US inflation is full of hotspots but a cooling trend is on the horizon
There are many ways to track inflation. The following heat map is a comprehensive view of how price increases are being experienced in the US economy. The various inflation gauges, gathered from a variety of sources, include personal consumption expenditure (PCE), the consumer price index (CPI), producer prices, and their “core” siblings that exclude volatile food and energy.
Note that the most recent months are on the left side of the map. Deep shades of red indicate the strongest statistical deviation from recent norms.
Year-on-year inflation has been extremely high for more than a year now, comfortably exceeding the Federal Reserve’s 2 percent target for core PCE. Inflation expectations, on the other hand, are mostly still below 3 percent, indicating that markets are still on board with the “inflation is transitory” story.
One reason to be optimistic is the broad-based decline in commodity prices – reflected in that patch of cool blue emerging at the bottom left of the map. This means energy will play a smaller role pushing up CPI, and will most likely start contributing to disinflation. That would be great news for the Fed.