{"id":1526,"date":"2019-05-10T09:56:46","date_gmt":"2019-05-10T13:56:46","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1526"},"modified":"2019-05-10T09:56:46","modified_gmt":"2019-05-10T13:56:46","slug":"april-consumer-prices-and-real-earnings-2","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1526","title":{"rendered":"April Consumer Prices and Real Earnings"},"content":{"rendered":"\n

KEY DATA:<\/strong> CPI: +0.3%; Ex-Food and\nEnergy: +0.1%; Food: -0.1%; Energy: +2.9%\/ Real Hourly Earnings: -0.1%;\nOver-Year: +1.2%<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cInflation is neither too hot nor too cold,\nbut for the Fed, it is hardly just right.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  Normally, news about inflation would take\ncenter stage and it should.  So let\u2019s\nkeep it there, even though there are now higher tariffs on Chinese\nimports.  Consumer prices rose solidly in\nApril, but much of the gain came from a surge in energy costs<\/em><\/strong>.  Meanwhile, food prices dipped.  Netting out those two volatile sectors,\nprices rose modestly for the third consecutive month.  Over the year, both headline and core prices\nwere up about two percent, so the Fed\u2019s target has been reached, at least for\nthis measure.  <\/em><\/strong>The details of the\nreport were a bit odd.  Clothing\nprices cratered again<\/em><\/strong>, but there was a change in the data collection\nprocess, so maybe we should also exclude clothing.  And there was a large drop in used vehicle\ncosts, but it is unclear why that is happening given all the vehicles coming\noff of lease.<\/em><\/strong>  Maybe we should\nexclude that too.  And while I am at\nit…  Okay, just kidding around.   Not\nreally.  There is a serious point in\nsaying we should exclude most components. \nThe Fed claims there are transient factors restraining inflation and we\nhave to determine which ones they are referring to and how much of an impact\nthey are having.  Right now, core<\/em><\/strong>\n\u2013 i.e., non-food and energy – prices rose at a less than two percent pace\nover the past three months.  How long\nwill the Fed wait to see if the impacts are indeed transient? <\/em><\/strong> The one factor that we can agree is not\ntransient is the continued surge in housing costs.  Those should remain high for an extended\nperiod.<\/p>\n\n\n\n

With prices up solidly but hourly and weekly\nearnings rising more slowly, real, or inflation-adjusted earnings fell in\nApril.  Consumer spending power has grown\nabout one percent over the year and that is hardly enough to support strong\nconsumption growth.  <\/em><\/strong><\/p>\n\n\n\n

MARKETS AND\nFED POLICY IMPLICATIONS:<\/strong>  Today\u2019s news\non inflation may disappear in the uproar about the raising of tariffs on\nChinese imports and the threats to broaden them to all Chinese products.  But consumer prices are something that need to\nbe watched.  It\u2019s not that inflation is\nlikely to soar; there is little reason to believe that.  It is that the tariffs are passed through to\nconsumers. <\/em><\/strong> The tariffs affect\nonly a small percentage of the economy, so the pass though of the costs should\nnot raise consumer prices significantly. \nBut the impacts don\u2019t fall evenly across income groups.  In addition, inflation-adjusted earnings are\ngrowing modestly and the combination of higher tariffs and slow spending power\ndoes not bode well for consumption going forward.<\/em><\/strong>  First quarter household spending was weak and\nApril\u2019s vehicle sales were really soft, so second quarter consumer demand may\nnot be that much better.  Meanwhile, the\ntariffs only make the Fed\u2019s job more difficult.<\/em><\/strong>  They slow growth but may raise inflation\nenough to keep it near the Fed\u2019s target. \nYet any agreement would unwind those impacts, whipsawing the data.  With no clear idea where the economy and\ninflation are going, the Fed will likely stay on hold for a long time.   <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: CPI: +0.3%; Ex-Food and Energy: +0.1%; Food: -0.1%; Energy: +2.9%\/ Real Hourly Earnings: -0.1%; Over-Year: +1.2% IN A NUTSHELL:  \u201cInflation is neither too hot nor too cold, but for the Fed, it is hardly just right.\u201d WHAT IT MEANS:  Normally, news about inflation would take center stage and it should.  So let\u2019s keep … Continue reading April 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":[1],"tags":[],"class_list":["post-1526","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1526","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=1526"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1526\/revisions"}],"predecessor-version":[{"id":1527,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1526\/revisions\/1527"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1526"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1526"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1526"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}