As we wait for the Chairman to speak, let’s review another key indicator of our economic condition.
The recently released Consumer Price Index rose a disturbing 0.5% in July, exceeding forecasts. Such prices are up 3.6% during the past 12 months, exceeding the 2.3% rise in average hourly earnings for all employees on private nonfarm payrolls.
To no ones surprise…higher energy costs led the way, with overall energy costs rising 19.0% during the past 12 months. Expectations that sluggish domestic and global economic growth could lead energy prices even lower than what has developed in recent weeks helps sooth some of the inflation anxiety in financial markets.
Food costs rose an estimated 4.2% during the past year, which most of our restauratuers would say is understated. The weak U.S. dollar hasn’t exactly helped either.
The “core” measure of consumer inflation (which excludes volatile food and energy costs) rose 1.8% during the past 12 months. This measure is within the Fed’s perceived long-term “core” target range of 1.5% -2.0% annually. At the same time, the 1.8% core rise is three times what is was as recently as last October.
Most forecasters, including the Fed, expect consumer inflation pressures to moderate in coming months as economic growth most everywhere seems to be slowing. Should inflation pressures not moderate, any new stimulus from the Fed would be limited.
We’ve discussed before the unpredictable nature of inflationary pressures. They may seem to ebb and flow, like the tide at the coast, and it may not always appear to impact you, but they steadily erode your purchasing power.