CPI and PCE: Two Measures of Inflation and Fed Policy
The BEA's Core Personal Consumption Expenditures Chain-type Price Index for January, released last week, shows that core inflation is below the Federal Reserve's 2% long-term target at 1.53%. The January Core Consumer Price Index release is currently lower, at 1.41%. The Fed is on record as using Core PCE data as its primary inflation gauge.
February ISM Manufacturing Index: Continued Expansion
This morning the Institute for Supply Management published its monthly Manufacturing Report for February. The latest headline Purchasing Managers Index (PMI) was 60.8, an increase of 2.1 from 58.7 the previous month and in expansion territory. Today's headline number was above the Investing.com forecast of 58.8 percent.
February Markit Manufacturing: "Production growth near six-year peak but price gauge highest since 2011"
The February US Manufacturing Purchasing Managers' Index conducted by Markit came in at 58.6, down 0.6 from the 59.2 final January figure. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.
How to Illustrate Planning Risks to Clients
Clients face three big risks in retirement from the sequence of returns, volatility and asset shortfalls. Michael Hirthler, the founder and chief investment officer at Pennsylvania-based Jacobi Capital Management, explained to me how he uses the Big Picture app to explain those risks to his clients.
February Moving Averages: Up 2.6% from January
Valid until the market close on March 31, 2021.
The S&P 500 closed February with a monthly gain of 2.61% after a loss of 1.11% in January. At this point, after close on the last day of the month, four of five S&P 500 strategies are signaling "invested" — Vanguard Total Stock Market ETF (VTI), Vanguard FTSE All-World ex-US ETF (VEU), Vanguard REIT Index ETF (VNQ), and Invesco DB Commodity Index Tracking (DBC) — unchanged from last month's quadruple "invested" signal.
America's Driving Habits as of December 2020
"Travel on all roads and streets changed by -10.3% (-28.1 billion vehicle miles) for December 2020 as compared with December 2019. Travel for the month is estimated to be 244.1 billion vehicle miles." The 12-month moving average was down 0.98% month-over-month and down 13.2% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) was down 1.04% month-over-month and down 13.5% year-over-year.
Michigan Consumer Sentiment: February Final Slightly Lower
The February Final came in at 76.8, down 2.2 from the January Final. Investing.com had forecast 76.5. Since its beginning in 1978, consumer sentiment is 10.9 percent below the average reading (arithmetic mean) and 9.9 percent below the geometric mean.
The Big Four: Real Personal Income in January
Personal Income (excluding Transfer Receipts) in January fell 0.14% and is down 0.6% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) MoM was down 0.48%. The real number is down 2.0% year-over-year.
Real Disposable Income Per Capita in January, CARES Act 2.0
With the release of this morning's report on January Personal Incomes and Outlays, we can now take a closer look at "Real" Disposable Personal Income Per Capita. At two decimal places, the nominal 11.33% month-over-month change in disposable income is cut to 10.95% when we adjust for inflation. This is an increase from last month's 0.55% nominal and 0.18% real increases last month. The year-over-year metrics are 14.38% nominal and 12.74% real. Increases can be attributed to the second round of funds distributions through the CARES Act.
PCE Price Index: January Core at 1.53%
The BEA's Personal Income and Outlays report for January was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index was up 0.34% month-over-month (MoM) and is up 1.45% year-over-year (YoY). Core PCE is now at 1.53%, below the Fed's 2% target rate.
February Regional Fed Manufacturing Overview
Five out of the twelve Federal Reserve Regional Districts currently publish monthly data on regional manufacturing: Dallas, Kansas City, New York, Richmond, and Philadelphia. The latest average of the five for February is 18.1, up from the previous month's 13.6. It is well below its all-time high of 25.1, set in May 2004.
Q4 GDP Second Estimate: Real GDP at 4.1%
The Second Estimate for Q4 GDP, to one decimal, came in at 4.1% (4.09% to two decimal places), a decrease from 33.4% (33.444% to two decimal places) for the Q3 Third Estimate and a slight increase from the Q4 Advance Estimate of 4.0%. Investing.com had a consensus of 4.2%.
Headline Durable Goods Orders Up 3.4% in January
The latest new orders number at 3.4% month-over-month (MoM) was better than the Investing.com 1.1% estimate. The series is up 6.3% year-over-year (YoY). If we exclude transportation, "core" durable goods was up 1.4% MoM, which was better than the Investing.com consensus of 0.7%. The core measure is up 8.5% YoY.
Pending Home Sales Retreat in January
Today the National Association of Realtors released the January data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales took a step backward in January as inventory constraints continue to hold back prospective buyers."
Kansas City Fed Survey: Manufacturing Climbed Higher in February
The latest index came in at 24, up 7 from last month's 17, which indicates expansion in February. The future outlook increased to 34 this month from 24. Here is a snapshot of the complete Kansas City Fed Manufacturing Survey.
