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CORE INFLATION IS PUSHING ABOVE EXPECTATIONS

2 March 2012 by Sober Look 3 Comments

By Walter Kurtz, Sober Look

Economists have once again underestimated a pickup in inflation. The core (excluding food and energy) PCE Deflator is pushing toward 2%. The chart below show survey vs. the actual numbers.

The Fed pays attention to this number more than the headline PCE Deflator, which was also underestimated today (2.4% vs. 2.3% estimated). And this is by far the preferred inflation gauge to the CPI because it focuses on what the consumer actually buys vs. a set basket tracked by the CPI. With fuel prices elevated and driving season not yet here, we may see further increases in inflation.

Yes, one can argue that inflation is still subdued, but it is certainly not consistentwith the 5-year treasury yielding 0.92% and the 10-year yielding 2%.

 

PCE Deflator Core (YOY)

 

 

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Sober Look was founded by Walter Kurtz, a New York based hedge fund manager and credit markets specialist.

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Comments
  • Anonymous

    the pce is going up and if you add back food and energy, which is a big part of a normal persons expenditures… you get significant real world inflation even without the transmission mechanisms in LTRO and QE… well I guess now that it is finding it’s way into commodities and not just stocks, we are seing a backdoor transmission… just not mainstreet transmission.

    03/02/2012 at 6:28 PM
  • KainIIIC

    Hmm. Does this bode well for the economy, meaning growth will increase along with core inflation? Or is this just more misery for the consumers… Perhaps in a week we’ll know..

    03/02/2012 at 9:43 PM
  • boatman

    as with anything, it is all how you measure it.

    my experience in a trip to purchase anything other than a house[something that i will never do again anyway] is in direct conflict with almost ALL numbers attributed to inflation.

    these bogus numbers are contructed by monetorists, socialists, and other fans of central economic planning, something never successfully done in the history of man.

    one record that will remain intact, and might even be recognized by the man in the street in the coming great reset.

    03/05/2012 at 9:53 AM