Morning Report: Consumer inflation remains muted

Vital Statistics:

 

Last Change
S&P futures 2787 2
Eurostoxx index 372.85 -1
Oil (WTI) 57.27 0.47
10 year government bond yield 2.65%
30 year fixed rate mortgage 4.32%

 

Stocks are higher with a general “risk-on” feel to the tape. Bonds and MBS are down.

 

Lael Brainard speaks this morning and then the Fed enters its quiet period ahead of next week’s FOMC meeting.

 

Consumer inflation rose 0.4% MOM in February. Ex-food and energy, the index rose 0.4% and is up 2.1% YOY. Inflation remains under control, which should give the Fed the leeway to hold the line on rates next week. Falling energy prices at the end of 2018 helped keep the index under control, and we are seeing evidence that medical costs are finally stabilizing. Medical goods fell 1% MOM and services were flat. Stabilizing medical costs should translate into stable health insurance costs, which leaves more room for wage increases.

 

medical cpi

 

Retail Sales in January rose 0.2%, a touch higher than expectations. Those looking for a big rebound after December’s anemic numbers were disappointed. Given the strong consumption numbers in Q4 GDP, the holiday shopping season remains a bit of a mystery. The government shutdown is a possible explanation, and while it certainly hit the shops at Tyson’s Corner, the rest of the nation was unaffected. Note that the Fed’s consumer credit report showed that revolving credit increased only 1.1% in December and 2.9% in January, both well below run rates we have seen in the months leading up to it

 

Nancy Pelosi doesn’t support impeaching Trump. This is probably a tacit admission that the Mueller report isn’t going to contain anything we don’t already know.

 

Small business optimism rebounded in February. Earnings trends fell as many contractors were temporarily sidelined due to the government shutdown. Employment trends also slipped, probably for the same reason. Plans for expansion rose, however they are still below levels we saw in 2017-2018, which were extremely strong. Actual hires were the highest in years, and small business still finds a shortage of qualified workers. I am curious as to whether the “shortage of qualified workers” means (a) nobody around knows how to do the job, (b) nobody around knows how to do the job and can pass a drug test, or (c) nobody around that knows how to do the job will accept what I am willing to pay.

Author: Brent Nyitray

Why do you need new bands? Everyone knows rock attained perfection in 1974. It's a scientific fact. - Homer Simpson

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s