So... The past 3 months, inflation has been 7.24%

[progree]

8. Unfortunately the latest 3 month PCE data is only slightly better than the CPI data

Last edited Mon May 13, 2024, 06:05 AM - Edit history (1)

The PCE also shows a strong elevation over the last 3 months.

The rolling year-over-year graph of the PCE (and CPI) look very nice, but they pretty much bury the surge of the last 3 months in 9 months of older mostly lower numbers.

In a 12 months rolling average, any month's increase is watered down by a factor of 1/12, so even if the latest month-over-month number is large, the change in the 12-month average looks like a little bump up -- and people just say, oh it’s a little bump up due to seasonal factors (the numbers are seasonally adjusted by the way).

Even a large 3 month increase gets watered down by a factor of 1/4 in a 12-month rolling average.

I'm not the only one that looks at shorter periods like 3 and 6 months to get a better read on CURRENT or RECENT inflation:

https://finance.yahoo.com/news/new-inflation-reading-reinforces-feds-higher-for-longer-stance-144840988.html

Fed Chair Jay Powell warned about today's PCE reading on April 16, saying he didn’t expect it to show progress and that measures of inflation on a three- and six-month basis are now more elevated.

(emphasis added)

Regular PCE through March that came out 4/26/24
PCE: https://fred.stlouisfed.org/series/PCEPI


The FRED graph at https://fred.stlouisfed.org/series/PCEPI by default shows the index numbers, and that's what I use to do my calculations. Here are the 4 most recent PCE index numbers:

Dec 2023: 121.448
Jan 2024: 121.962
Feb 2024: 122.374
Mar 2024: 122.769

(One can get the values from mousing over the graph, or from clicking the " (+ more) " link at the "Observation: Mar 2024: 122.769" just above the graph at the far left side.

The latest 3 month increase is 1.0877% (122.769/121.448 = 1.0108771 => 1.0877%)

Annualized, the 3 month increase is: 1.0108771^4 = 1.044223 => 4.42%

One can also show other displays of the FRED graph:

Click "Edit Graph" and choose, under "Units" "Percent Change from a Year Ago" and it looks paradaisical, pure utopia, thanks to this rolling 12 months display's ability to bury recent high numbers with 9 older months of mostly lower numbers.

But select "Percent change" which is month-to-month change, and its quite an upturn: (I set the time period from 2022-09-01 to 2024-03-01 to focus on the last 1 1/2 years)

Reading from the graph (data values pop up under the mouse):

Dec'23: 0.12531%, Jan'24: 0.42323%, Feb: 0.33781%, Mar: 0.32278%

The last 3 sum to 1.08382% or simple average of 0.36127%

Annualizing the 3 month sum produces a 4.41% increase (1.0108382^4 = 1.04406 => 4.41%)

Here is the Fed graph with the above settings (Percent change and time period 2022-09-01 to 2024-03-01) :

IMGUR:

Less accurately: Clicking on the " (+ more) " under the " Observation: Mar 2024: 0.3) " at the top left above the graph yields their rounded data points:

Dec'23: 0.1%, Jan'24: 0.4%, Feb: 0.3%, Mar: 0.3%.

Adding up the last 3 months is 0.4% + 0.3% + 0.3% = 1.0% which annualizes to 4.0% by simply multiplying by 4. Or to 4.07% using proper math ( 1.004 * 1.003 * 1.003 = 1.01003, 1.01003^4 = 1.040740 => 4.07%)

Here are the latest annualized numbers from the PCE and CPI, both the regular and the core variety:

The "1 month" number is the change from February to March, expressed as an annualized number.

"Regular" is the "headline" number that has "everything"

"Core" is the regular with food and energy removed (The Fed prefers this as a basis for projecting FUTURE inflation)

4/26/24 PCE (Fed's favorite inflation measure)

REGULAR 3 month: 4.4%, REGULAR 1 month: 3.9%; CORE 3 month: 4.4%, Core 1 month: 3.9%;

4/10/24 CPI-Consumer(retail) inflation

REGULAR 3 month: 4.6%, REGULAR 1 month: 4.6%; CORE 3 month: 4.5%, Core 1 month: 4.4%;

All four 3 month averages increase at or above 4.4% (annualized), more than double the Fed's target 2%.

All of the inflation graphs are at: https://www.democraticunderground.com/10143231474#post1

Edited to Add (7am EST 5/13):

Johnny2x2X often reminds us that wages are at least keeping up:

Average real (i.e. inflation-adjusted) hourly earnings are up over the past 2 years and are above the pre-pandemic level:
. . . # Real average hourly earnings of production and non-supervisory workers: https://data.bls.gov/timeseries/CES0500000032
. . . # Real average hourly earnings of private sector workers: https://data.bls.gov/timeseries/CES0500000013

The other thing is that I expect the 3 month rolling average increases of the core PCE and the regular PCE to turn down if the April month-over-month numbers come in the same as the March ones (+0.3% month-over-month for both the core PCE and regular PCE). That's because the very high January number drops out of the 3 month window. The April numbers for the PCE come out in late May.

Before that, we see the new CPI numbers this Wednesday May 15. I expect the same thing: a little turndown of the rolling 3 month average increases.