CPI vs. Core Inflation: What is it and Should You Care?

There’s been a lot of talk about inflation lately. While inflation, at its most basic, is an increase in prices, there are differences in the way that it is measured. You should pay attention to inflation, since it represents an erosion of your buying power.

However, it does help to know how policymakers view inflation. It will give you a better idea of how to plan your finances more effectively. Two measures of inflation that you should pay attention are CPI and core inflation.
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What is Stagflation and Should You be Worried

You may have heard the word stagflation before, but do you know what it is? Stagflation is a word penned from combining stagnation and inflation, and was first used in 1965 by a British politician by the name of Lain Macleod. He warned of a time when this could occur, where the inflation rate was higher than the rate of economic growth.

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What Is Deflation And Should You Be Concerned

Many of my clients (and me included) have been concerned about the expected rise of inflation. The problem is that we’ve been concerned for a few years and thus far, inflation has been a non-concern. What seems to be the new concern is deflation. Where deflation isn’t a typical concern for the average consumer, it has been a topic of concern for consumers and the Federal government at large for many years. Journalist Dave Carpenter refers to deflation as “Deflation is the potential new boogieman for consumers, replacing inflation.” So what exactly is this new boogieman? It is defined as the declining of prices of goods and services over time. Deflation is the direct opposite of inflation and occurs for one or more of the following reasons:
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Inflation the Next Concern?

Market Continues To Fret

Inflation The Next Concern?

Dear Clients and Friends:

Too much good news can be bad news—at least that is how the markets see it.

The recent string of better than expected economic data is consistent with the rapid pace of healing in the credit markets—the key driver of the recession. In fact, last week marked the 12th week that the financial indicators LPL Financial Research uses to evaluate the overall health of the economy have shown steady improvement. The data increasingly paints a picture of a still weak, but rapidly improving U.S. economy.  However, this news isn’t being interpreted as all good by the markets. [Read more...]

Investors’ Fear Shifts from Recession to Inflation

Worried about Inflation

Worried About Inflation

This report was prepared by my firm LPL Financial.

Last week’s key economic data came in better than expected, including the closely watched ISM report gauge of manufacturing activity, auto sales, and employment. This string of better than expected numbers is consistent with the rapid pace of healing in the credit markets—the key driver of the recession. Last week marked the 12th week of improvement in the LPL Financial Current Conditions Index. Important gauges of stress in the credit markets are back to pre-crisis levels; the TED spread, a key measure of interbank liquidity, is back down to a relatively normal 0.50%. On Friday, the employment report reflected a net job loss of 345,000 for the United States in the month of May, far less than forecasted and only half the loss reported four months earlier for January. May’s job loss was the smallest since the crisis began with the failure of Lehman Brothers and the seizure in the credit markets in mid-September of last year. The data increasingly paint a picture of a still weak, but rapidly improving U.S. economy. [Read more...]