NYLE SPEAKS! – POWER OF THE DOLLAR
• August 2016 reading of CPI – (Consumer Price Index)
• Released by Bureau of Economic Analysis (BEA)
• CPI reads on INFLATION which gives us read on FED
• FED DUAL MANDATE – Max Employment, Low and Stable Inflation
• FED prefers Personal Consumption Expenditure Price Index, slightly different than CPI, but close
CPI COMES IN TWO DIFFERENT FLAVORS
• Headline CPI
o Includes full basket of goods and services
• Core CPI
o Excludes food and energy
• Food and energy prices are volatile so excluding helps long-term view
• BOTH CAME IN HOT
o Core reading +2.3
o Headline reading of +1.1
• NOT CONVINCING ENOUGH FOR THE FED
• Core inflation has not been over 2.5% since 2007, and has not been over 3.0% since 1995.
• The highest year-over-year core reading since data started being tracked in 1958 is 13.1% in April 1980. That same month also saw the highest core reading, at 14.6%.
• Shelter, medical care, and educational books and supplies are among the categories that have seen the largest increase in the past year.
• Energy commodities are among the categories showing a sharp decline.
o Energy is joined by meat, poultry, fish, and eggs (avian flu had pushed egg prices substantially higher a year ago); infant and toddler apparel; and personal computers and equipment (which are adjusted for quality), which have all seen large drops as well.
• Despite a small pickup of inflation, inflation expectations, as measured by the University of Michigan’s Consumer Sentiment Survey, remain near all-time lows.
• As measured by headline CPI, the purchasing power of a dollar has fallen in half since 1988.