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Mike Konczal

@mtkonczal

Sep 29

Well that's about the best inflation print ever. Core PCE has a monthly value below 2 percent annualized (the Fed's target) for the first time since the lockdowns.

But under the hood it's even better - it's all in the right directions. Let's dive in. /1

This month had zero inflation in core goods and further slowing in services, especially non-housing services. This is exactly the scenario we want to see.

(Last month had the opposite, with negative goods masking a pop in services; why the Fed started using this distinction.) /2

Ok that's a lot of volatility in non-housing services. What's the trend? Good I'd say. The negative case is that the three- and six- month are the same, but I think that's hiding a real step-down in the level in recent months.

Worth pausing to see if it continues. /3

Read 8 tweets

Mike Konczal

@mtkonczal

Sep 13

There's going to be variance. After 2 months of core CPI inflation at or below 2017-2019 levels, we have a number that popped higher. (Though this 1-month number is still lower than any number since 2022 outside the previous 2.)

Let's dig into what's going on underneath this. /1

You can see the strong downward trend in 2023 by looking at the 3-month and 6-month values, which clock in at 2.4 and 3.7 percent respectively. Contrast that to values around 6 percent in 2022.

What's driving this, and what does it mean for the second half of 2023? /2

If we look at goods/shelter/rest-of-services, we can see goods remain at zero (even with an investment boom ongoing!). Meanwhile shelter continues to decrease, but not enough to offset a pop in services.

What's driving that this month? /3

Read 10 tweets

Mike Konczal

@mtkonczal

Sep 1

So let's jump right in: this month was right on the 2018-2019 average, but revisions lowered previous two months, especially, as you can see, for June. So labor market softening to watch here.

What's going on with that unemployment number? I have a take. /1

Unemployment rate increased to 3.8 percent. Here is a graphic of the four categories in that.

To me, and I may reverse this take with more analysis, is that this is driven more by "new entrants and reentrants" than not temporary job losers, though that number did tick up too. /2

You can see that in overall Labor Force Participation, which increased again and is so notably above CBO's prepandemic and pre-American Rescue Plan's projections. /3

Read 7 tweets

Mike Konczal

@mtkonczal

Aug 10

Solid inflation report. Today we see 2 months of prepandemic levels of core inflation in a row. I added two lines which correspond to the two previous iterations of inflation panic in this recovery - we're distinctly down.

But there's some trends underneath worth flagging. /1

First best news - another month of 0% goods inflation, stripping out used car prices (which are pulling them down more).

In the 21C through COVID, goods inflation has been around zero, completely invariant to demand conditions. Are we back? If so it realigns inflation debate. /2

It's tough to judge noise from signal in monthly analysis. This month saw a pickup in Shelter and Non-Housing Services, likely giving some hawkish vibes in commentary.

While there's some debate on how far Shelter goes down, the overall trend is still in the right direction. /3

Read 8 tweets

Mike Konczal

@mtkonczal

Jul 12

There it is: core inflation right at 2017-2019 levels. This is preloaded - and look, it's right there!

This is after ~9 months of it being stuck around 5 percent. More, when we look under the hood, there's reasons to believe this may continue. Let's dive in. /1

Looking at the three layers of inflation the Fed has emphasized (this is in units of contribution to inflation), all positive developments:
- Core goods at zero
- shelter continuing its decline
- rest of core goods has the lowest level since the recovery started. /2

I haven't said much because I didn't want to jinx it, but for the past 3 month we've had zero goods inflation outside always volatile used car valuations.

This was a big story of the recovery, the stubborn rise of goods after decades of slight deflation. Are we through this? /3

Read 8 tweets

Mike Konczal

@mtkonczal

May 10

Once again, core inflation moves sideways this month. It's lower by an important step than it was last year, but still one step above where it was pre-crisis.

However, under the hood, there's important shifts happening. Let's dive in. /1

The story you are going to hear about is in this graphic. There was a lot of debate about shelter, but it slowed yet again this month - maybe the data is finally catching up?

But goods had a giant jump up, more than offsetting that. And rest of core services remains elevated. /2

Here's where I was watching - the jump in used cars, which many analysts predicted, was partially offset by the rest of goods not seeing a price increase.

Stepping back from specifics, inflation in goods in 2023 has been higher overall than what the Fed expects. /3

Read 8 tweets

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More from @mtkonczal

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