This post shows that we continue to track to 4% inflation, twice the Federal Reserve’s target. Why do I track inflation? I track the recent trends in inflation since high inflation hurts the ability of companies to earn appropriate returns and grow. High inflation consumes spending power of our portfolios, lowering our chances of increased annual Safe Spending Amounts (SSAs, Chapter 2, Nest Egg Care (NEC). Going deeper: I display a table and the same four graphs that I’ve used to follow the trends in inflation. I include two more that I added last month.
The two most widely-reported measures of inflation are Seasonally-adjusted inflation and Core inflation.
Seasonally-adjusted inflation increased by 0.41% in April. The rate over the last six months translates to an annual rate of 3.3%. Inflation over the past 12 months has been 5.0%. We would expect that historical rate to decline in the next two months, since May and June of 2022 averaged 1.1% inflation per month.
Core inflation excludes volatile energy and food components. The level and trend are more stubborn. Inflation was +0.37% for the month, and inflation for the last six months translates to an annual rate of 4.8%.
Personal Consumption Expenditures (PCE) excluding Food and Energy was issued this morning. This measure of inflation is one that the Federal Reserve Board favors. The increase this month was greater than last month and greater than April 2022. The last six months equate to 4.2% annual rate.
== History of 12-month inflation ==
Full year inflation measured by the CPI-U shows that inflation for the last 12 months has been 4.9%. The historical 12-month rate has declined each month from its peak of 9.1% last June.
== Producer’s Price Index ==
I add this graph. The change in producer prices will impact consumer inflation. PPI over the last six months is well below 0%. It’s below 0% for the past 12 months.
== Services ==
I add this graph. Inflation for services is running fairly steadily at +6% annual rate.
Conclusion: The Core rate of inflation in February was 0.4%. The annual rate of inflation, based on the six recent months of lower inflation is more than 4%. This is about the same as last month. Other indicators of inflation are mixed: the producers price index for goods is running no greater than 0% while the services price index is running in excess 6%.