Tags: Fake | CPI | Components | Data | Fictitious

Fake News, Fake Data? 2 Components of CPI Data Are Fictitious

Fake News, Fake Data? 2 Components of CPI Data Are Fictitious

By    |   Tuesday, 18 April 2017 01:10 PM

So many economic reports, perhaps so little truth.

Savvy investors must be aware and constantly vigilant in search of the economic truth and what it means to your portfolio.

The retail sales data fell 0.2 percent in March. Meanwhile, in what I think is perhaps more important, February sales were revised sharply lower to minus 0.3 percent vs. an initial gain of 0.1 percent.

The CPI figures also fell 0.3 percent in March.

With the big shock of CPI normalization now behind us, noise in the trend is likely. Issues like seasonable adjustments around Easter or the data on housing costs, etc., are bound to become more significant on a month-by-month basis.

Investors could do well keeping in mind that these CPI data do not actually reflect what people experience in day-to-day inflation, which means that long-term investors should take these CPI numbers with care.

For example, no one does actually pay attention to what are considered as the two largest components of the consumer price inflation (CPI) data set, and which are, at least in my opinion, fictitious:

  • The rent of primary residence (rent);
  • The owners' equivalent rent of primary residence (rental equivalence).

Together they represent about 66 percent of the Consumer Expenditure (CE) Interview Survey.

The New York Fed’s Empire State Manufacturing Survey, which is an opinion poll, showed a sharp decline in the headline general business conditions index, which fell 11 points to 5.2, remaining positive after all.

This was, perhaps, to be expected.

It’s a fact that sentiment surveys’ levels have been unrealistically high and a reality check should lower the reported data without changing the underlying economic situation of the U.S., which is essentially pursuing a trend-like rate of growth.

Around the globe, events on the Korean peninsula or perhaps more accurately events on the Korean peninsula and on Twitter are not currently causing a strong reaction in financial markets. Fact is that the South Korean won and equities remain relatively well supported.

Long-term investors could do well not becoming too complacent about the whole subject and maybe it could be helpful to recall that on February 7, 2016, North Korea launched a missile that could, at least in theory, hit Washington D.C. and San Francisco.

Elsewhere in Asia, the Japanese government has raised the prospect of the Trans Pacific Partnership on trade (TPP) taking place without the United States.

On Saturday, Japan’s Chief Cabinet Secretary Yoshihide Suga signaled that Tokyo was ready to proceed with the TPP’s implementation saying, "We have a feeling that the 11-nation framework should be given weight."

Maybe for investors it could be helpful to recall that Japan has also been promoting talks on the China-led 16-member Regional Comprehensive Economic Partnership (RCEP), which is an non-U.S. trade pact and that is by many in Japan and other parts of Asia considered as an alternative to the TPP.

By the way, RCEP members account for about half the world’s population and around 30 percent of the world’s gross domestic product.

Besides all that, Treasury Secretary Mnuchin gave an interesting interview to the Financial Times (FT) wherein he rebuffed suggestions that Washington may be seeking to depreciate the dollar via verbal interventions following last week’s remarks from President Trump saying, “As the world’s currency, the primary reserve currency, I think that over long periods of time the strength of the dollar is a good thing. It’s a function of the confidence and the strength of the US economy,” adding, “The president’s comment, which again I agree with, is that over short periods of time the strength of the dollar creates certain issues that hurt our exports. I think that is what he has referred to, which is again factually correct.”

Mnuchin also said that the U.S. would place more sanctions on North Korea, which breached U.N. resolutions last Sunday, April 16th with its failed missile launch, but explained that it would be “more of a rolling process.”

Besides all that, Mnuchin insisted he still expected in the U.S. the tax system to be reformed in 2017.

According to the FT, his words are a sign of the struggles the president has faced as he tries to overhaul Barack Obama’s healthcare system and ease corporate and personal income tax in the first year of his administration.

Etienne "Hans" Parisis is a bank economist who has advised global billionaires and governments on the financial markets and international investments.

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No one actually pays attention to what are considered as the two largest components of the consumer price inflation (CPI) data set, and which are, at least in my opinion, fictitious:
Fake, CPI, Components, Data, Fictitious
Tuesday, 18 April 2017 01:10 PM
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