Latest Inflation Numbers and Discussion

[Surewhitey]

Oil prices have risen again, which could lead to higher inflation next month.

I was just thinking this yesterday...may slow the size of rate reduction.

 

[Chuckanut]

One thing to keep in mind, as inflation cools and the interest rate stays the same, that means the real rate of interest is rising. This 50 basis points cut in the nominal rate only offsets some of that decline.

An excellent point

 

[Chuckanut]

The almost zero percent interest rates of the last decade were not normal and not good for the country.

Indeed. IMHO, the very low mortgage rates are responsible for speculation in the housing market that has resulted in high home prices. I know people who bought one or two condos or a vacation property to rent out via AirBnB. Would the numbers work out at 5 or 6% interest? I suspect not.

 

[audreyh1]

CPI release for September https://www.bls.gov/news.release/pdf/cpi.pdf

0.2 for the month, 2.4 for last 12 months.

 

[Gumby]

CPI release for September https://www.bls.gov/news.release/pdf/cpi.pdf

0.2 for the month, 2.4 for last 12 months.View attachment 52631

Meaning the next Social Security COLA will be 2.5%. The I-Bond inflation component beginning November 1st will be 1.90%

 

[USGrant1962]

Meaning the next Social Security COLA will be 2.5%. The I-Bond inflation component beginning November 1st will be 1.90%

Here's the official notice on SS: Cost-of-Living Adjustment (COLA) Information | SSA

 

[finnski1]

Meaning the next Social Security COLA will be 2.5%. The I-Bond inflation component beginning November 1st will be 1.90%

Thanks as always.

 

[braumeister]

CPI release for September https://www.bls.gov/news.release/pdf/cpi.pdf

0.2 for the month, 2.4 for last 12 months.View attachment 52631

And for a different view, here is the CPI-W that the 2.5% SS COLA is based on:

 

[Gumby]

And for a different view, here is the CPI-W that the 2.5% SS COLA is based on:

View attachment 52633

Just so there's no confusion, the social security COLA = arithmetic mean CPI-W 3Q2024/arithmetic mean CPI-W 3Q2023. That's why it is 2.5% rather than 2.6%

 

[latexman]

Just so there's no confusion, the social security COLA = arithmetic mean CPI-W 3Q2024/arithmetic mean CPI-W 3Q2023. That's why it is 2.5% rather than 2.6%

Thanks, I was wondering about that.

 

[explanade]

The CPI was .1% higher on both headline and core numbers.

 

[MichaelB]

September PCE was released this morning. This is the Fed’s preferred gauge if inflation. Month over month came in at 0.2% and core PCE 2.7%. Personal incomes grew 0.3% while spending rose 0.5%, both nominal. See the news release here

The quarterly employment cost index was also released today, another important Fed measure. Both compensation and total employment cost rose 0.8% for the quarter, and compensation cost rose 3.9% for the past 12 months. Release here

Both numbers are still a bit higher than what would be consistent with a 2% inflation, but the are in line with a 2%-3% inflation range.

 

[MichaelB]

Nominal GDP growth is now close to or below 5%. The Fed funds rate has to come down from these levels, by 1.5%-2%. I would be surprised if this didn’t happen over the next 6 months.

 

[audreyh1]

September PCE was released this morning. This is the Fed’s preferred gauge if inflation. Month over month came in at 0.2% and core PCE 2.7%. Personal incomes grew 0.3% while spending rose 0.5%, both nominal. See the news release here

The quarterly employment cost index was also released today, another important Fed measure. Both compensation and total employment cost rose 0.8% for the quarter, and compensation cost rose 3.9% for the past 12 months. Release here

Both numbers are still a bit higher than what would be consistent with a 2% inflation, but the are in line with a 2%-3% inflation range.

Is that what spooked the equity markets this morning?

 

[explanade]

I think some of the earnings reports disappointed. MSFT was down 5.5% because it gave tepid guidance.

There were one or two other disappointments.

 

[audreyh1]

I think some of the earnings reports disappointed. MSFT was down 5.5% because it gave tepid guidance.

There were one or two other disappointments.

October is often a negative month and it looks like the markets are really trying to erase the mid-month gains, ha ha.

 

[MichaelB]

Is that what spooked the equity markets this morning?

It’s Halloween, so it could be anything.

 

[MichaelB]

Monthly CPI released this morning (here). CPI was up 0.2% for the month and 2.6% over the last 12 months. Core CPI increased 0.3% for the month and 3.3% over the past 12 months.

 

[Montecfo]

Amazed the monthly figure was 0.2 for three months in a row. According to reports the lagging shelter component was a big riser. Energy flat.

The report was in line with expectations and the markets seem to approve. I guess we are on track for a quarter point cut next month.

 

[GenXguy]

Monthly CPI released this morning (here). CPI was up 0.2% for the month and 2.6% over the last 12 months. Core CPI increased 0.3% for the month and 3.3% over the past 12 months.

Really hate to see Core CPI running so high (3.3%) at this point, more than 50% higher than we would like to see. Makes people question these interest rate cuts with inflation still this high.

 

[aja8888]

Really hate to see Core CPI running so high (3.3%) at this point, more than 50% higher than we would like to see. Makes people question these interest rate cuts with inflation still this high.

Have to agree...that 1/2% present cut did nothing (based on faulty unemployment reports) and this 1/4% cut recently will probably be seen as a nothing burger. Maybe it's time to pause for a few months?

 

[JoeWras]

Automobiles, both used and new, snuck up in trend. Perhaps the decline has stopped?

Health insurance, which changed the way it was measured a few years ago, snuck up too. The method to measure it is more obscure than shelter. I believe Fall is the time they reset it, so this new uptick may persist for another year.

 

[aja8888]

Here is Wolf Street's article on inflation posted today. Worth the quick read and covers all the categories.

Beneath the Skin of CPI Inflation: Overall CPI Accelerates for 4th Month, “Core” CPI for 3rd Month on Re-spiking Used Vehicle Prices & Rising Homeowner Costs | Wolf Street

Beneath the Skin of CPI Inflation: Overall CPI Accelerates for 4th Month, “Core” CPI for 3rd Month on Re-spiking Used Vehicle Prices & Rising Homeowner Costs​

by Wolf Richter • Nov 13, 2024 • 4 Comments​

Year-over-year, CPI and “core” CPI are starting to show the effects of the month-to-month increases since the “inflation is vanquished” summer.​

 

[Montecfo]

Core CPI 6 month average remains at 2.6% according to the article.

Will be interesting to see what PCE does given that is the Fed's reference. But all things considered it seems that inflation is finding a floor at about where it is now, at least for now.

The unemployment report will be interesting too since we had a suspiciously hot reading for September of 254k jobs followed by a suspiciously cold report in October of just 12.5k jobs (well below forecasts of 100k reflecting weather issues). The October report also included large downward revisions to August and September totalling 112k. August was originally reported at 142k. Post 2 rounds of revisions it came in at just 78k jobs.

These revisions should get a LOT more attention than they do.

But Fed will almost certainly cut 25bp in December. And theoretically they still have quite a bit of room to cut but data will determine.

 

[JoeWras]

And today Powell hinted at pumping the brakes. This doesn't mean the quarter point is out this December, but it almost certainly means it won't be 1/2. I suppose he also opens the door to doing nothing based on the data they get between today and the Dec meeting.

“The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said at a talk in Dallas on Thursday. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”