Inflation | timiacono.com

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.

Consumer Prices Jump 0.3% in April

The Labor Department reported that consumer prices jumped 0.3 percent in April, due largely to the rising cost of food, motor fuel, and other transportation items as the annual rate of inflation in the U.S. now stands at 2.0 percent. Excluding food and energy, prices rose 0.2 percent last month, now up 1.8 percent from a year ago.

This marked the biggest increase in the cost of living in 10 months and, after yesterday’s surge in wholesale prices as noted here, signals new concern over rising inflation, a topic that has been off-the-radar of both investors and policy makers at the Federal Reserve.

Three times in the last eighteen months annual inflation has risen to 2.0 percent, but it has not exceeded that level since late-2012 as it came down from multi-year highs in 2011 that, not coincidentally, marked the all-time nominal high for the gold price.

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Today’s report on producer prices from the Labor Department has certainly heightened the anticipation for tomorrow’s reading on consumer prices, but, in some ways, that’s a lot like saying “one is greater than zero” as few seem worried about inflation these days.

After rising 0.5 percent in March, wholesale prices were expected to increase just 0.2 percent in April but, instead, they jumped 0.6 percent, the most since September 2012. Gains were paced by a surge of 2.7 percent in food prices and the second straight increase of 1.4 percent for trade services. The so-called “core rate”, excluding food and energy prices, rose 0.5 percent  following an increase of 0.6 percent in March.

Recent history is replete with examples of producer prices surging, but having little effect on consumer prices as retailers have found ways to deal with the increases without having to pass them along to their customers. But, with the general view that the U.S. economy is improving, that could be changing and, if so, the first signs of that could be seen tomorrow.

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