Consumer prices rose 8.5% in March – highest since 1981(cnbc.com)
cnbc.com
Consumer prices rose 8.5% in March – highest since 1981
https://www.cnbc.com/2022/04/12/consumer-prices-rose-8point5percent-in-march-slightly-hotter-than-expected.html
694 comments
Stepping back from the numbers and into the realm of personal anecdotes:
1. I was listening the radio a couple weeks ago and the DJ invited people to call in and talk about the mask mandate being lifted (in Toronto). Woman calls in, says she went to the grocery store, got three bags of groceries, $146. The dj asks "and... were people wearing masks?" "oh yeah, some were" says the woman before going on to explain how she paid $14.50 for a roll of aluminum foil. The topic was masks and the caller didn't even want to talk about that, the cost of goods was her top and only issue.
2. Standing in a park, an older gentleman is walking by with two small bags of groceries in his hands. I look at him to greet him as he passes, but he walks straight up to me as though he wants to address me. He stops in front of me, looks right in my eyes, lifts his groceries and says "FORTY DOLLARS! Too much money!!" (English was not his first language.) I directed him to the discount grocery, he confirmed that's where he is already shopping, and it's a green grocer with dry goods so I know his bags contained no (costly) meat, just vegetables and maybe some bread, pasta, or eggs.
I frequently hear of "inflation" etc. on the news or economic reports, but this is different. I have never been approached by strangers on the street who are so frustrated and shocked by price hikes they couldn't walk all the way home without telling someone, even a stranger. This economic situation is different from any I have experienced in my ~40 years.
1. I was listening the radio a couple weeks ago and the DJ invited people to call in and talk about the mask mandate being lifted (in Toronto). Woman calls in, says she went to the grocery store, got three bags of groceries, $146. The dj asks "and... were people wearing masks?" "oh yeah, some were" says the woman before going on to explain how she paid $14.50 for a roll of aluminum foil. The topic was masks and the caller didn't even want to talk about that, the cost of goods was her top and only issue.
2. Standing in a park, an older gentleman is walking by with two small bags of groceries in his hands. I look at him to greet him as he passes, but he walks straight up to me as though he wants to address me. He stops in front of me, looks right in my eyes, lifts his groceries and says "FORTY DOLLARS! Too much money!!" (English was not his first language.) I directed him to the discount grocery, he confirmed that's where he is already shopping, and it's a green grocer with dry goods so I know his bags contained no (costly) meat, just vegetables and maybe some bread, pasta, or eggs.
I frequently hear of "inflation" etc. on the news or economic reports, but this is different. I have never been approached by strangers on the street who are so frustrated and shocked by price hikes they couldn't walk all the way home without telling someone, even a stranger. This economic situation is different from any I have experienced in my ~40 years.
The biggest story here is in shelter prices.
https://www.bls.gov/charts/consumer-price-index/consumer-pri...
March saw a continuation of a year-long trend in which YoY shelter inflation accelerated by almost exactly an additional 0.3% each month. March came in at 5%, 0.3% higher than February's 4.7%, and so on.
Shelter is the largest category in the CPI basket, and it is critical for a reason. It isn't coming from Ukraine. It mostly isn't coming from supply chain bottlenecks and shipping container shortages. It isn't discretionary. And most importantly, it's a deeply lagging indicator with a long way still to go to catch up to the current activity in the housing and rental markets.
My expectation is to see this trend continue. Base year effects (in the second derivative) might slow it down a bit, but by June we could be looking at almost 6% inflation in shelter alone.
And remember -- a linearly increasing growth rate is faster than exponential price growth.
Interest rate hikes may help, but the dynamics are such that they'll need to make things worse before they make things better.
https://www.bls.gov/charts/consumer-price-index/consumer-pri...
March saw a continuation of a year-long trend in which YoY shelter inflation accelerated by almost exactly an additional 0.3% each month. March came in at 5%, 0.3% higher than February's 4.7%, and so on.
Shelter is the largest category in the CPI basket, and it is critical for a reason. It isn't coming from Ukraine. It mostly isn't coming from supply chain bottlenecks and shipping container shortages. It isn't discretionary. And most importantly, it's a deeply lagging indicator with a long way still to go to catch up to the current activity in the housing and rental markets.
My expectation is to see this trend continue. Base year effects (in the second derivative) might slow it down a bit, but by June we could be looking at almost 6% inflation in shelter alone.
And remember -- a linearly increasing growth rate is faster than exponential price growth.
