Aside from energy, the price of goods is creeping higher for the first time in over five years
By guest author Justin Lahart from Wall Street Journal
Americans have been paying more for stuff lately. That actually counts as something new.
Overall consumer prices were flat in January from a month earlier, the Labour Department said on Wednesday, February 13, 2019, held down by a decline in gasoline prices. Core prices, which exclude food and energy items to better capture inflation’s trend, rose 0.2 %, putting them 2.2 % above their year-earlier level.
The gain in core prices was in keeping with increases over most of the past year, so for investors Wednesday’s report was generally benign. The Federal Reserve in January gave “muted inflation pressures” as a reason it could be patient on rates, and it looks as if the mute button is still on.
Dig into the details of the report, though, and something curious is going on. Core services inflation, which includes prices for things such as haircuts and doctors’ visits, has been cooling. That is partly a consequence of lower fuel prices, since transportation counts as a service.
But prices for goods excluding food and fuel—in less technical terms, “stuff”—have been rising. Stuff prices were up 0.3 % versus a year earlier last month, after rising 0.2 % in December and 0.3 % in November. Those increases might seem slight, but they also count as the first gains since early 2013.
Recently introduced tariffs probably have something to do with the arrival of stuff inflation, and Goldman Sachs economists note that the introduction of internet sales taxes in more states also is playing a role. But, the trend from deflation to inflation appears to have begun over a year ago. Moreover, there are things that should be acting as a drag on higher prices, including a stronger dollar and lower shipping costs.
Investors should pay attention—this stuff could matter.