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Whip It! Univ of Michigan Inflation Remains Unchanged at 2.6% (But Declines To 2.5% For 5-10 Yr Ahead)

This is a syndicated repost published with the permission of Snake Hole Lounge. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

The University of Michigan survey of consumers just released their montly update on inflation expectations. If only The Fed’s Janet Yellen was watching consumer inflation expectations because consumers expect more inflation than The Fed’s inflation target of 2%. Apparently, The Fed is having trouble whipping inflation above 2%.

Consumer inflation expectations remained at 2.6% for August, but the expectations for inflation down the road fell to 2.5%.

michinfl

Of course, 2.6% inflation is higher than The Fed’s target inflation rate of 2%. All inflation measures of core prices (excluding home prices, education, healthcare, etc) are under 2%.

inflationugh

As I mentioned, home prices are left out of the core inflation calculation. But if home prices WERE included, for example, we could have substantially greater inflation since YoY home price growth ranges from 5.7% to 6.9%. Wage growth is only about 2.36 – 2.5%. This indicates that home prices are growing around 2.5x wage growth.

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It is clear that consumers are pricing in non-core inflation into their forecasts, such as home prices, rent, food, healthcare, tuition, textbooks, childcare, etc.

costs since 1996

Whip it (inflation) good, Janet!

yellenwhipit

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