Charles Steindel

The Federal Reserve Bank of Philadelphia’s state coincident indexes in January were generally soft. In the one-month changes, California was the only state to have an increase as high as .50 percent, while 14 recorded declines.  Over the three months ending in January, there were four states with increase of more than 1 percent (California was highest, with a 1.20 percent gain), but 13 were down, with 3—Montana, Delaware, and West Virginia—off by more than 1 percent.  Over the 12 months from January 2025 to January 2026, five states were down (West Virginia by a very large 4.37 percent), and 7 others had increases of less than one percent. Only 3 states saw increases of 3 percent or more, with Nevada’s 3.76 percent at the top.

The independently estimated national estimates of growth over the last three and twelve months were, respectively, .61 and 1.78 percent. Both seem to be in line with what the state numbers would have suggested.

State Coincident Indexes in January 2026

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Mickey D. Levy

This note assesses how the surge in oil prices affects inflation and the general price level, and how the Fed may respond.

The **general price level** is the cost of a basket of goods and services in either the Consumer Price Index or the Personal Consumption Price Index.  (For both baskets, the Bureau of Economic Analysis adjusts retail prices of goods and services for estimated changes in quality). **Inflation** measures the percentage increase in either the CPI or PCE Price Index; **deflation** measures the percentage decline in the index. Chart 1 shows the monthly percentage changes in the CPI and PCE Price Index in the last several years and Chart 2 shows the yr/yr change.

260420ML1.jpg

260420ML2.jpg

Changes in the indexes cumulate overtime: Chart 3 shows the cumulative percent changes in the CPI and selective components since December 2019. The CPI is up 27% since just before the Covid pandemic (while the PCE price Index is up 24%).  During the same period, food prices are up 33%, rental costs up 31.6%, medical care services are up 17.8% and motor vehicle insurance is up 55%. Consumers relate more to prices they pay (adjusted for quality) while economists, financial markets and the Fed focus more on inflation and changes in inflation.

260420ML3.jpg

PCE inflation was 2.8% yr/yr through February 2026 before the Middle East conflict began and oil prices spiked, and core PCE inflation excluding food and energy was 3.0%, while CPI inflation was 2.4% and 2.5% excluding food and energy.  The Fed’s preferred measure of inflation is the PCE and it equates 2% PCE inflation to price stability. The CPI measures a narrower mix of goods and services than the PCE: by excluding goods and services that are paid for by third parties, including Medicare, Medicaid and employer-financed health insurance, it is the best measure of consumer out of pocket expenses. Basically, the CPI has a much heavier weighting of shelter costs--rental costs and OER--and a much lower weighting of health care services than the PCE. The rationale for the core measures of inflation is twofold: the food and energy components tend to be volatile, and earlier empirical research showed that core inflation (rather than headline inflation) is a more accurate predictor of future headline inflation (I have not seen any updated empirical research on this).

The surge in oil prices in response to the Middle East conflict that constrained global supplies of oil is a negative supply shock to the U.S. economy.  The Fed is wisely deciding not to accommodate the oil shock: it kept rates unchanged at its March 17-18 FOMC meeting and is expected to remain on hold at its late-April FOMC meeting.  As a result, the negative supply shock will **temporarily** generate higher monthly inflation data for several months as the higher oil prices are reflected in retail prices, after which the monthly inflation data will fall back to its pre-inflation trend.  The negative supply shock will dent real economic activity. That is, nominal GDP growth will slow temporarily and a larger portion of it will be inflation and a smaller portion will be real.

Two major issues arise.  First, how long is "temporary"?  Second, if oil prices fall from their recent $95/barrel, what happens?

The oil price surge should boost the monthly CPI and PCE inflation data for 2-3 months. The CPI jumped 0.9% in March, reflecting the 21.3% surge in prices of energy commodities, while the core CPI was unaffected, rising 0.2%, on its prior path. PCE inflation data for March has not yet been released.  Both should jump in April. Retail prices of energy--primarily gasoline and diesel--are adjusting very quickly to the rise in crude oil prices (“[Oil Price Spike: Temporary Boost to Inflation, but for How Long?](https://www.haver.com/articles/oil-price-spike-temporary-boost-to-inflation-but-for-how-long)”, April 13, 2026).  This suggests that the bulk of the impact of the oil price surge will be in March and April, with the residual in May. The higher oil prices have also pushed up business operating costs.  However, slower aggregate demand resulting from the negative shock and hit to confidence will constrain the flexibility of businesses to raise prices on consumer products.

