< Back to All Articles

March Consumer Prices, Real Earnings and Leading Indicators

Inflation and earnings are rising moderately, not minimally, but I am not sure the Fed members want to admit that.


Key Data: CPI: +0.2%; Excluding Food and Energy: +0.2%/ Real Hourly Earnings: +0.1%/ Leading Indicators: +0.2%

In a Nutshell: "Inflation and earnings are rising moderately, not minimally, but I am not sure the Fed members want to admit that."

What it Means: As long as inflation remains well below the Fed's target, the members can be patient, even if they don't use that word anymore. Well, we don't have high inflation, but neither do we have low inflation. Consumer prices rose moderately in March, led by rising energy costs. But it wasn't all oil, by any means. Vehicle costs jumped, and there were moderate increases in clothing, medical care and shelter expenses. The only major categories where prices went down were food and utilities. Services inflation is stabilizing somewhat but that is being offset by a pick up in commodity inflation. Over the year, consumer costs excluding energy are nearing the Fed's 2% target.

The battle over who should get what share of earnings is raging, and with the number unemployed and underemployed falling, the pendulum is swinging. In March, for the fourth time in five months, real average hourly earnings for all workers rose, and the gain over the year remains above 2%. While that is nothing great, it is enough to allow consumers to spend at a decent pace.

Will the economy continue to grow at a solid pace? The Conference Board's Leading Economic Index rose moderately in March, but the gains have been smaller than we saw for much of the past year. That is not a positive sign for strong growth. Indeed, it implies only an average expansion going forward. However, the University of Michigan's mid-month reading on consumer confidence rose to its second highest level in eight years. With incomes growing, that bodes well for future spending.

Markets and Fed Policy Implications: The FOMC starts its next two-day meeting in 11 days, and there is little in the data to cause the members to stop believing that patience is still a virtue. As long as they continue to believe that, they can leave us in the dark about when rate hikes will come. But the music will likely stop playing sometime soon, and the monetary authorities and investors will have to face reality. Right now, the worries are foreign, with Greece and China once again at the top of the list. It's not as if the problems in those countries had gone away, It's just that they were put on the back burner. What those concerns remind us is that the Fed's ability to return to normal interest rates faces an awful lot of hurdles, even if the U.S. economy is not one of them.


You may also like:

2016 FOMC Meeting

By Joel Naroff, President and Chief Economist, Naroff Economic Advisors.

November Commentary: 2016 Regional Economic Outlook

The region's economy should build on the solid 2015 growth and accelerate over the next year.

August Employment Report

"We've hit full employment, so is anyone surprised that firms are having trouble finding qualified workers to hire?"




Beneficial Bank Footer Logo




1818 Beneficial Bank Place
1818 Market Street
Philadelphia, PA 19103

888.742.5272
info@thebeneficial.com
The use of non-secure email is intended for general questions, inquiries and comments only. Confidential Customer information cannot be accepted electronically.


Routing No: 236075689
SWIFT Code: BENFUS33

scroll top

Please Note:

You have clicked on a link that will navigate you away from the Beneficial Bank website to an external site that may have different privacy standards. Please click ‘Continue’ to proceed or ‘Cancel’ to stay on the Beneficial Bank site.

Continue Cancel
×

Unsecure Email Disclosure

Your privacy is very important to us. We would like to advise you that Internet email is not a secure method of communication. Please do not submit any information that you consider confidential. We recommend you do not include any specific identifying information such as your social security, account, PIN numbers, date of birth, etc...

Continue Cancel
×

Please Note:

You have clicked on a link that will navigate you away from the Beneficial Bank website to an external site that may have different privacy standards. Please click ‘Continue’ to proceed or ‘Cancel’ to stay on the Beneficial Bank site.

Continue Cancel
×






USA PATRIOT Act

To help the government fight the funding of terrorism and money laundering activities, the USA PATRIOT Act requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.

What this means for you – When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license and other identifying documents.