Inflation

Tomorrow's ECI Could Be Bad News

Jul 28, 2022 1 min read paid

Q2's Employment Cost Index (ECI) comes out tomorrow morning. In his press conference yesterday, Fed Chair Jerome Powell assessed inflationary pressures in the labor market. He said: "There's some evidence that wages, if you look at average hourly earnings [AHE], they appear to be moderating. Not so yet from the other wage measures. And we'll be getting the employment compensation index measurement I

Ed Yardeni

It's A Banana!

Jul 28, 2022 1 min read

Real GDP fell 0.9% (saar) during Q2, following a 1.6% decline during Q1. That's a "growth recession" in our opinion. It is widely believed that two consecutive quarters of declining real GDP is an outright recession. However, it won't be an official recession until the Dating Committee of the National Bureau of Economic Research says so. They might not do so since

Ed Yardeni

More Signs of A Mid-Cycle Slowdown

Jul 21, 2022 1 min read paid

The latest batch of economic indicators are in line with our mild recession outlook (a.k.a., a mid-cycle slowdown). We now have June's Leading and Coincident Economic Indexes (LEI & CEI) and July's NY and Philly regional business surveys, which are conducted by five of the 12 Federal Reserve district banks. The averages of the five tend to closely track the national manufacturing purchasing managers

Ed Yardeni

Is the Stock Market Discounting Peak Inflation?

Jul 20, 2022 1 min read

The S&P 500 rose yesterday by 2.76% to 3936.69. It is up 7.4% from its June 16 low of 3666.77. At that low, the index was 23.4% below its January 4 record high. Now it is down 17.9% from the record high. The S&P 500 index rose above its 50-day moving average yesterday. The Nasdaq also rose above its 50-day

Ed Yardeni

NY Fed Survey Shows Easing Pricing Pressures

Jul 19, 2022 1 min read

The NY Fed's July business survey showed significant declines in the prices-paid and prices-received diffusion indexes . Six-month-ahead expectations are down even more for both indexes (charts below). We will be closely examining the July business surveys conducted by four other Federal Reserve bank districts for confirmation that inflationary pressures are abating nationally. Philly will be released on Thursday. Dallas, Richmond, and KC will be out next week. We

Ed Yardeni

Homebuilders' Sentiment Plummets

Jul 18, 2022 1 min read

The National Association of Home Builders/Wells Fargo Housing Market Index, a survey designed to gauge market conditions, found builder sentiment dropped 12 points to 55 in July. That marked the largest one-month drop in the survey’s 37-year history with the exception of April 2020, when the reading plummeted 42 points to 30 during the pandemic lockdown. The S&P 500 Homebuilding Index, which is highly correlated with

Ed Yardeni

The Rent Is Too D@mn High!

Jul 13, 2022 1 min read

The Fed's ultra-easy monetary policies, in response to the pandemic, caused home prices to soar, and now rents are soaring. Over the 24 months through May, the median single-family home price is up a whopping 44.5%. This year's jump in mortgage rates only exacerbated the affordability problem facing first-time would-be homebuyers. As a result, many of them have no choice but to rent. Today'

Ed Yardeni

Inflation Remained Persistent In June

Jul 13, 2022 1 min read

The bottom line on June's headline CPI release is that it was higher than expected and showed few signs of peaking. The 9.1% y/y jump beat expectations of an 8.8% increase and exceeded May's 8.6%, though the core rate edged down from 6.5% in March to 5.9% in June. Moreover, June's inflation was broader-based than widely anticipated: (1)

Ed Yardeni

Will June's CPI Inflation Rate Be the Peak?

Jul 12, 2022 1 min read paid

June’s CPI will be out tomorrow. Bloomberg is showing consensus estimates of up 1.1% m/m (8.8% y/y) for the headline and 0.6% m/m (5.8% y/y) for the core inflation rates. Both y/y estimates are up from May’s rates of 8.6% and 6.0%.

Ed Yardeni

Is the Bond Market Anticipating Peak Inflation?

Jul 11, 2022 1 min read

The 10-year US Treasury bond yield has recently stabilized around 3.00%. That calm reflects a remarkable increase in the comparable TIPS yield that has been offset by a drop in the expected-inflation component of the nominal yield. What's going on? Consider the following: (1) Until the past few weeks, the daily TIPS yield has been highly correlated with the monthly real bond yield, defined as the spread

Ed Yardeni

Gold Losing Its Shine

Jul 9, 2022 1 min read

Gold hasn't been a good hedge against inflation over the past highly inflationary year. That's not surprising since this precious metal's price is inversely correlated with the 10-year TIPS yield and with the trade-weighted dollar (charts below): (1) The TIPS yield fell to a record low of -1.19% on November 9, 2021. It then moved higher, especially this year, closing at 0.72%

Ed Yardeni

Goldilocks & the Fed

Jul 8, 2022 1 min read paid

Was today’s June employment release a Goldilocks report? Payroll employment rose 372,000, and wages increased 0.3%—not too hot, not too cold. The problem is that consumer prices have been rising faster than wages for the past year or so. As a result, the purchasing power of our Earned Income Proxy for private wages and salaries in personal income has been significantly eroded by higher prices (chart)

Ed Yardeni

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