Policy-makers have been worried that rising energy costs could lead to higher prices for other things including higher wages and compensation, but it looks like companies are keeping their employment costs in check.
We've seen, over the past seven months or so, orders stabilize or improve slightly, compared to a big decline last year. Orders are rising relative to inventories, and that's a positive sign for capital spending.
So core inflation is still rising slightly but doesn't appear to be a problem, and I think this is good news for the Federal Reserve . With energy prices declining it reduces the risk that fuel costs will be passed on to consumers.
Energy prices are dropping, and consumer spending is holding up despite rising unemployment . These are encouraging things the market is recognizing.