Interest rate hikes may help, but the dynamics are such that they'll need to make things worse before they make things better.
I think the article's own title is incorrect?
> Headline CPI in March rose by 8.5% *from a year ago*
Another notable piece:
> core inflation appeared to be ebbing, rising 0.3% for the month, less than the 0.5% estimate
which matches the other commenter mentioning that the gas prices were a massive contributor to this.
> Headline CPI in March rose by 8.5% *from a year ago*
Another notable piece:
> core inflation appeared to be ebbing, rising 0.3% for the month, less than the 0.5% estimate
which matches the other commenter mentioning that the gas prices were a massive contributor to this.
Fuel[1] accounted for a substantial portion of the overall lift, we've actually come in under expected inflation which is why you're seeing markets up today.
Gasoline, unleaded regular - +48.8% (+20.1% over last month)
[1]https://www.bls.gov/news.release/cpi.nr0.htm
Gasoline, unleaded regular - +48.8% (+20.1% over last month)
[1]https://www.bls.gov/news.release/cpi.nr0.htm
Quite a lot of people are starting to say that measuring inflation with a single number is like measuring the temperature of the whole US with a single number - "today the temperature in US is 81 F".
The government is lying. The CPI index is being manipulated like crazy. Real inflation or grocery store inflation is at 20% percent min, and it's easy enough to check for most americans.
Just check your bills and factor in smaller sizes. Cost increase of at least 10% plus smaller portions.
Open question: won't inflation lead to mechanically higher stock prices, specially if it's demand driven?
Say we give duplicate the amount of money in the economy(M1 M2 etc) and prices immediately double. Won't that also double firm revenue, profits, dividends, and thus firm value in nominal terms?
Thus, if stock prices and home prices are +10% in nominal terms, with inflation close to 10%, doesn't this mean they are just breaking even?
Say we give duplicate the amount of money in the economy(M1 M2 etc) and prices immediately double. Won't that also double firm revenue, profits, dividends, and thus firm value in nominal terms?
Thus, if stock prices and home prices are +10% in nominal terms, with inflation close to 10%, doesn't this mean they are just breaking even?
The best cure for inflation is to increase taxes. This removes money from the economy, and can be targeted towards the areas of the economy with too much money.
Raising interest rates paid to the Fed are another way of removing money from the economy, but are a broader brush, although the Fed is a much better steward than Congress. Increased interest rates cause stock market declines, so they also tend to act as a wealth tax.
Cutting spending is another way, but it's slow acting. It's more of "don't make things worse" than attacking the core problem of "too much money".
So if you hear somebody screaming about inflation, ask them if they support increased taxes.
Raising interest rates paid to the Fed are another way of removing money from the economy, but are a broader brush, although the Fed is a much better steward than Congress. Increased interest rates cause stock market declines, so they also tend to act as a wealth tax.
Cutting spending is another way, but it's slow acting. It's more of "don't make things worse" than attacking the core problem of "too much money".
So if you hear somebody screaming about inflation, ask them if they support increased taxes.
and right at the top of CNBC we see
We are headed for unprecedented market deflation.
BREAKING Stocks rebound on hope inflation is peaking, Nasdaq adds 1%
We are headed for unprecedented market deflation.
> Real worker earnings fell by another 0.8% during the month as the cost of living outpaced otherwise strong pay gains.
Most post-WWII recessions were preceded by or coincident with a spike in CPI (and not coincidentally by record-low unemployment numbers). This point is widely overlooked and plain forgotten. A substantial CPI-spike preceded the GFC, for example.
Here's a handy chart to look into this further:
https://fred.stlouisfed.org/series/CPIAUCSL#0
Way too much attention is being focused on the Fed at this point. The Fed is pretty much a bystander engaged in a psychological operation on the American Public. It talked up the current stock market bubble with its pointless QE and now it's in the process of talking down the bubble as gently as it knows how.
Meanwhile markets are telling you what's about to happen. The inversion of the Eurodollar curve in late 2021 and Treasury yield curve more recently are telling you that a recession is on the way. The speed with which interest rates have been fluctuating tells you that something big could be in the works. The sudden appearance of large amounts of housing inventory, partially resulting from spikes in long-term rates tells you that market is peaking. Overvaluation of the stock market by just about any metric (e.g., "the Buffett Indicator") tells you that the bull market is transitory.
