- September's core CPI was flattered by unsustainable declines in airline fares, lodging and used car prices...
- ...But rents rose at the fastest pace in 15 years, so all eyes now will be on the October report.
- Stop Press: FOMC minutes confirm tapering to be announced at the November meeting.
Ian Shepherdson (Chief Economist and Founder)U.S.
- China's manufacturing slowdown is not helpful to the U.S., but it is a long way from a hammer-blow.
- Consumers' spending likely rose a bit in August, but September won't be great; Q4 should be much better.
- The core PCE spike is over, but airline fares will lift the August reading relative to the core CPI.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The FOMC is on course to taper in November, provid- ed markets aren't in turmoil over the debt ceiling.
- The Fed's new economic forecasts are much more realistic, but FOMC opinions are spread widely.
- Chair Powell remains confident that inflation will be contained; upward forecast revisions are no big deal.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The FOMC and Chair Powell appear prepared to signal that tapering will start in December.
- Expect more dots for a 2022 rate hike, but the median forecast likely will still be for the first move in 2023.
- Existing home sales are falling slowly, while inventory is rising; price gains are slowing.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The current inflation spike can only become a spiral if unit labor costs accelerate..
- ...Faster productivity growth can prevent that, and the signs are that business capex is stepping up.
- Stronger productivity growth would prevent runaway inflation but lift r-star; the Fed would still have to hike.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Core PPI inflation likely hit a new high in August, but the month-to-month increases are set to slow.
- Much of the recent surge has been due to widening margins, especially in autos; this can't last forever.
- The drop in jobless claims reported yesterday is noise, not signal, and it says nothing about payrolls.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Chair Powell can't signal a tapering start date today because the Fed first needs to see fall labor data.
- Expect the usual themes instead; inflation will be "transitory", insufficient progress to taper, and Delta risk.
- Upside risk for both consumers' spending and the core PCE deflator in today's July data.
Ian Shepherdson (Chief Economist and Founder)U.S.
For most of the decade before the pandemic, core CPI inflation ran a few tenths higher than core PCE inflation, mostly because rents, which are twice as important in the core CPI, rose faster than broad inflation.
Ian Shepherdson (Chief Economist and Founder)U.S.
The Wall Street Journal ran a nonsensical editorial piece yesterday on the subject of inflation.
Ian Shepherdson (Chief Economist and Founder)U.S.
Chair Powell made it clear yesterday that the Fed's leadership is sticking to its view that the reopening surge in inflation is due mostly to "base effects… and production bottlenecks or other supply constraints", which will not last.
Ian Shepherdson (Chief Economist and Founder)U.S.
The Dallas Fed last week published a short blog post—seehere—focused on the predictive power of their trimmed mean PCE inflation measure.
Ian Shepherdson (Chief Economist and Founder)U.S.
We have never taken much notice of the quits rate from the JOLTS report, on the grounds that it’s usually just a proxy for the unemployment rate, released with a lag and prone to odd jumps and dips which turn out not to be significant.
Ian Shepherdson (Chief Economist and Founder)U.S.
Consumption is the biggest single component of GDP, accounting for 68% of the economy.
Ian Shepherdson (Chief Economist and Founder)U.S.
The early signs are that the June payroll numbers will be materially stronger than May's.
Ian Shepherdson (Chief Economist and Founder)U.S.
The FOMC statement yesterday changed only trivially from April, just noting that the Covid picture is improving, easing the pressure on the economy, and that inflation is no longer below the target.
Ian Shepherdson (Chief Economist and Founder)U.S.
Since the late April FOMC meeting, policymakers have seen two huge core CPI prints, alongside copious evidence that surging labor demand has collided with constrained supply, limiting the pace of payroll gains and—probably—pushing up wage growth.
Ian Shepherdson (Chief Economist and Founder)U.S.
We have to talk about Covid again, unfortunately. The downward trend in U.S. cases appears to be over, for now, following a 94% drop from the January peak.
Ian Shepherdson (Chief Economist and Founder)U.S.
First, an apology for breaking our two-page rule; we have a lot of ground to cover today. So, to business. Tapering is going to happen over the next few months; the only questions are when, and at what pace.
Ian Shepherdson (Chief Economist and Founder)U.S.
Most of the action in the May CPI was in the Covid- sensitive components, again.
Ian Shepherdson (Chief Economist and Founder)U.S.
In 2015, key labor market indicators from the NFIB small business survey returned to levels last seen at the peak of the cycle in 2007, and unemployment hit the Fed's then-estimate of the Nairu.
Ian Shepherdson (Chief Economist and Founder)U.S.
