that will force the rate below 2%. Just one more should do it.

Last edited Wed Jul 31, 2024, 03:48 PM - Edit history (1)

The inflation situation as of the release of the PCE on 7/26/24. Here is a summary table followed by the graphs.

I annualize them all to be easy to compare to each other, and to compare to the FED's 2% goal. I use the actual index values rather than the one-digit changes that are commonly reported in the media. Links to the data are with the graphs.

ALL the numbers are the seasonally adjusted ones

The "1 month" number is the change from April to May expressed as an annualized number.

The "3 month" number is the growth over the last 3 months (and then annualized). It is calculated based on the change in the index number between the latest one and the one 3 months previous. e.g. if the latest index value is 304 and the one 3 months previous is 300, then the 3 month increase is 1.333333%
. . . (304/300 = 1.01333333 => [subtract 1 and multiply by 100%] => 1.333333%)
Annualized, it is 5.4%
. . . (1.01333333^4 = 1.0544095 => [subtract 1 and multiply by 100%] => 5.44095% => 5.4%).
. . . Most people just multiply the 3 month increase by 4 to annualize it: 1.333333%*4 = 5.333333% => 5.3% which isn''t technically correct (it leaves out compounding) but it is close for small percentage changes.

"Regular" is the "headline" number that has "everything"

"Core" is the regular with food and energy removed (The Fed prefers this as a basis for projecting FUTURE inflation)

Finally, the main summary table
All are seasonally adjusted and ANNUALIZED
PCE-Personal Consumption Expenditures Price Index (Fed's favorite inflation measure)
CPI-Consumer Price Index (retail)
PPI-Producer Price Index (Wholesale prices)
Links to the data are with the graphs below



Average real (i.e. inflation-adjusted) hourly earnings are up over the past 2 years and are above the pre-pandemic level:
. . . # Real average hourly earnings of production and non-supervisory workers: https://data.bls.gov/timeseries/CES0500000032
. . . # Real average hourly earnings of private sector workers: https://data.bls.gov/timeseries/CES0500000013

And now the graphs, in the following order:

* Core PCE and Regular PCE (Core PCE is the Fed's favorite for projecting FUTURE inflation)

* Core CPI and Regular CPI

* Wholesale inflation - Core PPI and Regular PPI (so to see the 7/12 update, page down to the last graphs)

CORE PCE through JUNE that came out 7/26/24 (PCE=Personal Consumption Expenditures price index)
CORE PCE (seasonally adjusted): https://fred.stlouisfed.org/series/PCEPILFE
BEA.gov News release: https://www.bea.gov/ and click on "Personal Income and Outlays" or "Personal Income"

This is the one that the Fed weighs most heavily. The Fed weigh the PCE more heavily than the CPI. And in both cases, they weigh the CORE measures higher than the regular headline measures for projecting FUTURE inflation

I usually don't include the 6-month rolling average, but I had it handy, and it is fascinating how it gives such a different picture than the rolling 3 month average. The big reason for the difference is the huge January month-over-month increase (6.2% annualized), which is in the 6 month window, but not in the 3 month window. When January drops out of the 6 month window next month, it should look a lot different (i.e. it will show a downturn barring a shocker in next month's report)


Regular PCE through JUNE that came out 7/26/24
Regular PCE (seasonally adjusted): https://fred.stlouisfed.org/series/PCEPI
BEA.gov News release: https://www.bea.gov/ and click on "Personal Income and Outlays" or "Personal Income"



CORE CPI through June that came out 7/11/24
CORE CPI (seasonally adjusted) http://data.bls.gov/timeseries/CUSR0000SA0L1E
BLS CPI news release: https://www.bls.gov/news.release/cpi.nr0.htm



The Regular aka Headline CPI through June that came out 7/11/24 (CPI=Consumer Price Index)
Regular CPI (seasonally adjusted) https://data.bls.gov/timeseries/CUSR0000SA0
BLS CPI news release: https://www.bls.gov/news.release/cpi.nr0.htm



Some Additional CPI Series of Interest
Shelter, which is pretty much all rent -- either regular rent or "owners' equivalent rent", has been a problematic issue -- because changes in new rents take several months before they appreciably move the CPI (because of the inertia of 11 months of older rents). It is the largest component of the Core CPI and one of the largest of the regular CPI. Through May, shelter remained elevated at 0.4% month over month for several months. Fortunately, in June it fell to a 0.2% increase. Year-over-year, shelter is up 5.1%

Shelter: https://data.bls.gov/timeseries/CUSR0000SAH1

Core Inflation less Shelter: https://data.bls.gov/timeseries/CUSR0000SA0L12E
^--This is up 0.0% for a 2nd month in a row, and a 3 month annualized average of +0.8% (compare to core of +2.1%)

Click on "More Formatting Options" on the upper right hand of screen, and on the page that appears, choose some or all of: "1-Month Percent Change", "3-Month Percent Change" and "12-Month Percent Change".

