by Calculated Risk on 4/17/2015 04:17:00 PM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.6% annualized rate) in March. The 16% trimmed-mean Consumer Price Index also rose 0.2% (2.2% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.2% (2.9% annualized rate) in March. The CPI less food and energy also rose 0.2% (2.8% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for March here.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.2%, the trimmed-mean CPI rose 1.8%, and the CPI less food and energy rose 1.8%. Core PCE is for February and increased 1.4% year-over-year.

On a monthly basis, median CPI was at 2.6% annualized, trimmed-mean CPI was at 2.2% annualized, and core CPI was at 2.8% annualized.

On a year-over-year basis these measures suggest inflation remains below the Fed's target of 2% (median CPI is slightly above 2%).

The key question for the Fed is if these key measures will move back towards 2%.

by Calculated Risk on 4/17/2015 03:06:00 PM

Some excerpts from interesting analysis by Goldman Sachs economists Alec Phillips and Hui Shan: An Update on Student Loans: A Bigger Headwind but Still Not a Deal Breaker

The upshot is that the student debt burden on young households has increased and it has become a bigger headwind to housing demand compared to a few years ago. That said, we still think the sheer size of the millennials who are currently in their 20s and whose housing consumption should increase sharply in the coming years will support aggregate housing demand.

However, we are skeptical that student loans would pose serious systemic risks even if default rates increased significantly from their already high levels. The main reason is simply that around two-thirds of the outstanding balance of student loans is held directly on the federal government's balance sheet, and most of the remainder is held in the form of asset backed securities that are guaranteed by the federal government, subject to a small first loss (up to 3% of the outstanding balance and accrued interest). ... The bottom line is that the non-guaranteed portion of federal student loan balances plus all non-federal student loans that have not yet been charged off by lenders is probably not much greater than $100 billion and could be as low as $20 billion.

Of slightly greater concern is the fact that student loan debt is in many ways senior to other forms of consumer debt. For example, student loans cannot generally be discharged in bankruptcy, and borrowers in default can face wage garnishments and reduced tax refunds, among other remedies. In theory, this makes it more likely that a borrower's limited income would be used to repay student loan debt rather than to service mortgage or other consumer debt. This could, in theory, increase the default rate on non-student debt during the next economic downturn.

That said, recent policy changes alleviate this concern somewhat. Income-based repayment programs, which limit required monthly payments to a manageable percentage of borrowers' income and, in some cases, allow remaining debt to be forgiven, should reduce the competition between debt service on student loans and other debt. The Obama Administration has recently expanded eligibility for these programs.

Overall, after updating our prior analysis on student loans we come away with the view that increased student debt levels, and particularly the concentration of higher levels of debt among some borrowers, could create some headwinds for consumers, but that the risk of an acute financial disruption caused by student loan defaults is low.

by Calculated Risk on 4/17/2015 11:58:00 AM

From housing economist Tom Lawler: Texas: Non-Farm Payoll Employment Fell in March

The Texas Workforce Commission reported that non-farm payroll employment in the Lone Star State declined by 25,400 (or -0.22%) on a seasonally adjust basis in March, the first monthly decline since September 2009 and the largest monthly decline since August 2009. Declines were broad-based from an industry perspective, with mining and logging, construction, manufacturing, and the service-producing sectors all experiencing a monthly dip in employment.

From the end of 2013 to the end of 2014 non-farm payroll employment in Texas increased by 3.6%, easily outpacing the 2.3% growth for the US as a whole.

In 2014 single-family building permits in Texas were up 8.7% from 2013 compared to 1.5% for the US as a whole. In the first two months of 2015 single-family building permits in Texas were up 6.7% from the comparable period of 2014, compared to a YOY gain of 5.6% for the US as a whole.

CR note: As Lawler points out, single family building permits (and housing starts) have increased much faster in Texas than in the U.S. With the slowdown due to lower oil prices, employment is now falling, and building will probably slow.

by Calculated Risk on 4/17/2015 10:03:00 AM

Click on graph for larger image.

The preliminary University of Michigan consumer sentiment index for April was at 95.9, up from 93.0 in March.

This was above the consensus forecast of 93.7. Lower gasoline prices are probably the reason for the increase over the last several months.

by Calculated Risk on 4/17/2015 08:32:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in March on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index declined 0.1 percent before seasonal adjustment.

The index for all items less food and energy rose 0.2 percent in March, the same increase as in January and February.
emphasis added

I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI. This was lower than the consensus forecast of a 0.2% increase for CPI, and at the forecast of a 0.2% increase in core CPI.