Daily update
Daily update
- The Truth About Inflation is complex (interesting fact—the price of certain economic books remains completely unchanged). US November consumer prices are due today. The US 2021 transitory inflation was about durable goods. This inflation is largely over; it peaked at 18.7% y/y in February, and was 4.7% y/y in October—the most dramatic disinflation on record.
- The second wave of US consumer prices was commodity driven. As commodity price changes have slowed, that has contributed less to the headline and core consumer price measure (commodities indirectly appear in core inflation).
- The third wave is about profit expansion. Profits have grown faster than wages for seven of the past eight quarters, and at –4% real business compensation rates for workers are the worst on record. Resilient consumer demand (funded by savings and credit card borrowing) allowed firms to expand margins, and customers have been sold a story that the price increases are justified. There is anecdotal evidence that both demand resilience and consumer acceptance of price increases are fading.
- The German ZEW economic sentiment survey is due. UK labor market data showed an unexpected rise in employment, with more older people abandoning dreams of early retirement and returning to the workforce. Real earnings in the UK remain near all-time lows.