This “temporary” impact on inflation is not like the surge in inflation beginning in 2021.  That episode of high inflation persisted despite the Fed's erroneous reference to it as a "transitory supply shock". No question, the Covid pandemic gummed up global supply chains and was a temporary negative shock to supply. However, unprecedented fiscal and monetary stimulus--a 25%+ increase in deficit spending, plus the Fed's zero interest rates and massive asset purchases (it effectively purchased approximately one-half of the increase in US Treasury bond issuance) generated the strongest acceleration of aggregate demand in modern U.S. history.  The Fed somehow (purposely?) chose to ignore its role in generating the surge in aggregate demand and inflation, instead blaming it on a transitory supply shock.  If the Fed had accommodated the current oil price shock by lowering rates, stronger aggregate demand could have transformed a temporary inflation into a more permanent one.  But the Fed has wisely decided to avoid past mistakes.

If oil prices stay near recent elevated levels, once the temporary impacts of the oil shock work their way through the monthly inflation data, the monthly increases will settle back to their prior pace, but along a higher channel. Their yr/yr inflation measures will reflect several months' of big increases and gradually decelerate toward its pre-shock rate. The general price level will remain higher than where it would have been absent the higher oil prices.

However, if oil prices fall from their recent peak, subsequent months' CPI and PCE Price Index data will actually decline to reflect lower retail prices of energy, and the temporary months of deflation will reduce the general price level from its oil price-driven peak. If oil prices fall all of the way back to their pre-conflict level of $65/bbl--which seems doubtful since markets are expected to build in a risk premium even if global oil markets settle down--then the months of decline in the CPI and PCE Price Index (deflation) will largely offset their temporary spikes, and the price indexes will recede their pre-oil price spike paths.

It is noteworthy that market-based inflationary expectations have risen only very modestly in response to the surge in oil prices and CPI inflation. This reflects expectations that oil prices will recede back toward their pre-crisis level (as oil price futures markets are predicting) and the Fed's credibility that it will continue to pursue its long-run target of 2% inflation.

**Outlook for the Fed**. Kevin Warsh will assume his role as Chair of the Federal Reserve as these trends and the impact of the Middle Wast conflict on the economy and labor markets are sorting.  Prior to the oil price shock, Fed members were saying that further rate cuts would be appropriate, and the futures market had priced in rate cuts. Since the oil price spike, the Fed has spoken about the need to be prudent while the futures markets have delayed expectations of a rate cut until later in 2026.

Warsh is like an old-fashioned conservative central banker who understands that the Fed must pursue monetary policy that achieves 2% inflation and maximum employment, and that the oil price shock impact on inflation is temporary. Warsh also has a practical nature.  If all goes well and the monthly inflation data simmer following their temporary jump in March-April-May while the weakness in labor markets is accentuated by the oil shock, then it seems likely that the Warsh-led Fed may justify the need to ease earlier than the market now expects.

Oil Prices, the General Price Level and Inflation

As is well known, the oil price spike is a negative supply shock that dents the real economy and generates a one-time rise in the general price level that temporarily raises the monthly inflation data but is not inflationary.  How long are these temporary impacts expected to last?  This depends largely on how long the oil prices stay high.  But so far, the rapid responses of retail energy prices to the spike in crude oil prices suggest that the impact on the monthly inflation data will run their course quickly, in 2-3 months. The monthly inflation data should subsequently simmer down to their pre-Middle East conflict pace of increase, while the year-over-year percentage increases in measured inflation absorb the temporary bulge. If oil prices fall back to their pre-conflict $65/barrel, then the monthly changes will turn negative and the general price level will recede to the level its pre-conflict rate of increase would have taken it.

