Economy | timiacono.com - Part 4

It’s All About the Dots

The Fed will, at some point, rue the day they decided to make dot-plots showing the collective view of central bank members on where they think interest rates are headed.

Here’s an animated version of the recent progression from this CNN/Money story showing why interest rates rising sooner rather than later has become a concern for investors.

While the graphic will be updated at CNN/Money later today, that may not happen here.

The Labor Department reported that annual inflation in the U.S. rose above 2 percent for the first time since late-2012 as a surge in energy prices added to broad-based inflation in other categories of consumer goods and services. Overall prices jumped 0.4 percent in May, the biggest gain in almost two years, and are now 2.1 percent higher than a year ago.

Expectations were for an increase of just 0.2 percent and “core” consumer prices – excluding food and energy – came in higher as well, up 0.3 percent versus a consensus estimate of 0.2 percent. On a year-over-year basis, core inflation now stands at 2.0 percent.

Overall energy prices jumped 0.9 percent last month paced by a surge of 2.3 percent in electricity costs and an increase of 0.8 percent for motor fuel. Food prices rose 0.5 percent with a gain of 1.4 percent for meat, poultry, fish, and eggs leading the way, closely followed by a gain of 1.1 percent for fruits and vegetables.

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Rosenberg on Inflation and the Fed

Gluskin Sheff chief economist David Rosenberg talks about such things as wage inflation where it matters and nascent rising prices with a ditzy Trish Regan who seems intent on extrapolating from a single month of data (last week’s negative PPI print for May).

Rosenberg has been warning about higher inflation for some time now and it’s worth pointing out that his track record on this sort of thing is pretty good.

I’ll never forget a few years back when he was predicting 10-year yields of 1.5 percent and everyone, including myself, thought he was kind of nuts.

The Commerce Department reported(.pdf) that May retail sales came in lower than expected, however, upward revisions to the April data offset much of last month’s disappointment.

Overall retail sales rose 0.3 percent in May, well short of the consensus estimate for a gain of 0.6 percent, as strong auto sales were partially offset by lower receipts at department stores and clothing stores. April sales were revised up from a gain of just 0.1 percent to a relatively strong 0.5 percent, this following a surge in both February and March after a sharp winter slowdown due largely to severe winter weather.

Excluding the 1.4 percent jump in auto sales, receipts rose just 0.1 percent last month and, excluding both autos and gasoline, sales were flat. Leading the advancing categories, miscellaneous store retailers saw a sales increase of 1.8 percent, home improvement store sales rose 1.1 percent, and nonstore (internet) retailers improved 0.6 percent.

Surprisingly, 8 of the 13 major categories saw lower sales, paced by drops of 0.6 percent at both general merchandise stores and clothing stores, 0.3 percent at electronics and appliance stores, and 0.2 percent at restaurants and bars.

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