Global Economics – April 30, 2021
Central bank officials have been warning us for months that annual readings on inflation, skewed by the easy year-ago comparisons of the great lockdown, will begin to climb. But this, as they have repeatedly assured us, will be nothing more than a head fake, that levels will then fall back harmlessly as the 2020 comparisons get more difficult. Jerome Powell at Wednesday’s FOMC press conference warned us at length that annual price readings in Friday’s personal consumption and outlays report would be going through the roof. But that wasn’t all that was going through the roof.
The Global Economy
The PCE price index, the Fed’s central price gauge, accelerated by 7 tenths in March to an annual rate of 2.3 percent and above the 2 percent target for the first time since August 2018. Yet no worries as the PCE core, a less volatile and equally important gauge, held below target, rising a less heated 4 tenths to 1.8 percent. But what if we toss out the annual rates? What about month-over-month acceleration? Comparisons on this score don’t involve 2020 at all, only the latest February. And here the results are definitely on the overheated side of the street, up 0.5 percent overall and 0.4 percent for the core, both higher than expected and the latter the sharpest gain since all the way back in October 2009. Yet in a reprieve of sorts, the University of Michigan’s gauge on inflation expectations at the consumer level, released later Friday morning, fell 3 tenths from mid-month to 3.4 percent. The month-end to mid-month comparison points to a reading closer to 3 percent flat over the last two weeks. Were US consumers actually listening to Powell’s press conference?
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