–CPI on Wednesday; UMich on Friday
WASHINGTON (MaceNews) – The Consumer Price Index is reported on Wednesday by the Bureau of Labor Statistics and is not expected to exhibit any sudden acceleration, particularly since its driving force, the shelter index, has been moderating for five months.
The consumer price measure plays a big role in establishing inflation expectations in the world at large though the Federal Reserve prefers the less-housing-oriented personal consumption expenditures measure.
No matter, whatever measure is used, it’s as far as ever from the Fed’s old objective of 2% annually or its new tolerance level of 3% or more until such time as the average over some unspecified time period hits target.
December’s CPI core annualized rate was 1.6%, the PCE core’s fourth quarter annual rate was 1.3%. Federal Reserve Chair Jay Powell, in his January press conference, said he wouldn’t mind seeing a little inflation.
Yet former Treasury Secretary Larry Summers sent an inflation-barbed harpoon in the direction of the President Biden’s “go big” $1.9 trillion American Rescue Plan earlier in the day that blindsided the White House economics crew. Council of Economic Advisers member Jared Bernstein was forced to offer rebuttal in the Friday White House news briefing, quoting Powell and declaring Summers “wrong.”
Not that the Biden plan is in any new jeopardy. The House Friday passed its version of the budget resolution pandemic relief envelope that the Senate had OKed just before dawn. Committees will add details and the plan may well pass, even if it never attracts any Republican votes, before enhanced unemployment benefits run out March 14.
Summers calculated the Biden plan will be delivering “in the neighborhood of $150 billion a month” to the economy, “at least three times the size of the output shortfall.”
Summers’ least generous critics say he is just peeved the new Democratic administration did not toss him at least a small ceremonial part to play, unlike when Biden was vice president and he served as director of the National Economic Council. Summers reasoned “unemployment is falling,” in his Washington Post Op-Ed. The January jobs report that came out after the publication showed only 6,000 private sector jobs created in the month, so weak it would take many years to regain full employment. Yet he warned, “There is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability.”
What a contrast to Powell. “It helps to look back at the inflation dynamics that the United States has had for some decades and notice that there has been, you know, significant disinflationary pressure for sometime for a couple of decades.” Any rebounds “are likely to be transient.” Finally, “It’s very unlikely anything we see now would result in troubling inflation.”
As for the CPI, its calibrating flywheel, shelter costs – 33.3% of the entire index — went up 1.8% for all of last year, pulling the index down from any 2% goal. As the BLS said, it was “the smallest December-to-December increase since 2010.” As for credit market pressures, junk bond yields are around 7.5%, historically low. Stocks remain at record highs. The GameStop phenomenon has largely fizzled. And every forecast is still seeing a second-half recovery despite the threat of a new wave of virus riding the more transmissible UK variant.
Other data for the upcoming week is mostly minor, no competition for the attention likely to be given the Senate trial of Donald J. Trump. Powell has a major speech on economic policy Wednesday afternoon.
Upcoming Economic Data
Tuesday, Feb 9 – 6:00a ET – NFIB small business optimism index
[Tuesday, Feb 9 – US Senate Trial of Donald Trump begins]
Tuesday, Feb 9 – 8:55a ET – Redbook same-store retail sales
Tuesday, Feb 9 – 10:00a ET – US Dec JOLTS hiring, quits report
Wednesday, Feb 10 – 7:00a – US MBA weekly mortgage applications
[Wednesday, Feb 10 – 8a ECB Pres Lagarde, Economist virtual interview]
[Wednesday, Feb 10 – 2p Fed Chair Powell to Econ Club/NY, text & Q&A]
Wednesday, Feb 10 – 8:30a – US Jan CPI
Wednesday, Feb 10 – 10:00a – Wholesale Inventories
Wednesday, Feb 10 – 10:30a – US EIA oil stocks
Thursday, Feb 11 – 8:30a – US initial jobless benefit claims
Thursday, Feb 11 – 2p – US Treasury Monthly Budget Statement
Friday, Feb 12 – 10:00a – Prelim UMich consumer sentiment
Contact this reporter: denny@macenews.com.
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