May 2011 Macro Pulse -- “Transitory” or “Transition”?

“Transitory” seems to be the Federal Reserve’s newfound adjective for describing a spate of recent negative economic data. The Federal Open Market Committee’s March 15 meeting minutes stated the Committee anticipates that “the effects on inflation of the recent run-up in commodity prices [will] prove transitory.” Fed Vice Chair Janet Yellen, in an April 11 speech to the Economic Club of New York, invoked the term six times. Examples included: “recent increases in commodity prices are likely to have only transitory effects on headline inflation… the overall inflationary consequences of these pass-through effects to be modest and transitory… my expectation regarding the transitory effects of commodity price shocks on consumer inflation… fairly modest and transitory effects of an oil price shock….” Finally, in his April 27 press conference, Fed Chair Bernanke said that -- other than construction, “most of the slowdown in the first quarter [was] viewed by the Committee as being transitory.”

Click here to read the entire May 2011 Macro Pulse recap. Are the developments mentioned there “transitory” or indicative of an economy in “transition”?

The Macro Pulse blog is a commentary about recent economic developments that affect the forest products industry. That commentary provides context for our 24-month forecast, which is contained in the monthly Economic Outlook newsletter available through Forest2Market. The monthly Macro Pulse newsletter summarizes the previous 30 days of commentary available on this website.