In February 2019 the Consumer price index increased for the first time in almost half a a year. The increase was modest around 0.2 percent , the main reasons for this increase was gains in the cost of food, gasoline, and rent. Although we saw the CPI increase it was still the lowest annual increase we have seen in 2 - 1/2 years .
What is very interesting is we as a country had pretty decent increase in wages for the year, in the month of February we saw a 3.2% increase in wages, but very little increase in prices which is fairly odd. This could be contributed to a slowing growth both domestically and globally .
https://www.cnbc.com/2019/03/12/consumer-price-index-february-2019.html
3 comments:
Brady,
Though prices have increased a small amount compared to the increase in wages may be alarming, it may be attributable to a high rate of saving amongst those who have received a higher wage/salary. In fact, we know savings=investments, so it would be interesting to see if there has been an increase in the rate of savings which would then lead (potentially) to more investments. This would be the preferred situation, however, we won't know for certain until it happens.
CPI increased 0.2% imply there is no significant change in demand and supply of goods and service. It also indicates inflation is not high. However, wage increased 3.2% in the same period.Is that because as more people become more educated than before, the wage for them are become higher? Or it is just because the CEO's wage increased again but no clear increased between middle and low income workers? That is a interesting question.
This increase of the volatile elements of CPI means that there is an increase in the cost of living. Despite an increase in wages, the increase in inflation has been restrained. This one month increase does not yet imply that annual inflation will reach the Federal Reserve’s target of 2% but it may be the first indication of rising inflation. Further observations will be needed to see if increased inflation persists and foreshadows increasing economic activity. It could also be good for businesses to invest more and inject more capital to be more productive. However, this may crowd out real wage increases and they might buy fewer goods and services.
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