Minutes released yesterday from the last FOMC meeting revealed some committee members at the Fed hold concerns that inflation may remain depressed at below-target levels for an extended period.
By Peter Martin
Friday, November 21, 2014
The committee in general anticipates lower energy prices working to keep near term inflation low, but ‘a few expressed concern that inflation might persist below the committee's objective for quite some time.’ There are certainly few indications of inflation warming up in October’s consumer price data, which was released today. The headline level of the Consumer Price Index (CPI) was unchanged following September’s 0.1% rise, while the core level (which excludes the volatile components of food and energy prices) firmed 0.2%. Looking at prices on a yearly basis, the index was 1.7% higher, still short of the Fed’s 2% objective.
Jobless claims were little-changed last week. Initial claims nudged 2000 lower to 291,000 (though the week prior was revised higher from 290,000 to 293,000). Today’s numbers are of added significance as they are part of the sample week for the official government report for the month of November and though jobless claims remain at low levels, the comparison with October isn’t favourable. The four-week moving average has risen to 287,500, some 6,250 higher than it was in the October sample week.
The pace of growth in the manufacturing sector is easing according to the flash reading of Markit’s manufacturing PMI, which slipped to 54.7 from October’s mid-month level of 56.2. Though still indicative of expansion, this is one of the lower results for 2014. Given that the manufacturing sector was dragged to its lowest ebb this year by inclement weather back in January, the extreme snowstorms being endured by the north-east currently do not bode well for fourth quarter activity, with heavy snows, freezing temperatures and travel disruption expected to persist to the weekend.
In stark contrast to Markit’s flash PMI, the Philly Fed’s manufacturing survey came in extraordinarily high. Manufacturing in the Mid-Atlantic region covered by the Philly Fed is soaring, judging by the rise in the General business Conditions Index, which leaped to 40.8 in November from October’s already-strong level of 20.7. The forward-looking component of new orders surged from 17.3 to a remarkable 35.7 and employment ramped from 12.1 to 22.4. Both the Philly Fed survey and the PMI flash report are compiled from anecdotal evidence rather than objective hard data, meaning we will have to wait for later reports in order to make a firm analysis of how the manufacturing sector is faring this month.
The day’s economic releases have been something of a mixed-bag, more uninspiring than outright disappointing, but the health of the US economy still appears to be in a much healthier state than other economies. By mid-afternoon in New York, the leading stock indices had made small gains: the Dow Jones was up 0.10% or 17 points at 17,702, while the S&P 500 index rose 0.15% to 2051.8.
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