December S&P/Case-Shiller Home Price Index: National Index up 10.4% YoY NSA
With today's release of the December S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index saw a 1.25% increase month over month which is cut to 1.1% with inflation adjustment. The non-seasonally adjusted national index saw a 10.4% YoY increase.
Richmond Fed Manufacturing: Continued Improvement in February
Fifth District manufacturing activity showed continued growth in February, according to the most recent survey from the Federal Reserve Bank of Richmond. The composite index remained at 14 in February and indicates expansion.
FHFA House Price Index: Up 1.1% in December
The Federal Housing Finance Agency (FHFA) has released its U.S. House Price Index (HPI) for December. U.S. house prices were up 1.1 percent on a seasonally adjusted nominal basis from the previous month. Year-over-year the index is up 11.4% on a non-seasonally adjusted nominal basis. After adjusting for inflation and seasonality, the index is up 0.82% in December and up 10.22% year-over-year (seasonally adjusted).
Weekly Gasoline Prices: Regular and Premium Up Again
As of February 15, the price of Regular and Premium were up twelve and thirteen cents, respectively, from the previous week and have risen for the 13th consecutive week. According to GasBuddy.com, California has the highest average price for Regular at $3.57 and Mississippi has the cheapest at $2.27. The WTIC end of day spot price closed at 61.70, up 2.7% from the last week.
World Markets Update: February 22, 2021
All eight indexes on our world watch list posted gains through February 8, 2021. The top performer is Hong Kong's Hang Seng with a gain of 7.67%, India's BSE SENSEX is in second is with a gain of 7.53% and Tokyo's Nikkei 225 is in third with a gain of 7.08%. Coming in last is London's FTSE with a gain of 0.98%.
CFNAI Components: Employment, Production, Consumption, Sales
The Chicago Fed's National Activity Index, which we reported on this morning, is based on 85 economic indicators drawn from four broad categories of data:
- Production and Income
- Employment, Unemployment, and Hours
- Personal Consumption and Housing
- Sales, Orders, and Inventories
Chicago Fed: "Index suggests economic growth increased in January"
Led by improvements in personal consumption-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to +0.66 in January from +0.41 in December. All four broad categories of indicators used to construct the index made positive contributions in January, but three categories decreased from December. The index’s three-month moving average, CFNAI-MA3, decreased to +0.47 in January from +0.60 in December
Existing-Home Sales Up 0.6% in January
This morning's release of the January Existing-Home Sales showed that sales rose to a seasonally adjusted annual rate of 6.69 million units from the previous month's revised 6.65 million. The Investing.com consensus was for 6.61 million. The latest number represents a 0.6% increase from the previous month.
New Residential Housing Starts at 1.58M in January
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for January new residential housing starts. The latest reading of 1.580M was below the Investing.com forecast of 1.658M and a decrease from the previous month's upwardly revised 1.680M.
New Residential Building Permits: Up Another 10.4% in January
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for January new residential building permits. The latest reading of 1.881M was up 10.4% from the December reading and is above the Investing.com forecast of 1.678M.
Philly Fed Mfg Index: Continued Growth in February
The latest Manufacturing Index came in at 23.1, down 3.4 from last month's 26.5. The 3-month moving average came in at 19.6, down from 19.9 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 39.5, down 13.3 from the previous month's 52.8.
Retail Sales Up 5.3% in January, Beats Forecast
The Census Bureau's Advance Retail Sales Report for January was released this morning. Headline sales came in at 5.3% month-over-month to one decimal and was well above the Investing.com forecast of 1.1%. Core sales (ex Autos) came in at 5.9% MoM.
NAHB Housing Market Index: "High Demand Offsets Higher Costs – For Now"
The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook. The latest reading of 84 is up 1 from last month's 83.
January Producer Price Index: Core Final Demand Up 1.2% MoM
This morning's release of the January Producer Price Index (PPI) for Final Demand was at 1.3% month-over-month seasonally adjusted, down from a 0.3% increase last month. It is at 1.7% year-over-year, up from 0.8% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 1.2% MoM, up from the previous month and is up 2.0% YoY NSA. Investing.com MoM consensus forecasts were for 0.4% headline and 0.2% core.
Empire State Mfg Survey: Modest Growth in February
This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at 12.1 was an increase of 8.6 from the previous month's 3.5. The Investing.com forecast was for a reading of 6.0.
An Inside Look at the GDP Q4 Advance Estimate
The accompanying chart is a way to visualize real GDP change since 2007 and uses stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself. Here is the latest overview from the Bureau of Labor Statistics.
Middle-Class Wages in January 2021: Where Are We Now?
We've updated this series to include the January release of the Consumer Price Index as the deflator and the monthly employment update. The latest hypothetical real (inflation-adjusted) annual earnings are at $43,310, down 5.1% from 45-plus years ago.