United States: the Tale of Two Inflations?

Someone predicted that the latest reading of ISM Price Index now pointing to 6.2% inflation twelve months later. Of course, when you look at the following chart, you will have strong reason to believe that a higher inflation is expected.

Source: Institute for Supply Management, St. Louis Fed

More Charts of Economic Indicators

Obviously, inflation numbers have been moving quite in-sync with the ISM Price Index. Or actually, the ISM index leads inflation for a few months, perhaps. However, when you look at the second chart, there will be some doubt here.

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Source: Institute for Supply Management, St. Louis Fed

More Charts of Economic Indicators

While the Inflation for all items are clearly on the rise, the core inflation, which strips out energy and food, is still on the downtrend. To give you an even clearer picture, the chart below shows the two measures of inflation on the some graph.

Source: St. Louis Fed

More Charts of Economic Indicators

As you can seeSo for the Federal Reserve which seems to have targeted core inflation, the core inflation chart shows that the United States is indeed more like headed to the path of Japan. So the comments from Thomas Hoenig, the Kansas City Fed President, that the Fed “May consider buying more US Treasury securities” may not come as too big a surprise.

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About Zarathustra

Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.