Forty-Seven Explains Much

Board, Blackboard, Economy, Inflation, Money

For Jay Powell’s inflation case, the University of Michigan provided it with some badly needed support. Telling the world he “flooded” it with “digital money printing” three-quarters of a year ago, actual inflation rates have instead fallen down to or near historic lows. No biggie, those in Powell’s corner say, just a matter of time before this changes (commodities), possibly a lagged response to the overabundance of US currency.

UofM reported Friday that the short run inflation expectations of consumers looking ahead one year from February 2021 perked up to 3.3%. That’s the highest in many years, nearly seven. You’d have to go all the way back in this particular data set to the average for the month of July 2014 to find an equivalent level.

And even then, not as definitive nor impressive as “highest in years” might otherwise make it seem. Longer run expectations, those derived from the same UofM survey, stuck at 2.7%. In other words, those picturing inflationary conditions for these college-based researchers can easily tell them that gasoline prices are rising now but might not stick around very long at the same rates of change.

The inflation Powell and the Economists who follow him seek isn’t this; rather, it would be sustained accelerating consumer prices including but by no means limited to oil. This would have to be broadly, not narrowly, based and it would be accompanied by dramatic labor market improvement required underneath to create it and make it widespread enough to take up so much remaining slack.

It is, for now, at least the one data point better than the alternative indicated by the CPI and PCE Deflator. And the interpretation it might offer is not being shared by these same surveyed consumers. When it comes to their overall economic expectations, which include their views on consumer price pressures in the future, Americans aren’t in a very positive mood whatsoever.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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