump in inflation and it doesn\u2019t look that is happening.  Over the year, consumer price increases are\nrunning pretty much at the Fed\u2019s target of 2%, no matter which measure you\nuse.  Yes, consumer prices popped in March,\nled by sharp rises in energy, food and rental costs.  However, excluding the more volatile food and\nenergy components, inflation only inched upward.<\/em><\/strong>  Looking forward, with growth moderating, it\nis not likely we will see continued large rises in energy.  However, the food and shelter components\ncould come in a little higher than the average. \nAnd there was some really bad news on the food front: Cake, cupcakes and\ncookie prices surged.  Back to the diet\ntime.  Offsetting, to some extent, the\npop in gasoline prices was a cratering in apparel expenses.  <\/em><\/strong>Clothing costs seem to be making a\nmove to be added to the volatile list, so don\u2019t expect this components\nmoderating impact on prices to continue. Thus, while inflation is not likely to\nsurge anytime soon, it could slowly accelerate.<\/em><\/strong>  <\/p>\n\n\n\n

One of the big surprises in the employment report\nwas the minimal gain in hourly wages. With overall inflation rising sharply,\nthat led to a large drop in real, or inflation-adjusted wages.<\/em><\/strong>  Over the year, real wage growth, which\nreflects household spending power, decelerated. \nThat said, this was the first time since July 2018 that we haven\u2019t seen\nreal wage gains accelerate, so I am not that worried.  Still, with purchasing power growing at a dismal\n1.3% pace, it is hard to generate lots of additional household demand. We need\nto get back to the nearly 2% rise we had in February if household spending is\nto expand at a decent rate.  <\/em><\/strong><\/p>\n\n\n\n

MARKETS AND\nFED POLICY IMPLICATIONS:<\/strong>  The\nFed effectively went on vacation and is likely to stay there for quite a few\nmore months.  <\/em><\/strong>Yes, the members\nwill gather, have some good meals, chat back and forth about what is going on\nwhat are the risks, but otherwise, don\u2019t expect them to decide to do anything.  <\/em><\/strong>Which raises the question: Is\nthe next move up or down?  The answer, of\ncourse, is it depends<\/em><\/strong>.  If\nyou are an optimist about a pick up in growth over the second half of the year,\nthen up seems possible, especially if inflation rises a touch.<\/em><\/strong>  By pointing to a rate hike in 2020, the\nmembers signaled that they really think the funds rate is still below neutral\nand they would like to get back there. \nOf course, they could just revise downward their estimates of neutral,\nas they have done, and declare victory, but I am not sure that is going to\nhappen.  Regardless, if we get back to 2.5% growth,\nthat might be enough for the Fed to get some guts and move the funds rate up a\nnotch. <\/em><\/strong> On the dreaded other hand, many\nsee the current slowdown as just a prelude to an even greater deceleration.\nThat would mean inflation would not increase and the Fed could be pressured to\nlower rates.<\/em><\/strong>  I\nstill think the Fed is looking for any excuse to get in one more rate hike, so\nI lean toward that happening.<\/em><\/strong>  As\nfor the markets, with inflation not an issue, the view that the Fed is on hold\nfor the rest of the year will likely continue to be the prevailing\nsentiment.  And as far as investors are\nconcerned, no Fed is a good Fed.     <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: CPI: +0.4%; Ex-Food and Energy: 0.1%; Gasoline: +6.5%; Food: +0.3%\/ Real Earnings (Monthly): -0.3%; Over-Year: +1.3% IN A NUTSHELL:  \u201cFor the most part, inflation remains tame.\u201d WHAT IT MEANS:  About the only thing that could get the Fed to raise rates would be a jump in inflation and it doesn\u2019t look that is … Continue reading March Consumer Prices and Inflation Adjusted 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-1499","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1499","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=1499"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1499\/revisions"}],"predecessor-version":[{"id":1500,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1499\/revisions\/1500"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1499"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1499"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1499"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}