US Monthly Economic Indicators (Through January 2025) US core consumer price inflation rate (excluding food and energy) is trending at 4.5% annualized and accelerating. The Fed's favorite inflation metric, core personal consumption expenditures price inflation rate (excluding food and energy) is trending at 2.9% and also accelerating. Both indicate re-emerging inflationary pressure. The difference between these two inflation metrics is evidently due to dynamic weights in the Fed favorite PCE price index vs fixed weights in the CPI, e.g., if the price of some item rises rapidly, the PCE index says that consumers will buy less of it. It's confusing to have inconsistent inflation metrics out of two different government statistical bureaus (Bureau of Labor Statistics for the CPI and Bureau of Economic Analysis for the PCE). Volatile producer price inflation is also trending up at 5.4%. Average hourly earnings change is trending at 4.8% annualized, which means that workers are marginally beating core inflation. Unemployment rate trend is 4.1%, still very low. On the activity side, Industrial Production (real) is trending up. Retail Sales (nominal) and Housing Starts (real) are both trending flat. Money supply M2 is trending up, reflecting consistent loosening by the Fed, notwithstanding their anxiety about inflation. Two-year and ten-year Treasury yield trends are divergent and non-inverted, which is healthy. The most recent daily Treasury rate figures are 4.1% for 2-year and 4.3% for 10-year, again non-inverted. Conference Board's Leading Economic Index inched down in January after an upward revision to December, still in line with moderate growth and no recession. Our Simple Macro Model forecasts trend real growth and quiet inflation over the next few quarters, but that picture is lagged. The economy is currently in flux, with re-emerging inflationary pressure and chaotic economic moves by the new administration. Consumer Sentiment is plunging. We are in a new, blustery domain.
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