And of course, there's falling real wages, which the article notes. 0.8% MoM decreases in purchasing power are not sustainable. Consumer spending makes up the majority of the US economy. Give people less to spend and they start going into debt to keep up appearances. Take away their job during a recession, and they default on those debts.
Every time these kinds of warnings flash, spinmeisters write them off as peculiarities of the current situation. Every time, there's a reason this time is different. It never is.
Most post-WWII recessions were preceded by or coincident with a spike in CPI (and not coincidentally by record-low unemployment numbers). This point is widely overlooked and plain forgotten. A substantial CPI-spike preceded the GFC, for example.
Here's a handy chart to look into this further:
https://fred.stlouisfed.org/series/CPIAUCSL#0
Way too much attention is being focused on the Fed at this point. The Fed is pretty much a bystander engaged in a psychological operation on the American Public. It talked up the current stock market bubble with its pointless QE and now it's in the process of talking down the bubble as gently as it knows how.
Meanwhile markets are telling you what's about to happen. The inversion of the Eurodollar curve in late 2021 and Treasury yield curve more recently are telling you that a recession is on the way. The speed with which interest rates have been fluctuating tells you that something big could be in the works. The sudden appearance of large amounts of housing inventory, partially resulting from spikes in long-term rates tells you that market is peaking. Overvaluation of the stock market by just about any metric (e.g., "the Buffett Indicator") tells you that the bull market is transitory.
And of course, there's falling real wages, which the article notes. 0.8% MoM decreases in purchasing power are not sustainable. Consumer spending makes up the majority of the US economy. Give people less to spend and they start going into debt to keep up appearances. Take away their job during a recession, and they default on those debts.
Every time these kinds of warnings flash, spinmeisters write them off as peculiarities of the current situation. Every time, there's a reason this time is different. It never is.
A local restaurant just got rid of their paper menus because it was too expensive to reprint every time they wanted to raise prices …
And yet people on hacker news or other high income forums seems to say "Just buy a EV".
It's the "Let them Eat Cake" of 2022. Poor people driving economy boxes and living in a 4th floor walkup apartment with 3 roommates aren't buying an EV... even if the savings are better long term.
It's the "Buy a better pair of boots they'll last longer".
And yet - people seem oblivious - like Marie Antoinette that the poor class can't simply upgrade to solar and use an EV and avoid the gas prices which hit their bottom line pay every week in the form of higher prices and higher costs to travel.
Who cares about bread when it costs so much to drive to the gas station? Let them get an EV
It's the "Let them Eat Cake" of 2022. Poor people driving economy boxes and living in a 4th floor walkup apartment with 3 roommates aren't buying an EV... even if the savings are better long term.
It's the "Buy a better pair of boots they'll last longer".
And yet - people seem oblivious - like Marie Antoinette that the poor class can't simply upgrade to solar and use an EV and avoid the gas prices which hit their bottom line pay every week in the form of higher prices and higher costs to travel.
Who cares about bread when it costs so much to drive to the gas station? Let them get an EV
If anyone wants to listen to a prescient conversation about the feds actions post-2008 and inflation today, take a listen to this podcast.
It was recorded in 2009.
https://www.econtalk.org/meltzer-on-inflation/
It’s an interview with Prof Meltzer from Carnegie Mellon who has done extensive research on the federal reserve system.
Cliff notes:
- As a result of the 2008 crisis the fed expanded the money supply to a degree never seen before
- Rather than drive inflation, the “new money’s” effect was muted due to skittish banks who would decide to just take the funds and hold as cash/treasuries (maintaining strong reserves) until more positive economic indicators emerged (this process could be paused if economic sentiment turned negative)
- Once economic forecasts turn more optimistic, the money will be deployed (through lending) into investments and assets leading to inflation in those prices
- Eventually the excess supply will spill over into consumer spending in the classic indicators of inflation like CPI
- However the fed will be under immense political pressure to not drive the “fragile” economy into a recession so any tightening will be far too late and inflation will overshoot targets by a large degree.
- Similar to the 70’s, until strong monetary contraction is brought in, inflation will run very hot despite other efforts to control it
Pretty accurate so far.
It was recorded in 2009.
https://www.econtalk.org/meltzer-on-inflation/
It’s an interview with Prof Meltzer from Carnegie Mellon who has done extensive research on the federal reserve system.
