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A Look at ?CPI & Retail Sales Tells Two Distinct Stories…

Some goods and services are rising while others are falling in price...

President of 1DB Asset Management

I am the President of 1DB Asset Management a boutique money management and investment brokerage firm in Palm Beach County, Florida. I publish a weekly blog at www.1DB.com, titled “Market Minute.” I also manage a private equity fund. I am an active partner in New World Angels where we actively fund start-up companies in Florida. I am an avid investor. Recreationally, I participate in endurance sports: Ironman triathlons, Ultra-marathons, mountain climbing. For leisure I enjoy reading, researching and writing.
I am the President of 1DB Asset Management a boutique money management and investment brokerage firm in Palm Beach County, Florida. I publish a weekly blog at www.1DB.com, titled “Market Minute.” I also manage a private equity fund. I am an active partner in New World Angels where we actively fund start-up companies in Florida. I am an avid investor. Recreationally, I participate in endurance sports: Ironman triathlons, Ultra-marathons, mountain climbing. For leisure I enjoy reading, researching and writing.

Stocks continue their assent on positive monthly economic releases, with the S&P 500 increasing in value for the 7th consecutive trading session. Markets were buoyed by strong retail spending and balanced consumer prices. Consumer spending on goods and services accounts for nearly 70% of US gross domestic product. The consumer is the major driving force of our nation’s output. Retail sales jumped 0.4% last month, 5.6% over the last year. The year-over-year increase in retail spending is the best in 5 years, considerably above its 3.7% average, as illustrated in the chart. Trump’s pledged policies appear to be boosting consumer confidence, as shoppers are ringing the cash registers.

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The Consumer Price Index (CPI) measures the cost of goods and services that folks purchase. The CPI rose 0.6% in January and topped 2.5% over the last year. Consumer price growth is now aligned to the FED’s two-percent longer term target. The CPI is a tale of two cities; some goods and services are rising while others are falling in price. Televisions, eggs, tomatoes and lettuce saw their prices sink -21.8%, -19.4%, -18.4% and -16.8%, respectively. Falling prices enable consumers to save more. At the same time, gasoline, train fares, dresses and car insurance saw their costs go up by 20.2%, 8.8%, 7.8% and 7.5%. All consumer items rose 2.5% for the year, while average weekly earnings for all workers grew by 1.9% during this period. Therein lies the problem. Will prices continue to climb without increases in wages and salaries? If not, how will folks be able to keep up with higher prices?

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