#Bidenomics Update: Inflation Hot, Housing Starts Not, Retail Sales Go Splot!

Humming right along, that’s us.

Look at this chipper little administration gnome cheering us along our way!

Why, the Treasury Secretary assured us yesterday, you’ll soon be living in a land of sweet milk and Biden honey, where you won’t notice a thing!

Yeah. She really said that.

And I wanna believe her – don’t you?

JUST KIDDING

About that inflation snek they keep trying to paper over as they wrestle with it under the porch – it’s not going so well. 

On Tuesday, the Consumer Price Index (CPI) was released to mega moans of dismay, as the core inflation numbers contained came in much hotter than analysts expected and rate cut hawks were praying for. The core CPI inflation rate was expected to fall and didn’t, while the monthly CPI inflation rate came in 20 basis points higher than they expected.

…If this is a one-off reading, the administration can brush it off as an aberration. Or revise it away, as they do with so many other inconvenient statistics. But if these numbers hold up and continue, even for the next few months…

Chris and Enda posted earlier about the political ramifications of CPI picking up, and it looks like nearly all major basic categories for consumers increased at a faster pace or stayed firm in January.

While gas prices decelerated, electricity bills were higher. Grocery prices were higher, particularly for dairy, fruits and vegetables, and beverages. (Dining out was also pricier). Shelter prices reaccelerated. Used car prices eased, but the price to insure a car was higher. Daycare and tuition prices increased at a faster pace.

Everyone was on the edge of their seats for the Bureau of Labor Statistics (BLS) release of the wholesale price data this morning. Would it show a trend or that the CPI has been a one-off, and maybe it wasn’t time to panic?

Hearts stopped when it hit. Hot, hot, HAWT.

Seasonally adjusted wholesale prices measured by the Producer Price Index went up 0.3% in January, more than expected, according to a Friday Bureau of Labor Statistics report.

For the 12 months ending in January unadjusted wholesale inflation, or headline PPI, was 0.9%. Producer prices for services drove the increase, while goods prices actually declined 0.2%.

“The index for final demand services moved up 0.6% in January, the largest increase since rising 0.8% in July 2023,” the BLS said in a statement. “In January, most of the advance is attributable to prices for final demand services less trade, transportation, and warehousing, which climbed 0.8%. The index for final demand trade services moved up 0.2%.”

Again, as with the CPI, it was lower energy prices saving our bacon on this number.

Like the CPI, this was also accompanied by yet another, although less dramatic, swoon from stocks on a core PPI rise that was .4% higher than predicted.

Stocks declined Friday after yet another hot inflation report stoked fears that Federal Reserve rate cuts may not arrive until later than anticipated this year.

…It’s been a roller coaster week for stocks, with investors carefully assessing the direction of the U.S. economy and when the Federal Reserve may decide to lower rates. On Tuesday, the Dow posted its biggest daily decline in nearly a year after January’s headline consumer price index reading came in at 3.1%, higher than the 2.9% economists polled by Dow Jones were expecting.

Consumers have been telling the administration for the past two years what the numbers show. 

I hope someone at the Fed is watching the front door.

So with CPI and PPI, you can pretty much calculate the PCE inflation number we’re going to get on Feb 29.
That number will annualize over 5.15%
Inflation is back..

— Frog Capital (@FrogNews) February 16, 2024

But that was only the beginning of the discouraging Friday news. Remember how, in the comments the other day, we were all talking about mortgage rates, insane housing prices, and the housing crunches in our areas?

This news is an indication that there is nothing in the pipe that is going to help alleviate any of that any time soon.

Biggest monthly drop in housing starts since April, 2020.
But we have plenty of housing right?
The storm that is now coming ashore was so damn avoidable… pic.twitter.com/7mfd08ulk4

— Frog Capital (@FrogNews) February 16, 2024

Speaking of those hard-pressed, supposedly “disconnected” consumers, there was a collective gulp out of the retail sector this morning, too.

Hey – maybe those folks out there in Marshalls, TJ Maxx, and Kohl’s land really are having a hard time.

Consumer spending fell sharply in January, presenting a potential early danger sign for the economy, the Commerce Department reported Thursday.

Advance retail sales declined 0.8% for the month following a downwardly revised 0.4% gain in December, according to the Census Bureau. A decrease had been expected: Economists surveyed by Dow Jones were looking for a drop of 0.3%, in part to make up for seasonal distortions that probably boosted December’s number.

However, the pullback was considerably more than anticipated. Even excluding autos, sales dropped 0.6%, well below the estimate for a 0.2% gain.

The sales report is adjusted for seasonal factors but not for inflation, so the release showed spending lagging the pace of price increases. On a year-over-year basis, sales were up just 0.6%.

WARNING, WILL ROBINSON

…However, worries linger that stubbornly high inflation could take its toll and jeopardize prospects going forward.

The question becomes jeopardize WHAT prospects going forward  – or maybe whose?

The economy? The election? Joe Biden’s?

All of the above?

Considering it’s CNBC, I’ll take Door Number 3, Monty.

Some guy on CNBC said “there’s no need to panic” based on this PPI number 😂 pic.twitter.com/APY5fAz3YR

— QE Infinity (@StealthQE4) February 16, 2024

For sure, there are some cock-eyed optimists looking at still-strong employment numbers (new unemployment claims came in at 212K vice the predicted 220K) and a rebound in the manufacturing sector, as the Fed’s Philly and New York surveys both came in better than expected – all indicators to the upside.

So we wait and see what happens in the next few months.

It’s not like we were going anywhere anyway.