The latest CPI Release from the BLS shows prices ticked up 0.3% in August from September.
Year-over-year inflation is up 1.5%. We are nearing the Fed’s 2% inflation goal. Inflationists call this “progress”.
Today I ask a simple question “Is the Rise in Price Inflation Transitory?”
Bear in mind, I am talking about how the BLS measures inflation, not actual inflation. Actual inflation is a measure of money supply and credit.
Even price inflation, as reported, is nonsense because medical expenses are seriously understated, and housing is not included in the CPI at all.
More accurately, the actual question I strive to answer today is “Is the rise in price inflation, as measured by the BLS, transitory?”
My answer to that question is “yes”. The reason is energy. From August to September energy commodities were up 5.5% and gasoline 5.8%. Those numbers have reversed.
Related Articles
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- Diving Into the Medical CPI: Are Your Medical Expenses Up Only 5% from Year Ago?
- Retail Sales Poised to Suffer on Higher Medical, Rental Inflation
In a foolish attempt to defeat routine consumer price deflation, the Fed has sponsored yet another asset bubble that will bring about damaging asset bubble bust and credit deflation. The BIS would agree.
For discussion, please see Historical Perspective on CPI Deflations: How Damaging are They?
Mike “Mish” Shedlock
Today I ask a simple question “Is the Rise in Price Inflation Transitory?”
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Deflation coming.
The Recession will see to that.
The Propaganda dept. sends a memo to the News dept. saying the inflation for the quarter was 2 percent.
The News dept. responds by asking if the Propaganda dept. included the Cherokee ceremonial headband, and removed the sausages from the CPI basket, as agreed.
The Propaganda dept. adjust the inflation to 1.5 percent.
When it comes to inflation, I can float like a butterfly and sting like a bee. There’s always a way to avoid most rising costs, except for gasoline and likely a couple of other things. I can live well and live cheap. For example, I recently loaded up on some new laptops and a new tablet. All happened to be used Dell models. The laptops are A-Stock off lease models, purchased for much less than $300 each, original cost over $1200. All have 3rd generation intel i5 processors. I upped the ram and installed a ssd in each. The included wifi card was ok but I upped mine to ac for $25 each. The tablet was was a used Dell Venue with a 4th gen i5 processor 8GB ram 256 GB ssd and included two keyboards and a docking station … $415. A steal. Each now has free Win 10 pro with the ‘spy’ featured disabled.
One of my old laptops is now a Plex server, which gives me some free tv, not pirated since it is the same as if I pulled it from the station’s internet site. This saves me from buying a Netflix sub for now as some stations moved from Hulu to Netflix. I own my Tivo equipment, saving me hundred a year over cable box rentals.
Buying shoes from Amazon is almost a gift if you shop well. Sames with most clothes a lot of the time.
The point, being a smart shopper makes inflation a novel concept that doesn’t apply a lot of the time.
“The Propaganda dept. sends a memo to the News dept. saying the inflation for the quarter was 2 percent.”
LOL !!
Yes, and the bank’s mortgage department sends a memo to it’s collections dept and tells them to declare a moratorium on foreclosures so that it doesn’t seem so dubious of a proposition to take out a mortgage.
Yes, it is transitory.
As MIsh states, the decline in oil prices will be a major factor – but several months down the road. Year-over-year comparisons still show an increase.
Also, skyrocketing health care costs seem preposterously under-represented in the CPI “basket”.
Those skyrocketing health care costs will continue to decimate consumers’ discretionary spending – which is hardly inflationary.
The Fed seems hell-bent on steepening the yield curve, which will put tremendous upward pressure on mortgage rates and likely deal the already-tepid housing sector a lethal blow.
IMHO, the inflation we see now is as much as we are likely to get, before the next bout of deflation.
Rinse and repeat.
Can you have inflation without wage inflation?
Prices rise and wages don’t.
How do you think that will end????
You can’t have real, long-term inflation without wage inflation. Labor is the ultimate and only real resource that counts.
I would assume that prices are a function of supply and demand. Do we really think that relationship stills exists? Fuel prices are fluctuating wildly while demand AND supply remain relatively fixed. Tiny changes in supply or demand translate in to large moves in market prices simply because the gamblers are trying to predict tomorrows numbers from tea leaves and financial soothsayers.
