Transitory? Depends On One’s Time Frame — November 6, 2023

Locator: 45959INFLATION.  

 

This is from Barron’s. If you can’t trust Barron’s ….

Link here.

All this comes at a time when inflation is decelerating. 

Core consumer price inflation has fallen from a peak of 6.5% in March 2022 to 4.1% in September. 

Using the most recent data, the three- and six-month annualized rates of core CPI inflation are now 3.1% and 3.6%, respectively. 

Those figures would have a “two-handle” were it not for the inclusion of owners equivalent rent (OER, a proxy for housing costs), which is presently running at a 7.1% rate. 

But as is widely recognized, OER embeds massive lags. Web-scraping measures of actual rents (from Zillow, for instance), suggest that annualized rent inflation has fallen to 1.1%. Put those more realistic rates into the core inflation figures, and the Fed’s target is essentially met. In the labor market, meanwhile, wage inflation is also slowing. 

The year-on-year rate of average hourly earnings has fallen to 4.1%. On a three-month moving average basis, wage inflation is down to 3.4%, a rate consistent with the Fed’s inflation target (after adjusting for trend productivity growth). 

Other data, including the latest figures on unit labor costs tell a similar story of wage moderation (notwithstanding the recent headlines made by selective union settlements).

To repeat, in case you missed it the first time:

Using the most recent data, the three- and six-month annualized rates of core CPI inflation are now 3.1% and 3.6%, respectively. 

Those figures would have a “two-handle” were it not for the inclusion of owners equivalent rent (OER, a proxy for housing costs), which is presently running at a 7.1% rate.