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Consumer inflation running at a 2-2.5% rate


The CPI jumped 0.7% in February, but it was almost entirely energy-related. Both the headline and the core CPI are up 2.0% in the past 12 months. This is slightly below the long-term trend of 2.5%, as illustrated in the chart above. In short, no news here, though I would be happier if inflation were 1% and the Fed were raising rates modestly rather than promising to keep them very low for a long time.

Swap spreads show no sign of trouble


A quick update of an important chart I've been featuring for years. Swap spreads are very important current and leading indicators of financial market health and the outlook for the economy. The fact that swap spreads in both the Eurozone and the U.S. remain relatively low and stable suggests that economic and financial market fundamentals are healthy, and thus we should expect growth rather than stagnation or recession. The Eurozone is not as healthy as the U.S., as many economies in Europe are in a mild recession, but things there are not deteriorating and ought to be slowly improving over the course of this year.

A short primer on swap spreads can be found here.

Ski photos

Monday we skied Vail, but someone forgot to groom the runs the night before, and the visibility was bad, so we had a disappointing day. Tuesday we went to Beaver Creek, and had nice weather, groomed runs, and good snow. Today we went to Keystone, our favorite spot from years before, and were not disappointed. Great weather, very good snow (it had snowed 4" yesterday), and super-long runs that are exhilarating. Keystone is under-appreciated, in my book.



Both photos taken, of course, with my iPhone 5.

Federal budget deficit declines by almost one third


With today's release of the February federal budget numbers, we find that two beneficial trends are continuing: revenues for the past 12 months are up 10.3% relative to a year ago, and spending is up only 0.1%. Revenues have been rising steadily for the past years, while spending has grown hardly at all.

Strong revenue gains reflect growth in incomes and corporate profits, which is a good sign that the economy is recovering. Flat spending growth is a combination of reduced "social safety net" spending, another sign of the economy's improving health, and the gridlock in Congress that is preventing more runaway spending. For the 12 months ended February, the federal deficit was almost exactly $1 trillion: a big number still, but much less than the $1.48 trillion registered just three years ago.

The federal budget deficit has declined by almost one third in the past three years. That should be making headlines.

Because it means that economic growth and spending restraint are an easy way to eventually balance the budget. And it also means that spending restraint is not necessarily bad for economic growth.

Blogging light this week

It's my annual guys' ski week, this year in Vail.