I don’t follow every economic metric but it looks like corporate profits are largely flat to lower, and even still they are fluffing their numbers with debt driven stock buybacks. Debt is climbing ever higher in all areas from car loans and student debt to the federal budget deficit. There is real danger here as our entire economy is suspended on debt, and debt is the one undeniable symbol of economic failure. we see it in our selves and every other entity. Zirp has failed and they are still talking out of both sides of their mouths, potentially raising AND lowering rates. IF they can figure out how to do both, I’m sure they will.
The ONLY way prices can rise in this environment is through shortages of necessary consumables (and that would be from deliberate measures given our over capacity in just about everything) Or simply flooding us with money printed from the depths of hell.
Labor rates can’t rise as immigrants or automation will be ready replacements at ever lower costs. Only fools would demand higher wages at this point…unless of course they are government employees as they appear to be constitutionally protected from job loss, wage cuts or reduction in entitlement payouts. Everyone else will see largely stagnated wages and slow attrition. Meanwhile, the price of everything we NEED will increase…slowly at first, and then….all of the sudden.
Best be stockpiling them acorns as winter is coming and it looks to be a bad one.
“You can’t have real, long-term inflation without wage inflation. Labor is the ultimate and only real resource that counts.”
Sure you can. The currency is debased while real wages stagnate or decline so that constant or even lower prices become inflated prices.
Yes. If you drop money out of helicopters, and continue to do so until everybody is converted to the right religion.
On second thought, it depends where you live.
Housing has experienced a phenomenal inflation, all of it unaccounted. Housing is NOT a necessity anymore, but an investment asset, and so inflation proof. Brought to you by the geniuses who brought you negative rates.
When supply is artificially inspired with malinvestment and demand is artificially inspired by massive ZIRP debt, how EXACTLY do we establish “price”.
Only a fool would demand higher wages when our jobs will easily be replaced ith either immigrants or automation. Wages CAN”T go up and prices will do what ever they want them to. When was the last time we had REAL supply and demand influence oil prices?
Actually, the recent crap out in oil was definitely a physical supply/demand issue. You could tell by the shape of the forward curve.
Gee, I wasn’t aware we had had any shortages.
We had excess.
“Only a fool would demand higher wages when our jobs will easily be replaced ith either immigrants or automation.”
Democrat politicians and their sycophants are fools. They demand $15 an hour, while allowing H1/2B’s and illegal immigrants to flood the country, which is deflationary to wages.
I would expect oil to fluctuate wildly from now on. We have Iran as a producer now and we have overcapacity capability with a rapidly responding fracking business here. Oil will continue to be available at the snap of a finger, until the underlying finance structure weakens or collapses, or some Hugh Mungus war starts in the Middle East.
It’s already fluctuating wildly – down more than 10% in TWO WEEKS.
Like all other commodities and securities, the Oil price now gets set in a fully financialzed Casino.
Shoppers benefit from CPI deflation. They can buy more goods with their pay/pensions.
It’s only good for those that don’t have jobs. Falling prices will eliminate jobs as lower prices indicate over supply. For those receiving entitlement payments that are fixed it will be “marvelous”…..at least until job and business elimination produces real shortages. People out of the workforce for very long will not be viable employees, so any increase in demand will be met with technology/automation..,.and significantly higher prices, of which no one will have income from which to pay..
They keep blowing ATMs out of banks in Spain, tenth since summer if I read right…
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It’s all pretty obvious that our only solution is that which Hillary Proposes….to “invest” in jobs, of course using our own money to do it….. well, it was our money but they haven’t printed it yet and added it to our debit sheet, and given that they spent it on “our” jobs, it’s all kind of illusory.
It appears no different than stealing from our savings account while we sleep and then using it to give us a raise…except we are forced to pay interest on the “loan”.
Our delusions are so deep now and our options so bleak, that we have no other way of seeing things but to actually believe that giving us our own money is a “gift”.
Our only choice is to vote Hillary if we are to have any hope of continuing our current illusions. At this point it is obvious that reality is simply more than most can bear.
Higher wages, more entitlements for those displaced by higher wages, higher taxes on those providing us jobs to pay for the entitlements of those displaced by higher taxes on employers, lower costs for consumption goods through even more aggressive trade deals, that allow those who have been displaced by low cost imports in their employment to still consume and provide corporate profits so that the multinationals can afford to bribe our government for even more protection form those same higher taxes that will be imposed on their competitors.
See, it ALL works!