Submitted by Atlas Indicators Investment Advisors on January 17th, 2018
Prices paid by Americans were higher in December 2017 according to data from the Bureau of Labor Statistics. However, the rates of change were mixed. For instance, the month-over-month Consumer Price Index (CPI) decelerated to just 0.1 percent after hitting 0.4 percent a month earlier, and the year-over-year tally slowed to 2.1 percent from 2.2 percent. However, core-CPI (which excludes food and energy because of their volatility) accelerated on both a monthly and annual basis. For the month, it reached 0.3 percent after hitting 0.1 percent, and the 12-month rate of change increased to 1.8 percent from 1.7 percent.
December’s headline figure was heavily influenced by housing and food. Roughly 80 percent of the monthly uptick was attributed to the shelter index; this subset rose 0.4 percent after climbing 0.2 percent in November. Eating got more expensive in the period no matter where you dined. Food at home rose 0.1 percent, erasing the prior period’s decline. Moving higher for the sixth consecutive time, food away from home continued its rising trend, matching the penultimate month’s increase of 0.2 percent. Energy prices helped offset some of the rising pressure as the gasoline index fell 2.7 percent, but this only partially made up for the 7.3 percent hike a month earlier.
Inflation has some room to grow before the Federal Reserve’s stated target is reached. Of course, their explicit goal of two percent annual price increases is measured from another index Atlas follows, but the CPI provides a good proxy for price trends. Simply put, the economy could heat up a little more before the central bank begins worrying about being too accommodative and needing to slow things down. With moderate inflation, low unemployment, and America’s output growing steadily, Goldilocks could be the most appropriate way of describing the current state of our nation’s economy.