Cliff notes:
- As a result of the 2008 crisis the fed expanded the money supply to a degree never seen before
- Rather than drive inflation, the “new money’s” effect was muted due to skittish banks who would decide to just take the funds and hold as cash/treasuries (maintaining strong reserves) until more positive economic indicators emerged (this process could be paused if economic sentiment turned negative)
- Once economic forecasts turn more optimistic, the money will be deployed (through lending) into investments and assets leading to inflation in those prices
- Eventually the excess supply will spill over into consumer spending in the classic indicators of inflation like CPI
- However the fed will be under immense political pressure to not drive the “fragile” economy into a recession so any tightening will be far too late and inflation will overshoot targets by a large degree.
- Similar to the 70’s, until strong monetary contraction is brought in, inflation will run very hot despite other efforts to control it
Pretty accurate so far.
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After reading the definition of how the gas price factors into the CPI [0], I don't think fuel use is included because it's a price index, not a use index. As average mileage improves[1], and WFH continues, I wonder if usage will either plateau or decline[2][3], resulting in the price of gas having less of an impact.
[0] - https://www.bls.gov/cpi/factsheets/motor-fuel.htm
[1] - https://www.epa.gov/system/files/styles/large/private/images..., from https://www.epa.gov/automotive-trends/highlights-automotive-...
[2] - https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W...
[3] - https://www.statista.com/statistics/188448/total-us-domestic...
[0] - https://www.bls.gov/cpi/factsheets/motor-fuel.htm
[1] - https://www.epa.gov/system/files/styles/large/private/images..., from https://www.epa.gov/automotive-trends/highlights-automotive-...
[2] - https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W...
[3] - https://www.statista.com/statistics/188448/total-us-domestic...
Honestly, this was just my gut and I've felt prices were artificially low for the past decade or so - maybe because of globalization and offshore manufacturing, and things are really just catching up to what they're actually worth. You can elect a guy that will "decouple" from China and trash international trade deals...but don't expect low prices 4 years later...
So, I think it’s time to build solutions that directly address the problem (inflation). An interesting idea would be an NFT (I know…bear with me)that breeds a “child NFT” when CPI(inflation) rises past a threshold. Owner can sell child to cover inflation costs. Child becomes a parent when transferred, and similarity breeds based on CPI increases. Cycle repeats…
Would love to hear why it won’t work, how to improve it, etc.
Instead of asking governments to stop printing so much dang money, or, starting wars, both of which cause inflation, we can now say fuck it and build economic tools that protect people from the crushing lose in purchasing power. Let’s do that!!
Would love to hear why it won’t work, how to improve it, etc.
Instead of asking governments to stop printing so much dang money, or, starting wars, both of which cause inflation, we can now say fuck it and build economic tools that protect people from the crushing lose in purchasing power. Let’s do that!!
This is what happens when global shipping supply routes break down.
So what does the normal working class guy like me do to protect my savings? Currently investing in diversified ETFs doesn't seem to protect me.
Chart with components. The big news for me is that durables, which were leading inflation for a year, are now a net drag in the month-over-month
https://twitter.com/lookinggdlouis/status/151388254299014759...
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Meat prices are up close to 30% for me in NYC since January. I am aware meat prices don’t dictate inflation numbers but I’m really having a hard time believing any official estimates at this point. The actual Covid numbers over the past ~1.5 months (use imagination) look extremely “smoothed downwards” as well, not that they were ever accurate (although certainly the US was one of few countries willing to or capable of providing public numbers). The underrated thing about Trump was his administration wasn’t capable of hiding their incompetence.
Normally the difference from a year ago is reported, but you might also want to look at the level graph:
https://fred.stlouisfed.org/series/CPIAUCSL
https://fred.stlouisfed.org/series/CPIAUCSL
A major reason gasoline, diesel and natural gas prices are spiking is the push to export more fossil fuels from the USA by the oil/gas industry. This was facilitated by the 2015 decision to eliminate the ban on crude oil exports, which Obama/Biden and Republicans backed. It's simple supply and demand: reduce domestic supply by increasing exports to jack up domestic prices and increase profits. Around the same time at least one major domestic refinery was also closed, adding to the domestic supply restriction.
There is some effort to get the ban re-instated as of 2021:
> "Khanna drafted a letter to the White House Monday signed by nine Democrats urging the administration to block the export of U.S. oil, which has been allowed since 2015 when Congress lifted a 40-year-old ban on the practice. Since then, U.S. exports have regularly surpassed 3 million barrels a day, more than the production of major OPEC members such as Kuwait and Iran."
https://financialpost.com/pmn/business-pmn/lawmaker-says-whi...
