US Monthly Economic Indicators (Through December 2024) US core consumer price inflation rate (excluding food and energy) is trending at 3.5% annualized and mildly accelerating. The Fed's favorite inflation metric, core personal consumption expenditures price inflation rate (excluding food and energy) is trending at 2.0% and decelerating, right where they want it, but we have divergence with the CPI. I thought it might be the housing component, but that doesn't appear to be the case. The difference 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). In any event, average hourly earnings change is trending at 4.1% annualized, which means that workers are beating core inflation. Unemployment rate trend is 4.1%, still very low. These are all decent numbers. Volatile producer price inflation is actually trending negative. On the activity side, Industrial Production (real) and Retail Sales (nominal) are both trending up. Housing Starts (units) are also trending up. 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 4.2% for 2-year and 4.6% for 10-year, again non-inverted. Conference Board's Leading Economic Index inched down in December after an upward revision to November, 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. For most of us, that would be a welcome outcome. This economy is better than people seem to think it is.
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