Inflation Heading Toward Soft Landing

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Personal consumption expenditures data for May suggest clear skies on both the inflation and income fronts: The PCED has been gliding steadily earthward and looks on course to reach the Fed’s 2.0% y/y destination for it by year-end. Consumer spending has been showing no sign of retrenchment, and consumption trends jibe with our rosy economic outlook. Moderating inflation with a robust economy argue against the Fed’s easing this year. So do stimulative fiscal policy, low unemployment, and the ramifications of cutting rates on inflation and financial markets. We’re in the small camp that would prefer not to see the federal funds rate lowered this year.

[@ttuck9603]

Great update! Amazing add to staff - rock star!

[@pauljcomp6621]

Nice job Eric. Good hire Ed. Eric, you need a dog.

[@chessdad182]

I was wondering who he was. I didn't see his name mentioned.

[@maciejs5763]

Many central banks raised rates together with FED and they already started dropping them. ECB cut rates... Canada cut rates... Switzerland cut rates same as China, Poland, Czech Republic, Hungary... Why would anyone think that FED would not cut in this year?

[@volkerm.4858]

You look younger in this video, Mr. Ed 😂

[@kp2718]

As per the chart that indicates expeted FFR changes in 12 months isn't it surprising that both times the number stopped going down (into more cuts), it was in accordance with trendlines from early 24 - wouldn't that meant those futures' indicators at those moments are more indications of algos' work rather than the most likely scenario probability?

[@kp2718]

Hi, def. a great one. I see only inconsistency - why keep the 5400 target, apart from consistency/moderation, if you do predict or indicate in data (both of market predictions and your most likely EOY 2,6% PCED scenario) more than 1 cut and therefore a melt-up (around 20:20)?

[@SigFigNewton]

Cuts wouldn’t necessarily send the market higher

[@SigFigNewton]

Likely that cuts are already priced in, and rather than cuts causing shares to rise, their absence would cause them to fall

[@maciejs5763]

15:05 aaand unemplyoment ticked up to 4.1%. You are really optimistic researchers. We have so so many signs like: 1) inverted yield curve for long time 2) unemployment going up (yes, from low levels, but look at the trend and hiring freeze) 3) autloans and credit cards defaults raising (yes, from low levels, but look at the trend, why would trend change?) 4) overall credit action from private banks halted 5) major slowndowns in other global economies (China, Germany) 6) recent drop in ISM... Of course none of those things guarantee recession and for sure none of them are saying anything about timing. But sirs, there is far bigger risk of recession in US right now when compared to 2 years ago. You can laugh as much as you want from those doomers from 2021, but situation slowly changed, why you chose to ignore it? Im looking at the same data as you and have totally different conclusions. Right now gov. bonds are looking more attractive than stocks, specially with lower inflation and still high yields.

[@SigFigNewton]

They notice everything that is line with their previous predictions and downplay what isn’t.

[@SigFigNewton]

The bulk of the disconnect between those who think the economy is very strong right now and those who disagree is probably the enormously unfair impact of inflation. Take the disposable personal income chart, figure 8. It shows inflation-adjusted disposable income as being flat over the past four years. So, since true inflation was higher for lower income earners than for higher income earners because necessities inflated more than other stuff, the reality is that higher income earners have seen an increase in real disposable income while lower income earners have seen a decrease in real disposable income. Now that a large number of lower income earners have stopped trying to maintain previous spending habits that are now unsustainable for them, we will begin to see whether their reduced spending decreases incomes of some higher earners.

[@SigFigNewton]

The fact the official overall inflation stats for the economy at large are such big underestimates of the inflation actually experienced by people who spend almost everything on housing, car, health care, and food more than makes up for the misleading data saying that real wages increased for low earners. Well, sure, when we adjust for inflation incorrectly on low income earners as we for some reason insist upon doing. So I tell myself, we’ll, low income earners weren’t driving the economy in the first place and feel like economy wide numbers will keep looking good since low earners have ALREADY been left far behind by decades of Reaganomics. Then I counter to myself that these low personal savings rates indicate that when things get a bit worse for some people, rather se people simply saving less, they will have to actually spend less, meaning that hardship experienced by some might be more likely to spread thru the economy than expected

[@markpiersall9815]

All good points. The Transportation Index appears to be barking as well.

[@maciejs5763]

@@SigFigNewton and @markpiersall9815 we are all aligned. There are signs of economic weakness and as private banks credit action YoY is lower than inflation then I do not see how those negative trends (in full time employment, credits, defaults, unemployment, cyclical economy etc) would stop or revert. Those trends are also NOT linear. They are starting slowly only to explode rapidly. It is easy to see when anyone would look at unemployment data from last 80 years: 1) unemployment is good times SLOWLY going down (May 2020 - Mar 2022) 2) during economic overheating is staying FLAT (Mar 2022 - Jul 2023) 3) during economic slowndown which is going up a SLOWLY and so far always those slowndowns are changing to recession that is why Sahm rule was created (Jul 2023 - up to now) 4) during recessions unemployment unemployment is going up SUDDENLY Between point 3 and 4 there can be as little as 3 months, but right now is already 12 and it can change to 20 months even. Because of BLS data revisions we are also blind for additional 3 months, so we can be even in recession right now and we would figure out it in October.

[@Mark-tm2zu]

President Biden, Fed Chair Powell and Yellen deserve more credit in turning this economy around since 1/21! Everyone keeps expecting A recession that has not happened! There needs to be more analysis on how bitcoin impacts the economy! It is an invisible monetary item that is not discussed in the money supply.

[@simonepecoretti3690]

looking at all the job mkt indicators and past dynamics it looks much more likely that the path forward is for an acceleration in weakness unless we gat further fiscal boost

[@gyrate98]

We’re all doomed!!!!!!!!!!!!!!!1