Thursday, April 28, 2011

QI PCE Core Inflation Close to 50-Year Low of 0.9%

According to today's BEA report, the annual inflation rate for Personal Consumption Expenditures (PCE) for the first quarter of 2011 is 1.6%, well below (less than half) of the average 3.6% rate back to 1960 (see top chart above).  Annual inflation for the PCE Index less food and energy is 0.90% for the first quarter, just slightly higher than the 0.8% in QIV 2010, which was 0.8% (see bottom chart above).  The only two quarters in more than fifty years going back to 1960 when the core PCE Inflation was less than 1% were the last two quarters.  

So I ask: Where's the inflation? It's sure not showing up yet in PCE inflation, and core PCE is suggesting deflationary, not inflationary, pressure.  

11 Comments:

At 4/28/2011 7:14 PM, Blogger Bernie Ecch said...

Here, taken from a tweet by Steve Forbes

http://www.marketwatch.com/story/the-9-places-where-inflation-is-crushing-us-2011-04-28

 
At 4/28/2011 9:09 PM, Blogger VangelV said...

So I ask: Where's the inflation? It's sure not showing up yet in PCE inflation, and core PCE is suggesting deflationary, not inflationary, pressure.

Gasoline. Electricity. Water. Insurance. Healthcare. Grains. Beef. Pork. Lamb. Doesn't the Fed count any of these price increases as legitimate? And don't you go shopping?

 
At 4/28/2011 9:16 PM, Blogger The High Priest said...

Yeah.. no kidding. All of my bills are inflating except for natural gas. I'm not sure how you could miss it.

 
At 4/28/2011 11:42 PM, Blogger Rufus II said...

Of course; everyone is sending all their money to Saudi Arabia, and Venezuela. There's no money left to run up "core" prices.

GDP Q1 1.8%.

Q4 likely negative.

 
At 4/29/2011 5:32 AM, Blogger geoih said...

Aggrogate! Aggrogate! That will make the economy great! Rah, rah, rah!

 
At 4/29/2011 9:05 AM, Blogger morganovich said...

that is an awfully incomeplete assessment of the data.

"core" is a nonsense metric. do you not eat or drive? that's like saying "it would be really cold in here if we did not have a raging fire going. it's just another way to ignore inflation by pretending the things that go up in price don't exist. what's more "core" than food?

"PCE price index -- The price index for PCE increased 0.4 percent in March, the same increase as in February."

that's a 5% annualized inflation rate, which is hardly low.

the MIT BPP shows an even higher YTD annualized rate:

2.32% inflation YTD = 7.1% annualized.

this shows no signs of abating at present.

there's your inflation.

and as vangel mentioned, weight healthcare appropriately in the "core" and you'd see a marked jump in inflation as well.

 
At 4/29/2011 9:28 AM, Blogger juandos said...

From Reuters: Consumer spending rises on higher prices

 
At 4/29/2011 1:08 PM, Blogger Eric H said...

Gas has never been cheaper! It is only $0.10/gallon now....if you have pre-1965 dimes.

Ben Bernanke was right during his speech. Inflation was only 2%....PER HOUR.

 
At 4/30/2011 1:06 PM, Blogger Benjamin said...

Inflation is not a concern at this time. Bernanke should think about boosting the economy. Japan is the example of what happens when a central bank gets too fussy about inflation.

 
At 4/30/2011 1:29 PM, OpenID American Delight said...

And when the housing market was wildly over-inflated, did we 1) have the data, 2) see the data, 3) believe the data? To some degree, but the experts thought we could have a "soft landing" until the bottom fell out of the economy.

It's still wise to have some diversification in your portfolio to hedge against the chance of inflation & deflation.

 
At 5/01/2011 8:46 PM, Blogger VangelV said...

Inflation is not a concern at this time. Bernanke should think about boosting the economy. Japan is the example of what happens when a central bank gets too fussy about inflation.

Wow. So many errors in so few words. Congratulations, if there were an ignorance contest you would be among the leaders.

First, inflation is a concern. The USD has lost more than 80% in the three decades since Nixon defaulted by closing the gold window.

Second, it is not Bernanke's job to boost the economy. He is supposed to keep the purchasing power of workers and savers from falling.

Third, Japan was never concerned about inflation. It borrowed and spent with the best of them. The problem is that you can't correct a balance sheet recession by borrowing and spending.

Forth, Japan owed most of its debt to its citizens and ran strong trade surpluses. It had more leeway and more time to do its damage. The US is dependent on external financing of it debt and deficits and has little leeway.

 

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