Blog 3
Sticky inflation happens in situations where prices do not adjust as quickly to supply and demand changes. This article discusses how fewer Americans applied for unemployment benefits. Despite signs of slowing economic activity, the Federal Reserve is unlikely to start cutting interest rates before June 2024, and other data on Thursday showed a larger-than-expected increase in producer prices last month. In addition, core retail sales are unchanged from previous months. Not only that, but US Treasury prices also decreased. It is about how higher interest payments may be crowding out consumer spending(consumption). Therefore, the revised data for continued claims are consistent with a job market that is showing some signs of loosening yet still strong. In the article, it says, “based on the CPI and PPI data, economists estimated that the core PCE price index increased 0.3% in February after gaining 0.4% in January. Core inflation is forecast to rise 2.8% in February, which would match January's gain”. Finally, it talks about how stock trades were lower. Retail sales for automobiles, gasoline, building materials as well as food services were unchanged in February.
I think data is often a reaffirming way of assessing the true state of the economy with some quick analysis, but it is hard to deny that there still seems to be a prevailing attitude about how the economy is "failing" or doing poorly. Maybe this is due to the election year and the accompanying politicization of our world. But it is interesting to see these numbers are unchanged relatively.
ReplyDeleteThere are two ways that people can take this information: On one hand, the recent inflation numbers have shown that the US economy is currently strong. Inflation numbers are coming in a little higher than expected, but nothing that is of major concern yet. Unemployment numbers are also currently low. However, some economists are worried about maintaining price levels while people are losing jobs. Unemployment has slightly gone up when looking YTD, and historically this means that unemployment will continue to increase. Thus, the fed is fearful that cutting interest rates could sent the US into a recession.
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