Morning Report: Consumer inflation remains muted

Vital Statistics:


Last Change
S&P futures 2787 2
Eurostoxx index 372.85 -1
Oil (WTI) 57.27 0.47
10 year government bond yield 2.65%
30 year fixed rate mortgage 4.32%


Stocks are higher with a general “risk-on” feel to the tape. Bonds and MBS are down.


Lael Brainard speaks this morning and then the Fed enters its quiet period ahead of next week’s FOMC meeting.


Consumer inflation rose 0.4% MOM in February. Ex-food and energy, the index rose 0.4% and is up 2.1% YOY. Inflation remains under control, which should give the Fed the leeway to hold the line on rates next week. Falling energy prices at the end of 2018 helped keep the index under control, and we are seeing evidence that medical costs are finally stabilizing. Medical goods fell 1% MOM and services were flat. Stabilizing medical costs should translate into stable health insurance costs, which leaves more room for wage increases.


medical cpi


Retail Sales in January rose 0.2%, a touch higher than expectations. Those looking for a big rebound after December’s anemic numbers were disappointed. Given the strong consumption numbers in Q4 GDP, the holiday shopping season remains a bit of a mystery. The government shutdown is a possible explanation, and while it certainly hit the shops at Tyson’s Corner, the rest of the nation was unaffected. Note that the Fed’s consumer credit report showed that revolving credit increased only 1.1% in December and 2.9% in January, both well below run rates we have seen in the months leading up to it


Nancy Pelosi doesn’t support impeaching Trump. This is probably a tacit admission that the Mueller report isn’t going to contain anything we don’t already know.


Small business optimism rebounded in February. Earnings trends fell as many contractors were temporarily sidelined due to the government shutdown. Employment trends also slipped, probably for the same reason. Plans for expansion rose, however they are still below levels we saw in 2017-2018, which were extremely strong. Actual hires were the highest in years, and small business still finds a shortage of qualified workers. I am curious as to whether the “shortage of qualified workers” means (a) nobody around knows how to do the job, (b) nobody around knows how to do the job and can pass a drug test, or (c) nobody around that knows how to do the job will accept what I am want to pay.

17 Responses

  1. Interesting parallel:

    “Bernie Sanders, Socialism’s Reagan?

    If Trump is a Carter figure, there’s an obvious candidate to play the Gipper.
    Ross Douthat

    By Ross Douthat
    March 12, 2019”


    • I don’t see Trump as a Jimmy Carter.


      • He kind of is, without the Iranian hostage crisis so far.

        But the cabinet disarray is very Carter like.


      • I’ve said the best analog for Trump’s presidency was Jimmy Carter since the first few months, especially when the press (at least at the outset) when to great pains to avoid the Carter comparison. Trump rolled in as an outsider, has never courted congress like Reagan or Bush, had “their own way of doing things”. Loyalty was a big thing in the Carter Whitehouse (or so I’ve read). And the cabinet troubles seem right out of Carter’s term.

        The comparison breaks down when you look at who the Republicans ran against Carter in 80 and who looks likely to run against Trump in 2020. The Dems aren’t going to have a Reagan to throw against Trump.


    • Sanders is no Reagan.


  2. Trump Admin is considering a “skin in the game” provision for colleges and student loans. If a student defaults, the college will be on the hook for some of the repayment.

    obama was interested in something like this, but his interest was limited solely to eliminating the for-profit sector of education.

    interestingly, elizabeth warren is interested in something along those lines.


    • anything that puts two below the waterline on academia is worth a look.

      You’ve never been out of college! You don’t know what it’s like out there! I’ve worked in the private sector. They expect results


  3. I gather we’ve solved all the other crimes.


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