WHOOSH Goes the Fed’s Lowest Lowball Inflation Measure. And Eats Up All Income Gains Plus Some | Wolf Street

The “core PCE” price index, which excludes food and energy and which understates inflation by the most of all of the government’s inflation measures and which is therefore wisely used by the Fed for its inflation target, spiked by 0.50% in December from November, and by 4.9% year-over-year, the worst inflation reading since 1983, according to the Bureau of Economic Analysis today. As measured by this lowest lowball inflation measure, inflation, is well over double the Fed’s inflation target:

Adjusted for inflation, per-capita disposable income (income from all sources minus income-related taxes, on a per person basis) fell by 0.3% for the month and fell by 0.5% year-over-year, continuing the relentless decline that started last summer when inflation took off at a velocity not seen in decades. Note the pre-pandemic, pre-massive-inflation trend line (green):

As inflation whittled down the purchasing power of labor, the rising number of households reduced the slice each household gets of the aggregate inflation-diminished income figures to where inflation-adjusted income from wages and salaries is now below where it was two years ago and below where it was three years ago:

WHOOSH Goes the Fed’s Lowest Lowball Inflation Measure. And Eats Up All Income Gains Plus Some | Wolf Street