After whiplash of
a turnaround in most markets, Canada TSX up by 13.3% and US by 11.2%, the watch
phrase today is “sit, wait and watch” which is what the US federal reserve is
doing. That of course leads most other governments to stop talking about raising
interest rates and even thinking about cutting it.
A
quote from National Bank Financial latest report, 4 April 2019.
"... temporary
employment ─ which, like the yield curve, is a decent leading indicator ─ even
registered a quarterly decline in Q1. The other report, the household survey,
showed a large drop in employment driven by cuts in full-time positions. And
with full-timers often better remunerated than part-timers, one should not be
too surprised by the moderation in wage inflation, the latter dropping in March
to 3.2% on a year-on-year basis. The only reason the unemployment rate managed
to stay unchanged at 3.8% (despite sizable job losses in the household survey)
was the drop in labour force participation. All told, there are reasons for the
Federal Reserve to be cautious and remain in pause mode for a while.
"
Why is inflation so low?
U.S. Watch By Krishen Rangasamy, NBIN
U.S. employment costs are on the rise thanks to a tight labour market. Latest data from the Bureau of Labor Statistics indeed showed the employment cost index (ECI) rising 2.8% year-on-year in Q1, close to the cycle high reached the prior quarter. But higher employment costs are not translating into surging U.S. inflation, the annual core PCE inflation rate falling to 1.7% in the first quarter, well below the Fed’s 2% target. So why is inflation so low?
It’s not because of the services sector whose PCE deflator has been rising at a roughly similar pace to its ECI in the last 15 years. As today’s Hot Charts show, it’s the goods sector that’s not converting rising employment costs into higher goods price inflation. In fact, despite goods sector ECI rising 2.4% year-onyear in Q1, the goods PCE deflator fell during the quarter and on a year-on-year basis.
And here, blame the strong U.S. dollar which is keeping import prices under wraps. Goods producers are more subject to global competition than their counterparts in the services industry and they seem to prefer absorbing the higher costs instead of passing them on to consumers and risk losing market share to cheaper imports.
Why is inflation so low?
U.S. Watch By Krishen Rangasamy, NBIN
U.S. employment costs are on the rise thanks to a tight labour market. Latest data from the Bureau of Labor Statistics indeed showed the employment cost index (ECI) rising 2.8% year-on-year in Q1, close to the cycle high reached the prior quarter. But higher employment costs are not translating into surging U.S. inflation, the annual core PCE inflation rate falling to 1.7% in the first quarter, well below the Fed’s 2% target. So why is inflation so low?
It’s not because of the services sector whose PCE deflator has been rising at a roughly similar pace to its ECI in the last 15 years. As today’s Hot Charts show, it’s the goods sector that’s not converting rising employment costs into higher goods price inflation. In fact, despite goods sector ECI rising 2.4% year-onyear in Q1, the goods PCE deflator fell during the quarter and on a year-on-year basis.
And here, blame the strong U.S. dollar which is keeping import prices under wraps. Goods producers are more subject to global competition than their counterparts in the services industry and they seem to prefer absorbing the higher costs instead of passing them on to consumers and risk losing market share to cheaper imports.
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