The US Inflation Tracker captures the trends that provide context in today’s economy. There may be some relief in sight as inflation continues to decline.
Aggregate Earnings Are Slowing
Wage gains and job growth have slowed, and we can see this by tracking aggregate weekly payrolls. This concept is simply the product of average hourly earnings, average weekly hours worked and employment. It represents total income earned, and tends to correlate quite well with nominal GDP growth while also acting as a proxy for consumer spending power.
With aggregate weekly payroll growth easing to +3.69%, this rate is much more consistent with a 4% nominal GDP growth range and more compatible with an inflation rate closer to the Federal Reserve’s 2% target.
Aggregate Weekly Payrolls vs. Personal Consumption Expenditures (12/31/14–12/31/22)
Source: Natixis Investment Managers Solutions, Bloomberg
Disinflation Momentum Is Accelerating
The December Core Consumer Price Inflation print came in light at +0.30% month-on-month, marking the third consecutive soft reading. More importantly, the three-month seasonally adjusted annualized rate dropped to +3.14%, getting ever so close to the Fed’s stated objective of 2%.
Why use the three-month seasonally adjusted annualized rate? Because the year-on-year number reflects stale data from 12 months earlier. Using more recent data provides a better glimpse into the current trajectory while also highlighting the acceleration in the rate of change, given the shorter time reference.
Inflation is certainly rolling over, and should these trends persist, the Fed’s target of 2% inflation could be within striking distance before the end of the year.
Core Consumer Price Inflation Momentum (11/30/12–12/31/22)
Source: Natixis Investment Managers Solutions, Bloomberg.
US Inflation Tracker – January 2023
This in-depth chart deck highlights historical data related to:
• Personal consumption
• Inflation surprises
• Goods and services
• Base effects and surges
• Supply chain, shipping, and restocking
• Housing market pressures
• Wage pressures
• Inflation expectations
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