Implications: Consumer price inflation is accelerating, rising 0.5% in February. Although consumer prices are up only 2.1% in the past year, they're up at a 3.9% annual rate in the past six months and a 5.6% rate in the past three months. We like to follow "cash inflation," which is everything in the CPI except for owners' equivalent rent (the government's estimate of what homeowners would pay if they rented their own homes). Cash inflation increased 0.6% in January and is up at a 7% annual rate in the past three months. Even "core" inflation, which excludes food and energy, is accelerating. Core prices rose 0.2% for the second straight month and are up at a 1.8% annual rate in the past three months. With easy money from the Fed, we expect persistent increases in the CPI throughout 2011 and beyond. In other news this morning, new claims for unemployment insurance declined 16,000 last week to 385,000. The four-week moving average fell to 386,000, the lowest since July 2008. Continuing claims for regular benefits declined 80,000 to 3.71 million. The labor market continues to improve and private sector payrolls will continue to move higher.
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Posted on Thursday, March 17, 2011 @ 10:30 AM
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