Headline CPI and Fed Rate Action

November 2019 - June 2024

The first tentative little quarter point rate increase was March 17, 2022, 12 months after year-over-year inflation went north of 2% in March 2021, and had reached 8.5%.

I'm fond of the 3 month averages as they are an average of 3 data points (so can't be easily dismissed as a "one off", unlike a single month-over-month figure), and they have much more recency than 12 month averages (yoy). I think of them as kinda a smoothed version of month-to-month.

FedFunds Target Rate (I used the upper end of the 0.25% width bracket): https://www.federalreserve.gov/monetarypolicy/openmarket.htm


WHOLESALE INFLATION (PPI - the Producer Price Index)

https://www.bls.gov/news.release/ppi.nr0.htm

As for which core PPI measure, since the BLS highlights the one below in its reporting (as opposed to the one without food and energy), then I guess I should do likewise.

CORE PPI (excluding food, energy, trade services) through June that came out 7/12/24:
CORE PPI (seasonally adjusted) http://data.bls.gov/timeseries/WPSFD49116



===========================================================

Regular PPI through June that came out 7/12/24 ( includes "everything" ):
Regular PPI (seasonally adjusted) http://data.bls.gov/timeseries/WPSFD4

The graphs from that & JMP look similar, but that summary table looks like Minitab, still formatted for dot matrix printers.
I used both but greatly preferred JMP, especially for very large datasets. That was especially true when running model iterations of multivariate systems, also called a "Desirability Analysis".
Way faster, and more elegant output graphics.

font. Thankfully it's a small table, so not much work even the first time I made it (and for each inflation report update, all I have to do is update one line and swap rows because the table is kept in chronological order).

Sadly, the summary table can't be simply copy and pasted from Word into a DU post, even if one uses the MONOSPACE tags. That's because DU software compresses 2 or more spaces in a row into one space. So I have to make an Imgur out of it once its nice and pretty.

I do the graphs in Excel 2010 (that's how far behind I am). In Excel, to adjust the ranges to include the new month and exclude the old month (I make the ones that I post 13 months in length), that's a little bit of a pain to do for each and every graph -- in today's posting, that was 5 PCE graphs (the CPI and PPI graphs were done back in mid-July, so I'm just using the Imgurs made back then)

For both graphs and the summary table, I then make an Imgur of them (one for the summary table, and one for the Regular set, and one for the Core set), so that's kinda a pain.

I've never heard of Minitab or JMP, to be honest. They look interesting ...

Thanks for the question and info

Even though Excel has added a lit of stats functionality, it is much less powerful & less user friendly for more involved analysis.
Perhaps you've heard of SAS, which started as a mainframe math analysis tool.
JMP was the microcomputer version of SAS. It came out in the early 90s, I think. It's gone through several new versions, with each one adding power & more techniques. By around 2012, it was not the little brother of SAS. It was simply an equal that ran on less powerful machines than mainframes & parallel workstations.
It even has actuarial techniques built-in, which I used in "side work" like analyzing safety & environmental incidents, both intracompany & industry wide, to trigger awareness sessions because an incident became too likely to occur.
I had the safety people "pfffttt" at my predictions, until the 3rd one in a row happened within a week of what I predicted. Then, they started listening.
I used Minitab when I went back for my MBA in the mid-90s. (No such software existed when I was in grad school fir chemistry. Wish it did.) My focus was in economics & finance.
I didn't like it as much as JMP because, for a very long, they never recorded the core operating program. Just kept hanging new options onto the same outdated core.
The company had corporate licensing for both, but I only used JMP. So did the people who worked for me. I think they knew I didn't like Minitab.

Consumer price inflation rose 21.78% between January 2020 and June 2024.