Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Click for Bio
Follow Brian on Twitter Follow Brian on LinkedIn View Videos on YouTube
   Bob Stein
Deputy Chief Economist
Click for Bio
Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 
  The Consumer Price Index was Unchanged in November
Posted Under: CPI • Data Watch • Inflation

 

Implications:  Consumer prices were unchanged in November as declining energy costs offset gains in nearly every other category.  Recent months have been a textbook example of how volatility distorts the headline reading. While energy prices swung from a 0.5% decline in September, to a 2.4% increase in October, to a 2.2% decline in November, "core" inflation (which excludes the typically volatile food and energy categories) has risen steadily month-to-month. That is why, in addition to emphasizing the core measure, we focus on the trend, which shows inflation continuing to run steadily above the Fed's 2% inflation target.  In the past year, consumer prices are up 2.2%, and the index has matched or exceeded the Fed's 2% inflation target in each of the last fifteen months ("core" has exceeded 2% in each of the last nine months).  So, after running stubbornly below the Fed's inflation target for the first five years of the recovery, the much-anticipated pickup has clearly arrived.  No, this isn't runaway inflation, but with the federal funds rate well below the pace of nominal GDP growth, the odds of higher inflation – paired with a tight labor market and widespread strength in economic data - should be enough to keep the Fed on track for slow-but steady hikes through at least the end of 2019.  Looking at the details of the November report shows medical care and housing led the rise in "core" prices, up 0.4% and 0.3%, respectively.  And while new car and truck prices were unchanged in November, prices for used vehicles rose 2.4%, the second largest single month increase since the start of 2010.  Maybe the best news in today's report was that real average hourly earnings rose 0.3% in November.  These wages are up just 0.8% in the past year but are heading higher, with wages up 1.1% at an annual rate over the past three months and up 1.3% at an annual rate in the past six-months.  And importantly, these earnings do not include irregular bonuses – like the ones paid by companies after the tax cut or to attract new hires – or the value of benefits.  It's an imperfect measure (to say the least), but we still expect a visible pickup in wage pressure in the year ahead.  The labor market remains strong and companies continue to report that finding available qualified labor remains a top headwind to even faster growth. Put it all together, and today's report shows an economy continuing to strengthen.  The Fed would do well to focus on the data as they forecast their path for 2019, rather than letting media narratives influence their actions.

Click here for PDF version

Posted on Wednesday, December 12, 2018 @ 10:32 AM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial advisors are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
Home |  Important Legal Information |  Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2019 All rights reserved.