U.S. Data's Not Market Moving; Baxter International's Split: Best of Kass

NEW YORK (TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.

Among the posts this past week were items about inflation and Baxter International.

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Parsing the Data

Originally published on Saturday, March 28, at 9:50 a.m. EDT

Inflation in February as measured by the PCE deflator, the  Fed's preferred gauge more so than CPI, rose +0.1% month over month both headline and core and +0.9% and +1.1% year over year headline and core, respectively. The near-7% increase in the CRB index in February was not at all captured in this figure, as it will take some time to work its way through (mostly food). Also, housing is a much smaller contribution to PCE than CPI and therefore doesn't fully reflect the near-3% gains in rents. PCE has a higher medical care component, which has recently been more benign of late.

The Fed doves will worry about disinflation; the hawks will know it's backward-looking. The labor market as measured by the unemployment rate is tighter than thought, and rates shouldn't be at zero anyway at this stage of the cycle, let alone still conducting QE.

Income and spending both rose +0.3% month over month nominally and +0.2% real, and the savings rate rose to 4.3% from 4.2%. Income growth is a key factor in whether the U.S. economy will accelerate from here, and it's up 3.1% year over year vs. 4.1% in January and compares to the 20-year average of 4.7% growth.

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