There is no good news on inflation or spending in recent data.
The Personal Income and Outlays Report for February 2025 shows stronger than expected inflation, and weak real spending.
I produced some new charts today to show what’s happening on the inflation front.
PCE Inflation Detail Month-Over-Month
- PCE: +0.3 Percent
- PCE Goods: +0.2 Percent
- PCE Services: +0.4 Percent
- Core PCE: +0.4 Percent
Core PCE excludes food and energy.
The Fed cares more about services than goods, and more about core than overall PCE. Thus, 0.4 percent on both the core and services was a disaster.
And Tariffs are highly likely to impact PCE goods inflation to the upside.
PCE Inflation Detail Year-Over-Year
PCE Year-Over-Year Change
- PCE: 2.5 Percent
- Core PCE: 2.8 Percent
- PCE Goods: 0.4 Percent
- PCE Services: 3.5 Percent
Year-over-year goods bottomed 5 months ago, PCE 5 months ago, and core 8 months ago. Services bottomed last much but is a general disaster.
Five Measures of Inflation Percent Change Year-Over-Year
Progress has also stalled on the CPI. Since September of 2024, the year-over-year CPI rose from 2.4 percent to 2.8 percent.
Core CPI was 3.2 percent in July of 2024. Progress is a mere 0.1 percentage points in seven months.
Rent is still in a downturn but 4.1 percent is nothing to brag about. And shelter is about 35 percent of the CPI.
Personal Income Strong, Details Weak, Spending Anemic
Personal income was strong in February, up 0.9 percent. However, all of the strength was in Personal Current Transfer Receipts (PCTR).
PCTR is income for which no work was performed. Examples include Medicare, Medicaid, Food Stamps, disability payments, and Social Security.
Real Personal Income excluding PCTR was up a mere 0.1 percent. In determining recessions, the NBER looks at this component.
For discussion and several charts, please see Real Disposable Personal Income Up 0.5%, Real Spending Up 0.1% in February
Consumers seem to be hunkering down in February as income outpaces spending.
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Gasoline prices fell 1 percent, airline fares fell 4 percent but shelter rose 0.3 percent.
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Also falling gasoline and airline fare prices are more of a sign of a slowing economy and falling demand than anything else.
Almost Everything Has Doubled Under The Democrats/Rhinos Warmongers.
Post-Bush/Cheney Patriot Act + Post-Obama/Biden NDAA = UniParty Warmonger$$$
Housing, Rent, Insurance, Property Taxes, Health Care, Groceries,
Gasoline, Diesel, Vehicles, Utilities, Wood/Building Supplies, Etc.!
Core Inflation – Excludes ‘Volatile’ Food & Energy Prices.!
Prices Will Now ‘Triple’ Under Sanctions & Tariffs.!
USAID – About Propaganda – Coups – Color Revolutions – Regime
Change – BioWeapons – War/Drug Profit$$$
March 27, 2025: US Debt Will Grow to a Staggering 156 Percent of GDP by 2055
Dear Mish, You said it this Hog Wash again today.
Please recheck what JayW said yesturday.
“Again, for the millionth time, Intragovernmental debt counts, because it’s ALWAYS paid off with public debt. ALWAYS.
$36.2 / $29.9 = 121%”
Powell has transitioned the U.S. banking system into a new regime, he has now joined Canada, the United Kingdom, Australia, New Zealand, Hong Kong and Sweden as a Central bank conducting monetary policy with just interest rates and not legal reserves.
The money stock can never be managed by any attempt to control the cost of credit. The creation and destruction of money is not self-regulatory, it is self-reinforcing, The only tool, credit control device, at the disposal of the monetary authority in a free capitalistic system through which the volume of money can be properly controlled is legal reserves.
Using a price mechanism, pegging policy rates, to ration Fed credit is non-sense (“a price mechanism is a system by which the allocation of resources and distribution of goods and services are made on the basis of relative market price”).
The effect of current open market operations on interest rates is indirect, varies widely over time, and in magnitude. What the net expansion of money will be, as a consequence of a given change in policy rates, nobody knows until long after the fact. The consequence is a delayed, remote, and approximate control over the lending and money-creating capacity of the banking system.
Contrary to Dr. Milton Friedman, there is no “Fool in the Shower”. Nothing has changed in > 100 years. Contrary to economic theory, & Nobel laureate, Dr. Milton Friedman and Anna J. Swartz (“Money and Business Cycles”), monetary lags are not “long & variable” (A Monetary History of the United States, 1867–1960, published in 1963). The lags for monetary flows, M*Vt, i.e. the proxies for (1) real-growth, & for (2) inflation indices (for the last 100 years), are historically, mathematical constants.
