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  • The Truth About Inflation is a complex subject, worthy of a book. The challenge for economists with today’s US consumer price data is stripping away the fiction to get at the reality. The largest part of the consumer price index is owners’ equivalent rent, which rose 6.3% in December. It is a price no one pays, and it means middle-income homeowners have a lower cost of living increase and thus more spending power.
  • Of note in the detail today will be evidence of profit-led inflation continuing to retreat (the transitory durable goods price inflation has been in deflation for 13 months, and is not a focus). Food prices may also matter because these are a political focus. So-called “shrinkflation” is captured by the data. Rounding up of prices has been prevalent, and can be seen in the very rapid vending machine inflation.
  • The UK Office for National Statistics has warned repeatedly about the quality of labor market data (an honesty other countries’ statisticians might learn from). The latest data showed slowing average earnings and low unemployment.
  • The ZEW survey is due from Germany (European surveys are nearly always too pessimistic). The US NFIB small business survey is also due, and has a tendency to mirror Republican views.
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