There is some effort to get the ban re-instated as of 2021:
> "Khanna drafted a letter to the White House Monday signed by nine Democrats urging the administration to block the export of U.S. oil, which has been allowed since 2015 when Congress lifted a 40-year-old ban on the practice. Since then, U.S. exports have regularly surpassed 3 million barrels a day, more than the production of major OPEC members such as Kuwait and Iran."
https://financialpost.com/pmn/business-pmn/lawmaker-says-whi...
In Februrary UK prices were up 6.2% YoY which is a 30 year high. https://www.bbc.com/news/business-60833361
[deleted]
I don't get it.
With this unemployment figures deficit could be decreased substantially without hurting much economy. Why on Earth they aren't doing this?
With this unemployment figures deficit could be decreased substantially without hurting much economy. Why on Earth they aren't doing this?
Who benefits from this? Is wealth distribution changing?
Here are the weightings of CPI [1]. It's not quite that simple (eg there are seasonal adjustments) but it's a good rough estimate. You'll note that Shelter (Housing) is 32% and Energy is 7%. Two key events YoY:
1. We went from Covid discounts in housing to a corection and a surge in the other direction. Housing is certainly a problem but the impact on inflation is slightly exaggerated because of that swing; and
2. A war started in Ukraine and this allowed energy companies to arbitrarily raise prices for massive profits that have little to do with actual or potential supply issues.
Housing takes a long time to turn around. I honestly think we need to start punitively taxing property held by corporations (including LLCs), foreign-owned property and illegal hotels (ie AirBnB) as these are restricting access to a necessity for no real benefit.
As for energy, as much as many in the US in particular like to blame this on Biden. It's worldwide. The real problem though is profiteering by oil companies. It maddens me when I see governments suspending taxes to reduce the hit but somehow the energy companies can't take a hit? They're making absolute record profits. But no one even speaks about that.
Where Biden is responsible is in the same way every US president is, regardless of party. And that is in promoting a reckless foreign policy and dangling NATO membership to Ukraine to keep it aligned with the West when it was (and is) never going to happen for exactly the reasons we're seeing now. Of course, Russia is to blame for a completely unjustifable and horrific invasion and everything that comes from that but both of these things can be true at the same time.
Put it this way: you park your car in a crappy part of town and leave your Macbook on the hood and there's a good chance it'll be stolen. Sure the thief is responsible but you also could've taken more care. And no, that's not victim-blaming.
[1]: https://www.pewresearch.org/fact-tank/2022/01/24/as-inflatio...
1. We went from Covid discounts in housing to a corection and a surge in the other direction. Housing is certainly a problem but the impact on inflation is slightly exaggerated because of that swing; and
2. A war started in Ukraine and this allowed energy companies to arbitrarily raise prices for massive profits that have little to do with actual or potential supply issues.
Housing takes a long time to turn around. I honestly think we need to start punitively taxing property held by corporations (including LLCs), foreign-owned property and illegal hotels (ie AirBnB) as these are restricting access to a necessity for no real benefit.
As for energy, as much as many in the US in particular like to blame this on Biden. It's worldwide. The real problem though is profiteering by oil companies. It maddens me when I see governments suspending taxes to reduce the hit but somehow the energy companies can't take a hit? They're making absolute record profits. But no one even speaks about that.
Where Biden is responsible is in the same way every US president is, regardless of party. And that is in promoting a reckless foreign policy and dangling NATO membership to Ukraine to keep it aligned with the West when it was (and is) never going to happen for exactly the reasons we're seeing now. Of course, Russia is to blame for a completely unjustifable and horrific invasion and everything that comes from that but both of these things can be true at the same time.
Put it this way: you park your car in a crappy part of town and leave your Macbook on the hood and there's a good chance it'll be stolen. Sure the thief is responsible but you also could've taken more care. And no, that's not victim-blaming.
[1]: https://www.pewresearch.org/fact-tank/2022/01/24/as-inflatio...
Inflation is hurting Americans, and the war in Ukraine is killing Ukrainians. The idea that these people would try to use one of these things to advantage themselves politically instead of addressing the suffering that their policies are causing (and changing course) is reprehensible to me.
There is a daily White House press briefing that I suggest everybody watch (you can 2x speed through it). Here is a link to today's: https://www.youtube.com/watch?v=07-AMwJbXQY
Just the way that they talk about this is so...vile. 8.5% inflation is a nightmare. You're in charge. Take ownership of that, and for the love of god stop trying to use the massacre of innocent people in Ukraine is a political tool for youself.