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eternalfuture · 28-02-2004, 07:50

novice,

Recent U.S. CPI figures showed that it went up to 0.5%.

However, that was the headline figure.

The core component, which excludes volatile food and energy items was still growing at a 'low rate', +0.2%.

When core component number is strong, I think it shows that economic activity is the cause of the upward pressure in inflation.

When core is still low while the headline number is strong, usually energy prices are to be blamed. The case would be of growthless inflation.

Current inflationary pressure is most likely caused by rising energy prices, while economic activity is still rather mild.

There is an increase in durable goods order lately. Excluding defense items, orders are up 2% from 1.7% in December. The December figure, was revised up from -0.7%. This is a promising sign.

Still, recent fall in consumer confidence, could ruin the whole recovery scenario. With slow job growth, consumers seem to have become rather 'pessimistic' towards the economy.

Dropping from 96.4 (revised from 96.8) to 87.3 in February, this is not something to be overlooked. If the consumers become pessimistic about the economy, they will probably put a brake to their spendings and thus put a brake on the economy as well.

Back to inflation, if you look at the chart on inflation, the figure, both headline number and core numbers are still well below 0.6% on monthly basis. Looking at the y/y data, it's undeniably falling. Take a look at the data from Labor Department, and plot the chart. Or as a shortcut, look at the chart from TheStreet.com.

So, unless we see a headline or more importantly, the core number above 0.6%, there's still weak sign of inflation.

I'm no economy genius, but I hope I'm not making error on my words above.

28-02-2004, 07:50	#4 (permalink)
eternalfuture Padawan Join Date: Aug 2003 Posts: 892 Rep Power: 0	Inflation? What Inflation? novice, Recent U.S. CPI figures showed that it went up to 0.5%. However, that was the headline figure. The core component, which excludes volatile food and energy items was still growing at a 'low rate', +0.2%. When core component number is strong, I think it shows that economic activity is the cause of the upward pressure in inflation. When core is still low while the headline number is strong, usually energy prices are to be blamed. The case would be of growthless inflation. Current inflationary pressure is most likely caused by rising energy prices, while economic activity is still rather mild. There is an increase in durable goods order lately. Excluding defense items, orders are up 2% from 1.7% in December. The December figure, was revised up from -0.7%. This is a promising sign. Still, recent fall in consumer confidence, could ruin the whole recovery scenario. With slow job growth, consumers seem to have become rather 'pessimistic' towards the economy. Dropping from 96.4 (revised from 96.8) to 87.3 in February, this is not something to be overlooked. If the consumers become pessimistic about the economy, they will probably put a brake to their spendings and thus put a brake on the economy as well. Back to inflation, if you look at the chart on inflation, the figure, both headline number and core numbers are still well below 0.6% on monthly basis. Looking at the y/y data, it's undeniably falling. Take a look at the data from Labor Department, and plot the chart. Or as a shortcut, look at the chart from TheStreet.com. So, unless we see a headline or more importantly, the core number above 0.6%, there's still weak sign of inflation. I'm no economy genius, but I hope I'm not making error on my words above.