Inflation will peak in September 2025.
Interest is the price of credit. The price of money is the reciprocal of the price level. I.e., monetarism has never been tried.
The demarcation was in 1965, when the interbank demand deposits reserve requirements were removed for the member banks.
That’s when William McChesney Martin Jr. re-established stair-step case functioning (and cascading), interest rate pegs (like during WWII), thereby abandoned the FOMC’s net free, or net borrowed, reserve targeting position approach in favor of the Federal Funds “bracket racket”.
see: 1965: The Year the Fed and LBJ Clashed | Richmond Fed
Difficult to feel sorry for the fed as they have to live with its policies and priorities.
Living in the midwest we have seen our gas prices go up by .20 cents in the past three weeks in anticipation of the tariffs. Not a healthy situation as the tariffs are not even in place yet, so it is really simple price gouging.
Regarding economic activity slowing? It is and fast where I live! I sold two highly appreciated properties last year and was going to invest in another rental property with some acreage that borders my farm. About a month ago I pulled the plug on buying it and the sellers are basically begging me to buy it as the market has gone suddenly quiet. They have lowered the price by $70k to me, but, given the rapid slowdown, I do not see making an offer until I’m looking at a 40% discount.
Lots of dry powder so I’m talking my book to a degree. To me it was only rational that the tariffs would harm the economy and drive stagflation into our homes.
My relatives in Canton, Ohio say the same thing – my newphew is in real estate, and in just the last month, he has noticed a major slowdown, of not only sales, but rentals which he also does.
“Stagflation and s*&t.”
I have been tracking unemployment announcements on Google News, and they are coming hot and heavy – especially in companies with goverment contracts – never mind the actual government reduction headcounts. Unemployed people (or those soon to be unemployed) don’t buy (fill in the blanks) houses, cars, etc. As I mentioned before these government statistics are rear view mirrors. I think the economy is slowing quickly in real time. Prices will ease when there is no demand.
Trump recognized our fragility as a nation. He isn’t a dictator. To survive he transferred power to the states (federalism) and to the Europeans to defend themselves and handle their own problems. He cut the deep state. He reduced our gov Responsibilities. He is fully committed to cutting debt. We are paying more to the banks, to the insurance co to the health sector and for rent. By cutting tens of thousands bureaucrats in the service sector the gov will cut the PCE service inflation. Real PI minus Real PCTR is rising. The spread between Real wages in the industrial sector and the service sector will rise.
Yes, that’s why we just raised the debt limit by another $4 trillion…
The current US gov debt: $36.2T. The reps want to raise debt by $4T, but if Chuck says no Trump will cut gov fat to the bones. He will keep HIS gov comatose as long as he wants. AOC competes with Chuck. AOC and Bernie trashed him. The dems are more confused, tired and rudderless than ever before. All they can do is mocking, puking, barking and attacking Trump with frivolous lawsuits;
Pavlov dogs: the private sector does the same. Co cut fat fast, but keep their muscles intact.
“Trump cut the Deep State.” If only. Aside from irrelevant stuff like gay marriage, the CIA runs this place. Any serious attempt to cut off their money and Trump and Vance would both have some tragedy befall them. President Mike Johnson would follow orders.
At least $25 million American tax dollars have been spent on his golfing weekends in the last three months. The guy is not watching out for your tax dollars. He’s spending it on himself.
B.R.O.K.E..
Isn’t FIAT wonderful.
The FED is obsolete, and is nothing more than the contiuation of a JP Morgan New York bankers free lunch.
There is no way out ad nothing more to say.
Stagflation will make government bonds a poor investment also, double trouble.
Transient phenomena should surely be constantly our laser focus for all our attention, the rest of reality be damned.
too much navel gazing and we lose the big picture.
How about a discussion of auto sales in Uganda and how rubber prices in Burma are affecting snow fall in Antartica and global warming.
lost in the weeds, again…
What’s the big picture?
An attack on Iran would probably push oil a lot higher especially if Iran blocks the Straight of Hormuz. That would work its way through all costs.
To say nothing of getting badly burned in the process by hypersonic missiles. Now that everyone knows aircraft carriers serve as a deterent at best and are otherwise obsolete in that theatre.
Falling demand in the face of rising prices will curb inflation. The FED shouldn’t do anything when the law of supply and demand is working as it is supposed to.
Everyone else being poorer will definitely help my inflation pressures.