The oil price spike raises costs of energy, so consumers will spend more for energy products (historically, the demand is fairly price inelastic in the short run) and will have less to spend on non-energy goods and services.  The oil price bulge and Middle East conflict has hit confidence and raised uncertainty (the University of Michigan consumer sentiment index fell sharply in its latest April meeting) and interest rates a bit. In addition, the higher energy costs will raise business operating costs, which may raise the prices of selected consumer products a bit.  As a result, the oil price spike will generate a deceleration of nominal GDP.  A larger portion of that aggregate demand will be inflation and a lower portion real.

The Fed properly recognized the oil price spike as a negative supply shock and wisely decided to keep monetary policy on hold at its March FOMC meeting. The Fed funds futures market expects the Fed will be on hold at its late April meeting, which is scheduled to be Chair Powell’s last. The Fed rarely admits mistakes, but it largely acknowledges that its accommodation of the oil price shocks of the 1979s contributed to persistently excess demand and dangerously high inflation and inflationary expectations and bond yields.

Two observations are important about the recent spike in oil prices. First, reflecting the U.S. shale revolution and surge in production of oil and natural gas, which has made the U.S. net energy independent in the aggregate (even though certain regions in the nation have regulations that constrain oil drilling and refining and distribution, forcing them to rely heavily on imported energy—particularly California), gasoline and other energy sources remain in ready supply—only at higher costs.  That’s starkly different than the 1970s, when gasoline was scarce and rationed.

Second, retail energy prices have been adjusting quickly to the higher oil prices.  As shown in Chart 1, through April 10, while oil prices have risen to $96.50/barrel from $65, a 48% increase, retail gasoline prices nationally have risen to $4.15/gallon, up from $2.97, a 40% rise.  Before the Middle East conflict, there was backwardation in the oil price futures curve—the markets had priced in a gradual decline in oil prices from their then-current prices.  (After the oil price surge, markets have priced in expectations that prices will fall back toward their earlier price level by later in 2026, but maintain a risk premium.) Prices of other refined oil products have risen even faster:  diesel fuel have risen from $3.75/gallon to $5.68, a 51% increase.

260413ML1.jpg

The CPI inflation jumped 0.9% in March, lifting its yr/yr rise to 3.3% from 2.4%, while the core PCI excluding food and energy rose only 0.2%, lifting its yr/yr to 2.6% from 2.5%. As shown in Chart 2, overall energy commodity prices in the CPI rose 21.3% in March. This is bigger than its largest monthly jump in 2022 when WTI oil prices spiked to a high of $125/barrel. The U.S. Bureau of Labor Statistics collects data for the CPI throughout the month, so another large increase is expected in April.

260413ML2.jpg

This dramatic rise in gasoline and diesel prices point to a very quick adjustment of retail prices.  This suggests that the impact of the surge in crude prices on the CPI will be temporary, with the bulk of it in 2 months.  I expect the residual impact will be relatively modest.  Businesses will face some increases in operating costs, but the slowdown in aggregate demand growth--the anticipated outcome of a supply shock--is expected to constrain the pass through of higher operating costs to consumers. That is, a deceleration in aggregate demand will constrain the ability of businesses to raise product prices, and result in a one-time squeeze on select business margins. The residual impact of the oil price shock on the CPI beyond a several month temporary impact may be elongated a bit by the tax cuts of the OBBBA, which by increasing after-tax disposable income, may mitigate the impact of the negative oil shock on aggregate demand. 

The caveat and uncertainty, of course, is the future pattern of oil prices.

Oil Price Spike:  Temporary Boost to Inflation, but for How Long?

Ethan Harris

The US economy is neither in a “Golden Age,” as Trump supporters argue, nor is it regularly flirting with recession, as Trump critics argue.  In reality, Administration polices have contributed to “stagflation”—a combination of below-trend growth combined with persistent above-target inflation. An even bigger test lies ahead, with a significant risk of a major energy shock.

**Presidential report cards**

In comparing Presidential regimes, a common approach is to average growth and inflation over the four years in office. Of course, this ignores other drivers of the economy, and the lagged effect of policies from the prior President.

Trump’s Presidency is different. He took “ownership” of the economy out of the gate, with sharp shifts in economic policy. In the process Congress was largely sidelined and Fed policy became secondary. This has been Trump’s economy from the get-go.

Let’s briefly look at how five kinds of policy shifts—trade, immigration, tax cuts, deregulation and war have impacted the demand and the supply-side of the US economy.

