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Thursday, March 19, 2015

Waiting for inflation $spy $bac $xom

The Fed targets 2%. This seems to be the measure they will use to raise rates.

Sucking the wind from the sails was the last PPI report. Too many components declined.

Component breakdown:

While components have declined employment started to accelerate. 

But that only matters if employment is viewed as a leading indicator.

Will employment be a leading indicator? Unemployment is at lows, and the Fed eluded to a 5.0-5.2% rate may in fact be the rate that matters.

Labor participation rate is used to brush off the unemployment rate. But labor participation is about the same spot as the early 80s, and the PCE was still pretty high.

Yellen acknowledged economic improvements, and that trends are currently above expectations, yet we have this deflationary concern. 

Will global stimulus mitigate the concern or is it just a matter of time before the jobs data starts trickling down to the component costs?

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