Decade High In This Inflation Measure
CAMS Weekly View from the Corner – Week ending 8/10/2018
August 13, 2018
If the citizenry experiences continued wage and income growth rates while the price of goods and services put in similar growth rates does that leave the everyday household much improved?
We have intermittently looked in on the inflation front for this very reason. Importantly, the above general backdrop is a storyline the everyday household has experienced in recent decades not just recent years.
As a case in point, a not-so-fun historical fact is that real wages – that is wages after inflation is accounted for – peaked in the early 1970’s. With this, we do have a multi-decade on-going story as an economic backdrop for households generally.
Various inflation measures were updated this past week with one in particular catching our attention.
The above is known as a “core” inflation measure whereby the Consumer Price Index is identified with the price of food and energy taken out.
This is not to minimize the importance and cost of said components to the everyday household but rather these two components are typically much more volatile in their price movements than other areas.
With this, the idea of a core rate, which typically moves more predictably, is looked at as well. If the core rate is trending notably this speaks to a developing inflation theme rather than a blip. Said developing theme is certainly what we have unfolding at this time.
The latest level of just over 2.3% for this core rate is a decade high. Admittedly, the 2.3% is registering this high by the slimmest of margins. Regardless, the trend is what is important and we certainly do have a trend to point to here in 2018.
With this inflation backdrop continuing the on-going expectation of another Federal Reserve interest rate hike yet in 2018 remains in place.
I wish you well…
Director, Market Research & Portfolio Analysis
Portfolio Manager, CAMS Spectrum Portfolio
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