FLASH UPDATE - March 18, 2009

 

 

 

JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS

 

FLASH UPDATE

March 18, 2009

 

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Annual CPI-U Inches Higher to 0.24% (SGS 7.7%)

Housing Starts Annual Plunge at Historic Extreme

 

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PLEASE NOTE: A full newsletter should follow over this coming weekend. Any intervening Flash Updates or Alerts would be published as dictated by economic or financial developments. 

– Best wishes to all, John Williams

 

CPI-U Inflation Bounces Minimally.  The Bureau of Labor Statistics (BLS) reported this morning (March 18) that February’s annual CPI-U (CPI for All Urban Consumers) inflation rebounded slightly from January’s near-brush with official deflation (year-to-year decline in the inflation measure), while annual deflation in both the CPI-W and C-CPI-U measures narrowed to 0.3% from the 0.5% deflation reported in January. Annual inflation formally is measured in terms of not-seasonally-adjusted, year-to-year-change, but, curiously, the seasonally-adjusted CPI-U is showing weaker annual inflation (0.2% deflation in January, 0.1% inflation February) than the unadjusted series. That suggests some unusual seasonal-factor games playing here by the BLS, which will be explored in the upcoming newsletter.

CPI-U.  The BLS reported that the seasonally-adjusted February CPI-U rose by 0.39% (up by 0.50% unadjusted) +/- 0.12% (95% confidence interval not seasonally adjusted) for the month, versus a 0.28% (0.44% unadjusted) gain in January.  Year-to-year inflation (unadjusted) in February rebounded to 0.24% +/- 0.20% (95% confidence interval), from 0.03% in January.  For those interested in exploring the various facets of official CPI-U reporting, I continue to refer you to CPIwatch.com, a site prepared by one of my SGS colleagues.

Annual inflation would increase or decrease in March 2009 reporting, dependent on the seasonally-adjusted monthly change, versus the 0.38% monthly increase seen in March 2008.  The difference in growth would directly add to or subtract from February’s annual inflation rate of 0.24%. With upside pressure on oil prices, continued avoidance of official deflation is a fair bet for March. Shy of a renewed collapse in oil prices, annual CPI-U should be near its trough for the current cycle.

Real Retail Sales.  Updating the March 12th Flash Update, inflation- and seasonally-adjusted February retail sales fell by 0.50% (down 0.11% before inflation adjustment), versus a January gain of 1.53% (1.82% before deflation adjustment). Year-to-year, February real (inflation adjusted) retail sales fell by 8.64% (8.58% before inflation adjustment) versus an 8.84% (8.97% before inflation adjustment) decline in January. The annual real change here has been skewed by the unusual patterns in the seasonally-adjusted CPI-U, mentioned earlier.

On a three-month moving-average basis, the February and January annual real declines were 9.30% and 9.53%, respectively. The January annual decline in the moving-average was the deepest in the history of the two historical retail series, making the current results still the worst of the post-World War II era.

CPI-W.  The BLS reported that the narrower, seasonally-adjusted January CPI-W (CPI for Urban Wage Earners and Clerical Workers) rose by 0.44% (0.49% unadjusted) following a 0.35% (0.43% unadjusted) gain in January.  Year-to-year inflation in February declined by 0.26%, versus a drop of 0.51% in January.

C-CPI-U.  Year-to-year or annual inflation for the Chain Weighted CPI-U — the fully substitution-based series that increasingly gets touted by CPI opponents and inflation apologists as the replacement for the CPI-U — also fell by 0.26% in February, following a decline of 0.54% in January. 

Alternate Consumer Inflation Measures. Adjusted to pre-Clinton (1990) methodology, annual CPI growth rose to roughly 3.6% in February, versus 3.3% in January, while the SGS-Alternate Consumer Inflation Measure, which reverses gimmicked changes to official CPI reporting methodologies back to 1980, rose to roughly 7.7%, versus 7.5% in January, and has been updated on the Alternate Data tab at www.shadowstats.com.  The alternate numbers are not adjusted for any near-term manipulations of the data.

Producer Price Index Rises for Second Month. Despite a short-lived relapse in declining oil prices, the regularly-volatile, seasonally-adjusted producer price index (PPI) for February rose by 0.1% (fell by 0.1% unadjusted). Such followed a 0.8% (0.9% unadjusted) month-to-month gain in January.   The BLS data showed February’s year-to-year PPI inflation contracted by 1.3%, versus a 1.0% drop in January. 

Such was the third month of formal PPI deflation (year-to-year price decline), subsequent to a 0.4% gain reported for November.  Since 1980, the finished goods PPI has shown formal deflation in 1986, 1994, 1997/1998 and 2001/2002, without the CPI-U ever following suit. As with the current circumstance, those declines and related index volatility often were tied to large swings in oil prices.

On a monthly basis, seasonally-adjusted February intermediate goods fell by 0.9% (down by 0.7% in January), and crude goods fell by 4.5% (down by 2.9% in January). The decline in year-to-year inflation continued to deepen, with February intermediate goods down 5.2% (down by 3.5% in January) and February crude goods down by 34.7% (down by 29.1% in January).

Annual Housing Starts Contraction Still Worst Since Great Depression. Wall Street hypesters got excited yesterday over a reported 22.2% (25.1% net of revisions) +/- 13.4% (95% confidence interval) monthly jump in February housing starts, another highly volatile and irregular series. The previously reported January monthly decline of 16.8% was revised to a decline of 14.5%. 

The February surge was not a signal for a turnaround in the housing market. The Census Bureau report showed all the gain to be in structures with five units or more (apartment buildings, condominiums), and the data were subject to the usual weather, seasonal-factor and reporting distortions. An element of bottom bouncing at a plateau of low-level activity also could be, or soon will be, in play. Importantly, building permits, which tend to lead starts, have not shown any confirming indication of a 79.9% monthly surge in such units, where again, month-to-month volatility often can be attributed to extreme weather, etc.

Volatile series, such as housing starts, generally are best viewed in terms of year-to-year change on a three-month moving-average basis. The three-month moving-average for housing starts as of February 2009 was down by 49.0% from February 2008, the deepest decline ever seen in the two historical housing starts series, going back to post-World War II. Such was versus a revised 47.9% (previously 48.2%) decline in January. For the individual months, February was down by 47.3% year-to-year, versus a revised 55.2% (was 56.2%) annual contraction in January.

 

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