Conditions for rising inflation are developing as the economy re-opens.

There was little economic data released last week. The Consumer Price Index did not reflect any increase in inflation pressures; this continues to be a concern of the Federal Reserve. They believe inflation must increase or we run the risk of deflation should the economy turn down into a business cycle recession. They do not use the CPI as a primary measure of inflation, but it is one of the inputs they consider. This week will have more data. Retail sales are expected to be up 1.0% for the month. This would reverse the three months of decline. Retail sales are not adjusted for inflation. Rising gasoline prices will contribute to the rise in overall sales. Auto sales have remained strong even as the supply of new auto’s is being restricted by a shortage of components, and the disruption in the supply chain has not been fully resolved.

 

PROBANK AUSTIN ADVISOR - FEBRUARY 15, 2021