Five Things You Need to Know: Inflation?, We're Rich!, And It's a Good Thing, Fed Says..., Department of Impossible to Make Up
What you need to know (and what it means)!
Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:
See that "?"? We added a question mark after the word "inflation" to denote something that is "questionable."
- The so-called core Personal Consumption Expenditures index (PCE), the Fed's preferred measure of inflation, came in at a paltry 0.1% for December, according to the Commerce Department.
- The forecast for core PCE was for a rise of 0.2% following November's flat reading.
- So where is the inflation?
- Nowhere to be seen, at least according to the bond market which happily ignored the upside in GDP yesterday in favor of a focus on vanquished inflationary pressures.
- Interestingly, the last time core PCE was this tame the market was fighting deflation.
2. We're Rich!
Disposable income increased by a whopping 0.5% in December, the Commerce Department reported this morning. And in a related story, nearly 250 million people were treated for injuries resulting from all that money burning a hole in their pockets.
- Personal income rose by 0.5%, up from 0.3% in October and November.
- Wages and salaries, increased by 0.6% in December.
- Meanwhile, take a look at the year-on-year growth rate in wages and salaries hitting a six-month high at 6.4%.
- So what should we do with all that money? Spend it!
- Spending on durable goods, rose by 0.8% in December, after a 0.9% increase in November.
- Spending on nondurables jumped by 1.6%, the fastest in a year.
- Since August, however, spending on nondurables is up a mere 0.3%.
3. And It's a Good Thing
It's a good thing we're so rich (see Number Two, above) because otherwise we wouldn't have two nickels to rub together.
- Personal Savings was a negative $116.6 billion in December, registering a third consecutive monthly decline.
- The rate fell to negative 1.2% in December, compared to November's negative 1% reading.
- That's the 21st consecutive month of negative personal savings.
- The yearly rate of negative 1% for 2006 was the worst since 1933.
- If you'll pardon the bullish spin, 1933 was one of the best buying opportunities in stocks in nearly 100 years, except that people didn't have any money because there was a depression on.
4. Fed Says...
Yesterday, while the Fed left rates on hold as expected, the FOMC statement accompanying the decision included a number of important changes.
- As we noted would probably happen in Five Things yesterday morning, the FOMC removed the word "mixed" with respect to the economy from the statement, opting for "Recent indicators have suggested somewhat firmer economic growth."
- As expected too, the vote was unanimous with the replacement of The Dissenter, the Richmond Fed's Jeffrey Lacker, in the FOMC voting.
- What was slightly unexpected was the note that "some tentative signs of stabilization have appeared in the housing market."
- That's a bold & weird statement; bold if for no other reason than that it simply can't be substantiated by the facts, and weird if for no other reason than that it simply wasn't necessary to include the housing comment to make the case that economic activity has become somewhat firmer.
- Vote: Where will the economy take the market?
5. Department of Impossible to Make Up
In Northern California thieves have apparently stolen 3,000 feet of guardrail from area freeways to cash in on the high price of aluminum, according to a CBS story.
- Caltrans, which operates the freeway system, says in one month thieves have stolen guardrail worth about $90,000.
- Some scrap metals dealers are reportedly offering about $3 a pound for aluminum.
- "You think you've seen everything that could happen but what do you know, they come and steal our guard rail," Jeff Weiss of Caltrans told CBS 13.
- Caltrans is now reportedly looking for an alternative to aluminum.
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