The above graph shows the bull and bear market durations. The bull market that ended with the financial crisis lasted 61 months, according to Morningstar’s chart, but the two prior runs were 153 months and 155 months long. In other words, stocks were in an uptrend for more than 12 years.
The chart also shows that bear markets are relatively quick, with the last two lasting 16 months and 25 months, respectively.
(Source: Morningstar)
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The latest Headline PCE price index year-over-year (YoY) rate of 1.62% is a relatively large increase the previous month’s 1.14% (a slight adjustment from 1.15%). The Core PCE index of 1.42% is up from 1.21% the previous month. The general disinflationary trend in core PCE (the blue line in the charts below) must be quite troubling to the Fed. After years of ZIRP and waves of QE, this closely watched indicator consistently moved in the wrong direction. Since April of last year has hovered in a narrow YoY range of 1.21% to 1.10%, although the April data point has broken above the range. Is this the beginning of a major trend reversal? This will be a closely watched series by the ongoing inflation/deflation debate.
The first chart below shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. I’ve also included an overlay of the Core PCE (less Food and Energy) price index, which is Fed’s preferred indicator for gauging inflation. I’ve highlighted 2 to 2.5 percent range. Two percent had generally been understood to be the Fed’s target for core inflation. However, the December 2012 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two while their accommodative measures (low FFR and quantitative easing) are in place. I’ve calculated the index data to two decimal points to highlight the change more accurately. It may seem trivial to focus such detail on numbers that will be revised again next month (the three previous months are subject to revision and the annual revision reaches back three years). But core PCE is such a key measure of inflation for the Federal Reserve that precision seems warranted. For a long-term perspective, here are the same two metrics spanning five decades. (Source: Advisor Perspectives) |
The adjacent thumbnail gives us a close-up of the trend in YoY Core PCE since January 2012. I’ve highlighted the narrow 12-month range that appears to have been breached to the upside in April.
A monthly gauge of U.S. consumer sentiment fell in May as a gloomy view on income growth clouded an otherwise positive economic outlook, a survey released on Friday showed.
The Thomson Reuters/University of Michigan’s final May reading on the overall index on consumer sentiment came in at 81.9, down from 84.1 the month before.
It was also below the expectation of 82.5 among economists polled by Reuters. However it did show a slight increase from the preliminary reading issued on May 16.
(Source: Reuters)
Japan’s core consumer prices jumped 3.2 percent in April from a year earlier, government data showed on Friday, the fastest gain since February 1991 as an increase in Japan’s national sales tax boosted prices across the board.
The increase in the core consumer price index, which excludes volatile fresh food prices but includes oil products, compared with economists’ median estimate for a 3.1 percent rise, the Ministry of Internal Affairs and Communications said.
That followed a 1.3 percent increase in March, posting the 11th straight month of annual gains.
The Bank of Japan estimates that the sales tax hike – to 8 percent from 5 percent that took effect on April 1 – will add 1.7 percentage points to Japan’s annual consumer inflation in April, and 2.0 points from the following month. The internal affairs ministry does not provide official estimates.
The so-called core-core inflation index, which excludes food and energy prices and is similar to the core index used in the United States, rose 2.3 percent in April from a year earlier, the fastest annual gain since December 1997.
Core consumer prices in Tokyo, available a month before the nationwide data and seen as a leading indicator of nationwide inflation, rose 2.8 percent in May from a year earlier, posting the quickest rise since April 1992.