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More Good U.S. Economic News Yesterday and Today [1]

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Date: 2022-12-01

U.S. Price Inflation Rates. Table prepared by the author from source data from the Bureau of Economic Analysis (www.bea.gov).

The latest economic reports for the U.S. continue to be good. Yesterday, economic growth (real GDP) was revised up to a 2.9% (annual rate) in the third quarter (2nd estimate). Today, the monthly inflation numbers for Personal Consumption Expenditures (PCE) were released through October. Bloomberg has this as their lead story as of 3pm EST: Powell’s ‘Most Important’ Inflation Indicator Is Cooling Down. Interest rates for 10 year Treasury Bonds (a benchmark of sorts) have fallen back from over 4% to around 3.5% over the last couple weeks as inflation fears ease. That should start showing up in at least slightly lower mortgage rates pretty soon.

The bottom line: economic growth is decent and price inflation continues to moderate. From the table above, I’ve marked a couple highlights: Gasoline prices have fallen over the last three months, although prices for Housing and utilities, Transportation services (airfares etc.), Food and beverages purchased for off-premises consumption (groceries), and Food services and accommodations (restaurants) are still rising uncomfortably fast.

The table shows monthly price changes. To convert to annual rates, multiply in your head by 12. Thus a 0.3% increase for overall PCE inflation in October would be about a 3.6% annual rate if that rate continued all year. For another example, the price index for PCE excluding food and energy — a commonly cited “core” rate of inflation — has risen at about 0.4% per month over the last several months. If that persisted all year, it would imply an inflation rate of 4.8%, which is high but not a crisis either in my opinion.

I believe much of core inflation still traces back to pandemic supply issues (which are gradually resolving) and to opportunistic price increases over and above cost increases by some companies that could get away with it (which will hopefully be resolved by competition as supplies continue to improve, or by government regulation if necessary).

Summary. The economy is on the mend and I’m starting to get more hopeful the Fed won’t overreact and create an unnecessary U.S. recession. To be sure, the world economy needs a little help from the Russian and Chinese leaderships, such as they are. Hopefully China will bring in some mRNA vaccines (I think they need roughly a billion doses, so no problem); Ukraine will continue kicking Russia’s asses back to the border; and the Russian government will sooner-rather-than-later decide to end the attacks, start making amends, and begin to join back into the global economic community.

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[1] Url: https://www.dailykos.com/stories/2022/12/1/2139443/-More-Good-U-S-Economic-News-Yesterday-and-Today

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