Sunday, July 06, 2014

Sunday Night Futures

by Calculated Risk on 7/06/2014 07:51:00 PM

On inflation: I'm sympathetic to people like Joe Weisenthal at Business Insider who is looking for signs of inflation increasing; I'm starting to look for signs of real wage increases and inflation too. I just think inflation isn't a concern right now (Weisenthal was correct on inflation over the last several years  in contrast to the people who were consistently wrong on inflation).

It is easy to understand the concern about inflation when we see articles like this from Ben Leubsdorf and Jon Hilsenrath at the WSJ: As Food Prices Rise, Fed Keeps a Watchful Eye

The consumer price of ground beef in May rose 10.4% from a year earlier while pork chop prices climbed 12.7%. The price of fresh fruit rose 7.3% and oranges 17.1% ... The U.S. Department of Agriculture predicts overall food prices will increase 2.5% to 3.5% this year after rising 1.4% in 2013, as measured by the Labor Department's consumer-price index.
Meanwhile gasoline prices are up year-over-year too (see graph below).  I suspect this is going to reignite the CPI (or PCE prices) vs. core prices again.

For food prices, the drought in California is having an impact.  From an earlier WSJ article:
Because California boasts a bigger agricultural sector than any other state, the drought could have an outsize economic impact nationally, raising produce prices.
And gasoline and oil prices have been impacted by the turmoil in Iraq. Monetary policy can't halt the violence in Iraq or make it rain in California - and this is why it is important to track various core measures of inflation.

On the Employment Report:
June Employment Report: 288,000 Jobs, 6.1% Unemployment Rate
Comment on Employment Report
More Employment Graphs: Duration of Unemployment, Unemployment by Education, Construction Employment and Diffusion Indexes

Weekend:
Mid-Year Review: Ten Economic Questions for 2014
Schedule for Week of July 6th

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are down slightly and DOW futures are down 11 (fair value).

Oil prices moved mostly sideways down the last week with WTI futures at $103.91 per barrel and Brent at $110.61 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.65 per gallon (about 20 cents higher than a year ago).  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.



Orange County Historical Gas Price Charts Provided by GasBuddy.com