On the inflation front, yesterday's report was mostly positive. The price index for PCE increased 0.4% in March, due to higher food and energy prices, after a 0.4% gain in February. Excluding food and energy, which economists often ignore because they tend to be volatile, the PCE index was flat. Year over year, the core PCE index was running at a 2.1% annual rate, down from 2.4% in February.
Economist have been watching inflation indicators for signs that energy and food prices would lead to broader price increases, but that hasn't happened. "Although headline inflation continues to climb, there is scant evidence of any pass-through to consumers," wrote Joseph Brusuelas, chief U.S. economist at research firm IDEAglobal, in a note to investors.
The statement in bold is completely removed from reality and needs to stop. Consumers see the signs of higher prices whenever they fill up their cars or buy groceries. In other words, consumers see higher prices at least twice a week and probably more often.
While the core/ex-food and energy data is important at the national level, it is only relevant to members of the Federal Reserve Board when they are considering interest rate policy. For everybody else, the total inflation number is a very important number.
Please adjust your reality perception accordingly.
Thanks --
Bonddad
