The Bureau of Labor Statistics (BLS) released some important data today surrounding the state of the U.S. economy. The first release shows the current CPI (consumer price index) or rate of inflation:

(BLS Release) […] The all items index increased 1.5 percent for the 12 months ending February, a smaller increase than the 1.6-percent rise for the 12-months ending January. The index for all items less food and energy rose 2.1 percent over the last 12 months, a slightly smaller figure than the 2.2-percent increase for the period ending January. The food index rose 2.0 percent over the past year, its largest 12-month increase since the period ending April 2015. In contrast, the energy index declined 5.0 percent over the last 12 months. (read more)

As noted above, energy prices are 5.0% lower year-over-year; this is a significant reason for the current low inflationary rate. Also energy prices (fuel, gas, oil) disproportionately impact the middle-class as an unavoidable cost. Lower gas prices (currently down 9.1%) help middle-America, and also have a downstream impact of lowering product transportation costs.

An overall annual rate of inflation at 1.5 percent is exactly on target. CTH has been predicting this energy-based outcome for more than three years:

The third highest variable cost of goods beyond raw materials first, labor second, is energy. If the U.S. energy sector is unleashed -and fully developed- the manufacturing price of any given product will allow for global trade competition even with higher U.S. wage prices. (link)

The second BLS release was a review of Real Earnings and Wages.

Here the news is terrific and the results on target: Annual wage growth 3.5%

[Source Link, Table A-2]

Keep in mind the wages and prices are national averages. There are regions and specific sectors of the workforce where the rate of wage growth is much higher. The average rate of wage growth is 3.5 percent; and wages are on an upward trend-line. With an ever tightening labor market we can expect to see continued upward pressure on wages.

Wage growth of 3.5% with inflation at 1.5% means higher actual income, more money in the pockets of workers, and increased purchasing or saving power.

Lastly, CTH would be remiss if we did not point out we are deep into year #2 of the steel, aluminum and China tariffs. The multinational doomsayers and financial pundits were predicting massive surges in U.S. consumer prices for the downstream products.

Wall Street’s proclaimed consequences are not happening.

Wilbur was right…