Economic Activity And Inflation Measures For September (Updated)

Summary

• Consumption remained at elevated levels, but personal income excluding transfers are only at pre-pandemic levels, in real terms. This is against a backdrop of other slowing indicators in September.
• Second, inflation in September, including the personal consumption expenditure deflator numbers, which were released on Friday. These were in line with expectations.
• What is interesting is that while the CPI-based inflation indicators blipped upward, the PCE deflator inflation continued a downward trend.

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Editor's note: This article was originally published on November 1, 2021, by Menzie Chinn here.

While the GDP release dominated the news, we got new looks at economic activity and price pressures on Friday (and monthly GDP today).

First, economic activity according to some key indicators followed by the NBER:

Figure 1: Nonfarm payroll employment from August release (dark blue), Bloomberg consensus as of 11/1 (blue +), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), consumption in Ch.2012$ (light blue), and monthly GDP in Ch.2012$ (pink), all log normalized to 2020M02=0. NBER defined recession dates shaded gray. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (11/1/2021 release), Bloomberg, NBER, and author’s calculations. [updated 11/1/2021]

Consumption remained at elevated levels, but personal income excluding transfers are only at pre-pandemic levels, in real terms. This is against a backdrop of other slowing indicators in September.

Second, inflation in September, including the personal consumption expenditure deflator numbers, which were released on Friday. These were in line with expectations.

Figure 2: Month-on-month annualized inflation from CPI-all urban (blue), from personal consumption expenditure (PCE) deflator (black), chained CPI seasonally adjusted (brown), sticky price CPI (green), and 16% trimmed mean CPI (red). Chained CPI inflation seasonally adjusted by author. NBER defined recession dates shaded gray. Source: BLS, Atlanta Fed, Cleveland Fed, via FRED, NBER, and author’s calculations.

Figure 3: Month-on-month annualized inflation from CPI-all urban (blue), from personal consumption expenditure (PCE) deflator (black), chained CPI seasonally adjusted (brown), and sticky price CPI (green). Chained CPI inflation seasonally adjusted by author. NBER defined recession dates shaded gray. Source: BLS, Atlanta Fed, Cleveland Fed, via FRED, NBER, and author’s calculations.

What is interesting is that while the CPI-based inflation indicators blipped upward, the PCE deflator inflation continued a downward trend.

CEA notes that year-on-year PCE inflation is being driven by developments in the indices from about 4-5 months ago.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.