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 Rose 0.1% in August
Posted Under: CPI • Data Watch • Inflation

 

Implications:  Tell us again why the Fed should be cutting rates, because the data suggest otherwise.  Consumer prices rose 0.1% in August while "core" prices – a gauge of inflation that strips out the typically volatile food and energy components – rose 0.3%.  Overall consumer prices are up 1.7% in the past year, but they have been held back by declining costs for energy.  Core prices are up 2.4%, tied for the largest twelve-month increase going back to late 2008.  Given the Fed's 2% inflation target, that should be a signal that everything is looking A-OK. Not too fast, not too slow, just right.  But the Fed showed at its last meeting that it has moved away from a "data dependent" stance, so don't expect the pickup in inflation – paired with yesterday's report on producer prices which showed core prices above 2% as well - to change the Federal Reserve's plan for additional rate cuts.  A look at the details of today's report should, at the least, make things interesting when the Fed releases its survey of economic projections (the "dot plots") at next week's meeting.  While core inflation is up 2.4% in the past year, it's up at a faster 3.4% annualized rate over the past three months, the largest three-month gain since 2006.  The Fed needs to keep this in mind in the months ahead as it deliberates about rate cuts.  With employment data continuing to show strength, the Fed would clearly be putting their dual mandate on the back burner in an attempt to use monetary policy to "solve" issues that have developed overseas.  It would be better served realizing that the woes in Europe, Japan, and China are issues with fiscal and regulatory policy, things monetary policy can't fix.  Housing, medical care, and services led the index higher in August, but prices rose virtually across the board.  We believe these data, as well as strength in trend inflation (which is far more important than single-month readings) don't support the case for rate cuts.  Possibly the best news in today's report was that real average hourly earnings rose 0.4% in August (tied for the largest monthly increase in nearly four years) and are up 1.5% in the past year.  With the strength in the labor market noted above, we believe the trend will continue to move higher in the months ahead.  Healthy consumer balance sheets, a strong job market, inflation in-line with Fed targets but pushing upwards, and the continued tail winds from improved tax and regulatory policy, all reinforce our belief that the economy is on solid footing.  In employment news this morning, initial jobless claims fell 15,000 last week to 204,000, and continuing claims declined 4,000 to 1.670 million. Plugging this data into our models suggests nonfarm payroll continue to grow at a healthy pace in September.

Click here for PDF version

Posted on Thursday, September 12, 2019 @ 10:43 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.