America’s economy: The stealth boom

Posted: June 13, 2013 in economy
Tags: , ,

TREASURY yields are rising. So is the dollar. Inflation is falling. Stocks have been beaten back a bit by a global swoon but have fallen much less than other markets. The labour market is improving at a steady if modest pace. Industrial activity is flat, but other private sector activity looks strong. Household finances are looking much stronger. What should we make of all of this?The answer would seem to be most apparent in the inflation figures. As Matt O’Brien notes, core inflation has been heading south for three years and shows little sign of slowing. Decline over the past year, which has caught many by surprise given the decent performance of the American economy and the Fed’s (relatively) accommodative stance, reflects the development of a few key trends.The first is the ebbing of the commodity price tide. In the CPI, energy prices have fallen 4.3% in the year to April. In the NIPA data, prices for energy goods fell at a 7.5% annual pace in the first quarter. These developments mostly show up in headline measures of inflation, of course, but also work their way through to core prices to some extent. Sinking commodity prices appear to be partly due to faster supply growth (especially in energy) and partly due to an unexpectedly sharp slowdown in emerging market economic growth.The second is broad disinflation in goods prices. In the NIPA figures prices for durable …

via Economic Crisis


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