Friday, April 17, 2015

CPI: there is still no inflation, and real wage growth has stopped

 - by New Deal democrat

This inflation report this morning concluded 4 data series that size up where we are at our current crossroads.  

Industrial production tanked, as expected.  Housing (of which I'll write more later) was a mixed bag:  the more forward-looking and less volatile permits, as revised, tied their post-recession high in February but fell back, in a normally variable range, in March.  Starts, which were severely impacted by the weather especially in the Northeast during February, only came back partway, as the Western region took a dive (Oil patch weakness?).

As to inflation, the primary takeaway I heard from the talking heads was "OMG! OMG! Core CPI ticked up .1% to 1.8%, thus moving closer to the Fed's 2% ceiling, oops, I mean target."

But the fact is that headline CPI is still just a skosh negative YoY:

The tame CPI number means that real retail sales for March took back almost all February's weakness, although they are still below their November peak:

They also mean that real wages declined slightly more in March from their January peak:

There has been a lot of pushback against the Fed raising rates in June, most recently from former Fed vice-chair Alan Blinder, mainly due to this weakness.  At this point I think we can safely assume that rate hikes are off the table in the next few months.