|
REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.
I don’t know about you, but I’m not looking forward to the political discourse that we’re likely to hear over the next six months, particularly if the U.S. economy continues to weaken and the finger-pointing increases leading up to the November elections. So, it might be a good idea to only look on the lighter side of the political debate as it relates to voters’ number one issue – the economy – a good example of which is shown below.
From the Nate Beeler archive at the Washington Times.
The Reuters/University of Michigan consumer sentiment index dipped from 75.3 in February to 74.3 in the first of two readings for March in a sign that rising gas prices may now be having in an impact on the mood of the consumer.
Based in large part on a recently improving labor market, the current conditions component remains firm, up from 83.0 to 84.2, however, the expectations component more than offset that gain, down from 70.3 to 68.0.
It’s a good think that equity markets don’t have a gas tank to fill every week or they too might think about pulling back but, so far, they show little sign of doing so, though that could soon change given that inflation expectations show signs of stirring to life.
Survey respondents ratcheted up their one-year outlook on consumer prices from an increase of 3.3 percent to 4.0 percent in a delayed reaction to rising pump prices that the Energy Department said gained another 4 cents over the last week, rising to a national average of $3.83 per gallon.
Five-year inflation expectations (the measure watched more closely by Fed economists) rose just one-tenth to 3.0 percent, indicating that, like Fed Chief Ben Bernanke, most Americans see rising gas prices as being temporary, a belief that, unlike Bernanke’s, could prove to be temporary itself.
The Labor Department reported that, paced by the surging cost of energy products, consumer prices in the U.S. jumped 0.4 percent last month and, on a year-over-year basis, inflation was unchanged at 2.9 percent.
Gasoline prices surged 6.0 percent in February and are now up 12.0 percent from a year ago as the energy index jumped 3.2 percent, now 7.0 percent higher on a year-over-year basis. Falling natural gas prices offset rising heating oil costs as the overall household energy index fell 0.6 percent last month and is down 0.3 percent from last year at this time.
In advance of tomorrow’s report on consumer prices that has the potential to offer a few surprises given the recent surge in the cost of gasoline, clothing, and other essentials, Amity Shlaes files this report at Bloomberg about how inflation has a way of coming about suddenly and, once it does, can be very difficult to stop.
A little is all right. That’s the message Federal Reserve Chairman Ben S. Bernanke has been giving out recently when asked about the evidence of inflation in the U.S. recovery.
Sometimes Bernanke doesn’t even go that far. He simply says he doesn’t see inflation. The Fed chairman recently described the prospects for price increases across the board as “subdued.”
“Sudden” is more like it. The thing about inflation is that it comes out of nowhere and hits you. Monetary policy is like sailing. You’re gliding along, passing the peninsula, and you come about. Nothing. Then the wind fills the sail so fast it knocks you into the sea. Right now, the U.S. is a sailboat that has just made open water, and has already come about. That wind is coming. The sailor just doesn’t know it.
“Sudden” has happened to us before. In World War I, an early version of what we would call the CPI-U, the consumer price index for urban areas, went from 1 percent for 1915 to 7 percent in 1916 to 17 percent in 1917. To returning vets, that felt awful sudden.
…
History has other examples. In 1945, all seemed well: Inflation was 2 percent, at least officially. Within two years that level hit 14 percent.All appeared calm in 1972, too, before inflation jumped to 11 percent by 1974, and stayed high for the rest of the decade, diminishing the quality of life for whole cohorts.
The fact that financial repression is now official government/central bank policy and that it’s been more than a generation since we’ve seen high official rates of inflation in the U.S. will surely make dealing with rising prices even more difficult this time around.
Also, this ominous warning was offered:
The greater the denial before, the faster the inflation accelerates after.
Yikes! Suddenly, tomorrow’s CPI report seems a whole lot more interesting…
The policy making committee of the Federal Reserve gathered today in Washington to pass judgment on the state of the economy and the stock market certainly liked what it heard, though precious metals markets surely did not.
As expected, there were no changes to short-term interest rates, existing policies were unchanged, and no new policy moves were announced.
The Fed acknowledged an improving labor market and rising oil prices while also downplaying the threat of spillover effects from Europe, that is, now that the European Central Bank has finally seen fit to print up more than a trillion dollars for the greater good.
“Steady as she goes” is what equity markets were waiting to hear and they responded accordingly (Susie Gharib and Tom Hudson no doubt had twinkles in their eyes on PBS’s Nightly Business Report) while gold and silver traders were again disappointed to hear nary a mention of further central bank money printing on this side of the Atlantic and many of them exited positions as a result.
None of that should come as much of a surprise.
But, what was interesting about today’s meeting was that the policy statement released after its conclusion had a few subtle changes as annotated in the graphic below, something that has been the exception to the rule lately.
The Commerce Department reported(.pdf) that big increases in gasoline station sales and automobile sales drove overall retail sales in the U.S. higher by 1.1 percent in February following an upwardly revised gain of 0.6 percent in January.
Excluding motor vehicles, retail sales rose 0.9 percent last month and, excluding both autos and gasoline, sales rose just 0.6 percent.
Surging pump prices more than offset falling demand as gasoline station sales jumped 3.3 percent in February after an increase of 1.9 percent the month prior. Motor vehicle sales rose 1.6 percent last month following a decline of 1.6 percent in January.
Clothing sales rose 1.8 percent, however, here too, rising prices played a significant role in the sales gains as the Labor Department recently reported that, over the last three months, the cost of apparel has been rising at an annual rate of more than 5 percent.
An unusually warm and dry winter has also spurred many purchases at home improvement stores, as sale there rose 1.4 percent for the second month in a row. Recall that the retail sales figures are adjusted for seasonal variations and holidays, but not rising prices, all of which makes the February surge less than what it appears.
By Tim Iacono, Since 2005
![[Most Recent USD from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
Recent Comments