Morning Report: Headline inflation cools

Posted on June 30, 2023 by Brent Nyitray

Vital Statistics:

Stocks have a “risk-on” feel as we round out the second quarter. Bonds and MBS are down.

Personal Incomes rose 0.4% in May, according to the BEA. Personal Outlays (spending) rose 0.1%. On the inflation front, the PCE Price Index rose 0.1% MOM and 3.8% YOY. If you strip out food and energy, the PCE Price Index rose 0.3% MOM and 4.6% YOY.

The annual increase in the PCE Price Index ex-food and energy (the core rate) is the Fed’s most important inflation indicator. If you look at the highlighted line below, it has bumped back and forth between 4.7% and 4.6% this year.

This report probably doesn’t change anything in the Fed’s thinking. They are going to hike 25 basis points in July.

The BEA has a good charting application which shows the 3 legs for the inflationary stool: goods, housing, and services ex-housing. The dark blue line at the bottom is durable goods, which rose rapidly during 2021 and was the initial driver of inflation. The top orange line is housing, which is about to plateau as home prices peaked around this time last year. The middle line is services ex-housing and that is the portion that the Fed is most concerned about. This part is basically wages. Once housing begins to have year-over-year declines, the headline inflation number will fall. But until the middle line flattens the Fed will remain hawkish.

Pending Home sales fell 2.7% in May, according to NAR. The Northeast saw increases, while the three other regions declined. “Despite sluggish pending contract signings, the housing market is resilient with approximately three offers for each listing,” said NAR Chief Economist Lawrence Yun, “The lack of housing inventory continues to prevent housing demand from being fully realized.”

We are pretty much back to the bad old days of the COVID lockdowns and the Great Recession. The bright side is that we are seeing increased homebuilding activity.

Consumer Sentiment rose in June, according to the University of Michigan Consumer Sentiment Survey. Inflationary expectations decreased, falling to 3.3% in June versus 4.2% in May. This is certainly encouraging and we know the Fed pays close attention to this statistic. Longer-run inflationary expectations remain at 3%, which is where they have been for the past couple years. Prior to the pandemic, longer-term inflationary expectations were in the 2.2%-2.6% range.

Filed under: Economy |

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28 Responses

  3. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on June 30, 2023 at 9:33 pm said:

    I think this trolling is hilarious.

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  4. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on July 1, 2023 at 11:17 am said:

    It could happen.

    https://twitter.com/zaidjilani/status/1674794473539375112?s=46&t=vSGsUlnc4rLxcUf7zfUiHg

    My favorite response was a hypothetical where sentient bears start killing humans, who would still have to consider paying back their student loans.

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  5. jnc4p's avatar
    jnc4p, on July 3, 2023 at 8:59 am said:

    No one could have predicted this at all:

    “How sellers of L.A. mansions are dodging a tax meant to help the homeless

    By Erica Werner
    July 2, 2023 at 9:00 a.m. EDT

    LOS ANGELES — A tax on mansion sales in Los Angeles was intended to raise millions to fight homelessness. It hasn’t quite worked out that way.

    Instead, wealthy Angelenos rebelled, putting the brakes on sales of homes priced at $5 million and above — those targeted by the initiative — with the result that the tax has raised far less money than expected since taking effect April 1.”

    https://www.washingtonpost.com/business/2023/07/02/mansion-tax-los-angeles-homeless/

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  6. jnc4p's avatar
    jnc4p, on July 3, 2023 at 2:57 pm said:

    Interesting twist to the usual narrative:

    “Doing better than ever. Still hardest hit”

    https://www.washingtonpost.com/business/2023/07/03/black-women-full-employment/

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  7. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on July 3, 2023 at 4:59 pm said:

    It takes a heart of stone not to laugh.

    many staff members experienced significant emotional turmoil on account of the memo. “The toxic atmosphere created by Stanton’s behavior has had a profound impact on the well-being and morale of our team,” one employee said in an email to the Desk. Another claimed that emotions at the station were “still raw.” A third employee, identified as a journalist, stated, “This whole situation killed what used to be a very enjoyable job. I have no passion for it anymore.”

    https://12ft.io/proxy?ref=&q=https://dnyuz.com/2023/07/03/news-station-director-fired-after-asking-journalists-to-tone-down-coverage-of-pride-events-following-viewer-complaints/

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    • Let the mutherfuker burn!'s avatar
      Let the mutherfuker burn!, on July 3, 2023 at 5:14 pm said:

      Is there no end to the nightmare for these employees?!?!?

      The outlet also hinted that Tang harbors extremist views, appearing to criticize him for following on social media noted conservatives like Ben Shapiro and Matt Walsh of the Daily Wire. “The anxiety at WOOD-TV caused by Tang turned a once-exceptional news team into a group that felt constantly under pressure, stressed and afraid,” the Desk wrote.

      BEN SHAPIRO!?!?! My God!

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    • jnc4p's avatar
      jnc4p, on July 3, 2023 at 7:45 pm said:

      Obviously this calls for:

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  8. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on July 3, 2023 at 7:58 pm said:

    It’s hard to argue the truth of this.

    Bud Light, like so many companies, would rather take a massive financial that essentially nukes their brand than not pander to the far left. That’s pretty insane, right? But it shows how deep this goes. This isn’t about some genuine care for transgenderism. It’s about making sure a company’s ESG score remains high enough to garner future capital.

    Do you know what you call that? You call that power, and it’s exclusively held by the left on a global scale.

    https://redstate.com/bonchie/2023/07/03/joe-rogan-roasts-dylan-mulvaneys-response-to-the-bud-light-controversy-n770711

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  10. jnc4p's avatar
    jnc4p, on July 4, 2023 at 9:15 am said:

    Happy 4th of July to everyone.

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  11. Brent Nyitray's avatar
    Brent Nyitray, on July 4, 2023 at 1:37 pm said:

    Happy 4th.

    Re the affirmative action decision. I am wondering if the left’s ululating over this decision is a reaction to the reality that rearranging society along equity lines just got harder.

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  14. jnc4p's avatar
    jnc4p, on July 5, 2023 at 3:49 pm said:

    Not the Onion (or the Bee):

    “Dining chat: I’m non-Asian and I use chopsticks. Is that cultural appropriation?

    By Tom Sietsema
    Updated July 5, 2023 at 11:00 a.m. EDT”

    https://www.washingtonpost.com/food/2023/06/29/tom-sietsema-live-chat/

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