Core CPI surprises (0.4% vs. 0.3% m/m) on the upside, while headline at consensus.
Figure 1: CPI headline instantaneous inflation (a=4,T=12) (black), core (sky blue), supercore month-on-month (green), mean month-on-month (red). Instantaneous inflation per Eeckhout (2023). Source: BLS, Dallas Fed via FRED, BLS, and author’s calculations.
Recall the CPI inflation is on average (pre-pandemic) about half a percentage point faster than PCE inflation. In Figure 2, I plot core measures of CPI and PCE instantaneous inflation.
Figure 2: CPI core instantaneous inflation (a=4,T=12) (sky blue), PCE core instantaneous inflation (tan), Instantaneous inflation per Eeckhout (2023). Source: BLS, BEA via FRED, and author’s calculations.
Over the period shown above, the difference is 0.44 percentage points.
Core sticky price CPI disinflation has stalled:
https://fred.stlouisfed.org/graph/?g=1idE6
Same for median CPI:
https://fred.stlouisfed.org/graph/?g=1idE6
Looks like services less rent of shelter are the main culprit:
https://fred.stlouisfed.org/graph/?g=1idGB
Lots of blathering today at a few other sites about how “hot” services inflation is, so inflation is not cooling down at all etc.
First of all, CPI less shelter has consistently been running at 2% or less for the past 8 months, and is only up 1.4% since June of 2022 – I.e., rising at an average of less than 0.1% per month since.
So, what does a long term look at services inflation look like, especially compared to inflation in goods? While the Census Bureau does not publish one aggregate for all goods, it does aggregate into durable and non durables. Here’s what cpi for services, durables, and non durables looks like for the past 65 years:
https://fred.stlouisfed.org/graph/?g=1ifb8
Three things stand out:
1. services inflation almost always runs hotter than durables, and except for the late 1980s and the 2000s, also typically runs hotter than non durables as well, by an average of about 2%. Thus the above graph subtracts 2% to show services inflation typically running at just about the average of goods inflation.
2. Services inflation typically lags nondurables and frequently but not always durables as well.
Which leads to:
3. Services inflation is most elevated compared with goods inflation in the aftermath of steep declines in the latter: in 1982, 1995, 2002, 2015 – and now.
If the present follows the past history, services inflation is likely to cool substantially over the next 12 months.
Services inflation cooling in coming months is also consistent with the lagged effect of monetary tightening. And fiscal tightening. And labor markets becoming somewhat less tight.
Shipping costs are starting to come into play.
https://www.marketplace.org/2024/03/06/panama-canal-drought-global-shipping/
Biden can’t do anything about a drought in Panama, but President Biden can do something about sub-human Houthi animals. I’m not normally into the macho chickenhawk stuff, but enough is enough. Americans should not have to pay higher prices because Houthi savages can’t subsist without mayhem. Uncle Moses did something he rarely ever does today, just on a whim I got a turkey sandwich at Arby’s for lunch. $7.35 for a single sandwich with two slices of bacon on it. Never again. If Biden has “to pull a trump”, then so be it. Bring out 3-4 of the MOABs for strategic hits in Yemen and let’s be done with these F***ers.
https://www.newyorker.com/news/news-desk/trump-drops-the-mother-of-all-bombs-on-afghanistan
It’s just like the losers in Beijing. You have to speak to them in their own feral language, or they just don’t “get it”
But on the other side of the globe, another key shipping route — the Panama Canal — has a serious problem of its own: not enough water.
Maybe all this rain in California can be shipped to the Canal.
I love you NDD but all history is past
“Recall the CPI inflation is on average (pre-pandemic) about half a percentage point faster than PCE inflation.”
This is true for the past 3 years. Now our Village Moron JohnH has claimed that the good folks at BEA are on Team Biden – or was that BLS is Team Trump? We posted some smart comments as to why they have diverged this way and it is not the jacka$$ claim from our Village Moron.
Try this – CPI’s weight for medical care is only 8% which is absurdly low. PCE’s weight is more properly 17%.And the cost of medical care is down. So PCE is the better measure unless one is dumb enough to take bleach during COVID. Oh wait Bruce Hall is on Team Trump.
Another blatant lie from pgl–” JohnH has claimed that the good folks at BEA are on Team Biden.”
Par for the course…
Yea you did. But then you make so many stupid claims it’s hard to keep up
I don’t see much here terribly insightful (regarding the data itself) other than the American economy is still humming along pretty well all things considered. But Republicans will still find things to b*tch about since they all enjoy forfeiting their jobs to MAGA lapdogs and changing the RNC letterhead to MAGA.
