Tuesday, March 12, 2019

February 2019 CPI

Inflation took a step down this month.  There is little need to repeat my monthly mantra.  This takes us a step further to a situation where consumption may be waning, but the Fed thinks inflation is near their target because of high imputed rent inflation.  And, they think the risk is toward more inflation because of the low unemployment rate and Phillips Curve thinking.

Trailing 12 month core inflation is at 2.1%.  But, core-non-shelter inflation is down to 1.2%.  (Sorry, not shown.  I'll update when I can.)  TIPS forward inflation is also below 2%, although it has recovered from its recent lows, but that is also a bad sign, since that suggests expected non-shelter inflation is below 1% for the next 5 years, unless there is a building boom around the corner.


  1. "The first quarter isn't off to a huge start. Retail sales rose a mere 0.2% following a sizable negative revision in Dec."

    Okay, so housing and retail are slowing. So Europe is slowing, So China is slowing.

    So the only inflation in the US is in housing, and US housing policy, local and national, is to suppress housing production.

    So what?

    I will tell you about an A-bomb:

    On falling neutral real rates, fiscal policy, and the risk of secular stagnation
    Lukasz Rachel and Lawrence H. SummersThursday, March 7, 2019

    Summers comes close to dismissing monetary policy once rates get low, which they are already.

    He is a little funny on fiscal, laughing at the MMT crowd on one day, but then advocating more federal spending the next.

    Summers does not even address the obvious question: What about money-financed fiscal programs. Housing is not on the agenda either.

    I am beginning to wonder if macroeconomists (as a group) have been wrong on every major issue of the day.

    1. Housing (they are absent).
    2. Money policy (always worried about too-loose and not too-tight).
    3. Chronic and large trade deficits (balloon asset values, corner the Fed).
    4. Federal deficits (?). Not sure here. Japan has them and no inflation. Summer says we need deficits.
    5. Money-financed fiscal programs. I think this is the answer (along with abolishing property zoning) but I form a mighty party of one.

    Good luck USA!

  2. Benjamin,

    I thought economists are universally in favour of more housing? (Or at least relaxed zoning.) It's just that they all agree, so there's not a good paper in it. It's publish or perish for academics, after all.

    (Just like they are approximately all in favour of free trade. But you couldn't get a paper praising free trade published in any academic journal these days.)

    Economists don't seem to worry about trade deficits too much, do they? Isn't it accepted that they are mostly about net saving and investment, and not about trade?

    Money-financed fiscal programs are a bit silly. We could do with some government austerity instead (until the state is as small as in say Singapore). But I agree that we can reasonably disagree on that.

    1. Matthias:

      Oh come. The amount of ink or pixels expended on Trump's trade tariffs vs. the much larger structural impediments known as property zoning must be a 100 to 1. At least in the United States, economists are not interested in property zoning as a topic. Our host, Kevin Erdmann, had to write an entire an pioneering book about this topic.

      I like Singapore. But if you think Singapore is a free market economy, please see my links and comments on Scott Sumner's blog. Singapore is a dirigiste economy--- that is what Singapore economists who live in Singapore say when they write for Singapore economic journals.

      Evidently, it is only western economists who believe that Singapore is a free market nirvana.