The Week in Review: April 17, 2023
Latest Inflation News Offers Some Encouragement
The slowdown in the rate of inflation last month was aided by food and energy prices. The Consumer Price Index rose 0.1% in March versus February amid a 3.5% decline in energy prices and no change in food prices (U.S. Bureau of Labor Statistics data). Grocery stores fell 0.3%, while food at restaurants jumped 0.6%.
Food and energy can be volatile, contributing to higher prices or reducing the rate of inflation.
Economists consider energy and food but also look at what’s called core inflation. The core CPI removes food and energy. Last month, the core CPI rose 0.4%. It is up 5.6% versus one year ago and remains well above the Fed’s annual target of 2.0%.
The CPI is up 5.0% versus one year ago. A gradual moderation in core inflation is helping, but headline inflation is also getting some help from the drop in energy prices versus one year ago when Russia’s invasion of Ukraine forced a spike in oil prices.
April may be more problematic since energy and gasoline prices have turned higher this month.
The overall slowdown in the CPI is encouraging, but inflation remains a problem. However, according to the U.S. BLS, the Producer Price Index reflects a faster slowdown in inflation at the wholesale level.
Take a moment to review the graphic below. Two data points are provided, the annual change in the core CPI and the 3-month annualized rate for the core CPI.
You’ll notice the 3-month annualized rate is more volatile, as we’re simply taking the change in inflation over 3 months and annualizing it.
It detects changes in the trend sooner, and it is more forward-looking, but it is noisier and may provide false signals, which happened during the 2010s.
More recently, the data highlights that the 3-month annualized rate has been far more volatile than the annual change, but we are seeing lower peaks and lower valleys.
In other words, progress has been uneven, and the rate remains too high, but we are seeing gradual improvement.
Please let me know if you have questions or would like to discuss any other matters.
Two for the Road
While U.S. government debt is perhaps the most widely held class of security in the world, 21.8% of the public debt, or $6.87 trillion, is owned by another arm of the federal government itself. That includes Medicare; specialized trust funds, such as those for highways and bank deposit insurance; and civil service and military retirement programs. But the biggest chunk of those “intragovernmental holdings” belongs to Social Security. As of the end of January, the program’s retirement and disability trust funds together held more than $2.8 trillion in special non-traded Treasury securities or 9% of the total debt. -Pew Research, February 14, 2023
In 2021, India exported more in software ($133 billion) than Saudi Arabia did in oil ($113 billion). -Level Up, February 6, 2022
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