The market seemed to like inflation report issued Wednesday. Core inflation – the measure closest to the one the Fed prefers (PCE less food and energy) that gets updated at the end of this month – was lower than the previous four months. The last six months run at 3.2% annual inflation. PCE-F&E generally runs a little cooler than Core inflation.
I display a table and six graphs that I use to follow the trends in inflation. I added a graph on Hourly Wages.
Details:
The two most widely-reported measures of inflation are Seasonally-adjusted inflation and Core inflation.
Seasonally-adjusted inflation: the last six months average 3.0% annual rate. This is the most widely reported measure of inflation.
Core inflation excludes volatile energy and food components. This is similar to the measure favored by the Federal Reserve. The last six months run average to 3.2% annual rate. The next three months of inflation replace three high months in 2024.
Personal Consumption Expenditures (PCE) excluding Food and Energy is the measure of inflation that the Federal Reserve Board favors. The graph shows the data ending November; the data for December is issued at the end of this month. The last six aim at an annual rate of 3.2%.
== History of 12-month inflation rates ==
Full-year inflation measured by CPI-U shows that inflation for the last 12 months is at 2.9%. This measure of inflation will likely fall in the next several months. This measure of inflation was high in the first three months of 2024.
== Producer’s Price Index ==
The change in producer prices will impact consumer inflation. PPI for December remained low declined. The rate for the last six months is -0.5%. annual rate.
== Services ==
Inflation for services declines in December. The last six months average to 3.7% annual rate.
== Wages ==
Hourly wages have increased by 4.3% over the past year. Workers have seen a real increase in inflation.
Conclusion: Core inflation for December was lower than the prior four months. The last six months of Core Inflation are at an annual rate of 3.2%. The next three months for Core inflation replace three high months in 2024.