**Demand damage**

The impact of Administration policies on spending and demand has been mixed. The good news is that income tax cuts tend to stimulate consumer spending and corporate tax cuts tend to stimulate investment. Unfortunately, these positive effects have been canceled out by the dramatic increase in consumer and business uncertainty.

The chart below shows a news-based measure of policy uncertainty from Bloom and others. There has been a massive spike in policy uncertainty in general and trade policy uncertainty in particular. The later is much higher than during the first trade war. This has put sand in the gears of the economy, with firms reluctant to hire and invest and households reluctant to spend. This is one of the reasons why business investment, outside of data centers, has remained weak and manufacturing jobs have declined.

260413EH1.jpg

**Golden age or cooking the golden goose?**

The cross currents on the supply side of the economy are even more dramatic. The Administration sees a big boost in potential growth as deregulation improves productivity, tax cuts encourage work and investment, and tariffs induce companies to move operations to the US.

**Getting the timing right**

Unfortunately, this is not the end of the story. History shows that there are long lags from policy changes to improved potential. It takes years to build new productive capacity, change business planning around regulations, and to revamp supply chains. Indeed, as I noted above very high levels of uncertainty have made the lags even longer than usual. The increase in investment projects (outside of AI) hasn’t happened yet, let alone completion of the projects.

Meanwhile some policies are undercutting potential growth. Not only is policy uncertainty freezing up business plans, huge budget deficits are absorbing savings, crowding out private investment. Perhaps most important, immigrant reduction policy has been very successful in slowing the growth of the labor force. The “breakeven rate” for employment growth—the rate that keeps the unemployment rate constant—has dropped close to zero. This is down from the 150k or more at the height of Biden’s “open door” policy. This is already having a big impact on potential growth.

With all that said, other developments—unrelated to Administration policy—have been good for potential growth. As the chart shows, productivity growth started to trend higher back in 2023. The driver was not Administration policy, but investments and innovations in response to the COVID shock. Similarly, while it is too early to see real benefits from Artificial Intelligence, as data centers are completed, and businesses learn how to use the new tools it could spark a productivity boom.

260413EH2.jpg

**The verdict**

Coming into 2025 both growth and inflation were trending down. On net, Administration policies seem to have caused a leveling off inflation, while contributing to slower growth, particularly in the labor market inflation (chart). On the other hand, I think the trend growth in productivity has improved, first from the business response to COVID and over time due to Artificial Intelligence.

260413EH3.jpg

Unfortunately, the Administration’s second year could look about the same or considerably worse. I expect immigrant reduction policy to continue to suppress labor force growth. I also think high levels of policy uncertainty are here to stay. On the other hand, the benefits of the tax cuts and deregulation could start to show up.

The wild card, of course, is the Iran war. I think both economists and investors are underestimating the risks to both growth and inflation. So far, the US economy has been spared the worst of the shock: energy prices have jumped more in Europe and there are physical shortages in Asia. However, as US oil exports increase, US prices will tend to rise to global levels. Most important, there is no easy answer for opening the Strait and the longer it is closed, the bigger the risk of a huge price spike. Fingers crossed.




The Trump Economy, One Year In

State real GDP growth rates in 2025:Q4 ranged from -8.3% in DC to 3.8% in North Dakota. The plunge in DC was related to the federal shutdown (Maryland also had a marked decline). North Dakota was an outlier on the other side, reflecting a pickup farm output. Most states had sluggish growth rates within a point of the nation’s .5%.

Personal income growth rates ranged from -4.0% in North Dakota to Hawaii’s astronomical 41.5%. Hawaii’s gain was the result of a large settlement payment related to the 2023 Maui wildfire. North Dakota’s loss stemmed from a sharp drop in earnings (compensation plus proprietors’ income). Most states saw gains trailing the national growth rate of 3.4%; with the exception of California the larger states typically saw higher growth rates.

State Coincident Indexes in January 2026

Charles Steindel

More Viewpoints

Oil Prices, the General Price Level and Inflation

Oil Price Spike: Temporary Boost to Inflation, but for How Long?

The Trump Economy, One Year In

State GDP and Personal Income in Q4 2025