Just a reminder that the Fed has stated that their inflation target is based on the all-items (headline) personal consumption expenditures (PCE) price index, although they do look at core PCE for additional information.
The Lincoln Group is getting a new teammate:
https://thehill.com/homenews/state-watch/4526513-republican-group-planning-50m-campaign-to-block-trump-from-reelection/
Lots of effort underway outside the Democratic Party to keep Trump from getting back to the White House.
That said, $50 million is the cost of one competitive Senate campaign these days. The 2020 presidential campaign cost about $6.5 billion, so an extra $50 million isn’t as important as who it is spending that money.
@ Macroduck
I keep wondering who could tear off votes from trump as an independent candidate. Ideas not hitting me at the moment. Though I am sure some magazine must have touched on this topic if Politico hasn’t. Any ideas here?? It would only take like a 10% ringer, write?? It wouldn’t take much. Cheney would get more Democrat votes at this point, so she’s out.
That Cheney problem? Seems likely to be pretty unversal. People want alternatives to both candidates.
I think the write answer is “grind it out”. Get out the vote. Get the good message out – SOTU-like performances frm Biden and his surrogates, over and over. Remind voters who Trump really is. No magic bullet, I’m afraid.
Trump has a lot of negatives even with a lot of non-democrats. It seems pretty straight forward that we need to have adds reminding swing voters why they don’t like Trump. It could also help keeping some of the GOP voters from voting at all (if voting for a democrat is too much). The advantage of such a campaign is that it would likely rattle Trump and make him more likely to make mistakes (that further alienate the not MAGA crowd). Most of that has to happen the last 6 weeks before the election.
*right?? Warm late winter effecting my brain.
Dean Baker: “The data are clear, corporations are taking a larger share of the pie now than before the pandemic. Go nail the bastards, President Biden!”
https://rwer.wordpress.com/2024/03/11/is-greedflation-over/#comments
Isn’t it long past time to attack one of the primary drivers of inflation?
Since we see a good bit of climate denialism in comments here, it’s worth noting that denialism changes its stripes as needed. It is, arter all, largely an astroturfing phenomenon, paid for by the fossil fuel industry. The whole “aw shucks” element is crafted by professionals, then aped by rubes. Here’s a look at the latest evolution of denialism:
https://counterhate.com/research/new-climate-denial/
The gist is that “Nuh Uh! Is not!” approach is being replaced by “Too late! To expensive! The public won’t do it”. Denialism is being replaced by fatalism. All for a buck.
On the subject of climate change, the EU released its first climate change risk assessment on Monday:
https://www.eea.europa.eu/publications/european-climate-risk-assessment
Here’s the press release, for the busy or faint if heart:
https://www.eea.europa.eu/en/newsroom/news/europe-is-not-prepared-for
One broad policy finding is that “…Europe’s policies and adaptation actions are not keeping pace with the rapidly growing risks. In many cases, incremental adaptation will not be sufficient and, as many measures to improve climate resilience require a long time, urgent action may be needed even on risks that are not yet critical.”
Given that this is only the first climate change risk assessment the EU has done, perhaps we shouldn’t be surprised that adaptation is running behind. Spain and France are both running into political problems over competing demands for water. Immigration pressures are partly the result of widespread drought in the Middle East and Africa. Taking “urgent action on risks that are not yet critical” would have been a great idea ten or twenty years ago.
What they don’t talk about is how expensive it will be to do nothing. The reality is that it is too late and too expensive to do nothing drastic. Unfortunate that the human brain is build for short term thinking so it takes an actual experienced catastrophe to get most people to act and make sacrifices.
Compared with 2021-22, much ado about nothing.
However, it is coming at at time when the Fed is considering lowering its rate and that might cause a pause if the number is similar in March.
One thing on the horizon:
https://www.agweb.com/markets/market-analysis/will-cattle-prices-set-new-records-2024-outlook-cattlefax
https://www.usda.gov/media/radio/daily-newsline/2024-02-26/actuality-projected-meat-prices-2024
That will color consumer perceptions of inflation. A projected decrease in turkey prices will not be much of an offset.
Obviously off-topic
I thought this was an interesting article. Hopefully the authors know what they are talking about, I wish they would have provided more links to support their contentions, but I am about 80% sure nearly all of this article holds up to facts:
https://www.piie.com/blogs/realtime-economics/2024/covid-19-originated-china-so-did-diagnostic-tests-saved-lives
Brings up memories of past blog threads.
https://econbrowser.com/archives/2021/01/the-current-administrations-current-official-economic-forecast#comment-246832
Did Kopits want all of us to refer to it as “The China diagnostic test”?? or “Chinese protective gear”?? Somehow I doubt it. There’s no negative connotation to those those labels, so in Kopits’ view, why bother??