Inflation Scorecard: Is Reflation Upon Us?

By Brad Zigler

Real-time Monetary Inflation (last 12 months): 2.0%*

Inflation was front-and-center this week in the wake of the U.S. Labor Department's reports on the Producer Price Index (PPI) and Consumer Price Index (CPI). Wholesale prices measured by PPI fell 4.3% over the past 12 months, moderating the record 6.8% rate of decline chalked up the previous month. The rate at which consumer prices declined was also tempered. CPI declined at a 1.5% annualized pace in August after falling at a 2.1% clip in July.

Monetary inflation measured by our proprietary real-time indicator flipped from deflation to inflation on August 24, and now shows inflation running at a 2.0% pace over the last 12 months.

For the week ending Thursday, Sept. 17:

• London gold rose 3.2%, averaging $1,005.50 an ounce at the morning fix; the mean COMEX (IAU) spot settlement of $1,008.20 reflected a 1.7% uptick; New York settlements were 0.3% lower, on average, than London's morning prices.

• The contango in three-month forward London gold held steady, though the downtrend in place since March hasn't yet reversed. Since March 18, the three-month spread has been compressed $1.60 an ounce. The roll between spot September COMEX futures and the active December contract was squeezed 20 cents an ounce, mostly reflecting the shortening carry period ‘til the December contract's final trading day.

• Gold stocks tracked by the NYSE Arca Gold Miners Index (GDM) rose 2.7% while the Dow Jones Industrial Average inched 1.6% higher.

• Nearby NYMEX (NMX) crude oil nosed up 0.7% to an average $70.81 settlement; oil's three-month roll continued to shrink, though this week's pace was slowed.

• The gold/oil ratio, like last week, averaged 14.2-to-1.

• The cost of short-term credit facilities held steady; the TED spread - which represents the yield premium of the London Interbank Offered Rate over U.S. Treasury bills - again averaged 18 basis points this week, though T-bill rates softened significantly over the past two trading days.

• Long bond prices held steady, but the rate compression at the short end kept the Treasury yield curve steady at an average 4.11%.

• The U.S. dollar weakened 1.2% against the euro, as cross rates averaged $1.4356 in interbank dealings.

• Our daily updates in the 12-month monetary inflation rate averaged 1.8% for the week; the inflation rate increased 0.3%.

Real-time Monetary Inflation

*Note: The monetary inflation rate is calculated daily and represents the change in our proprietary index over the last 12 months. We update long-term inflation in real time as well. Since 1999, the compound annual growth rate in our index is 5.7%.

Comments

[wcrxlp edit...:]

Laura Franks' Bexley (OH) CPI reports a 14% retail price increase for 3rd Quarter, 2009.

Her report covers retail prices in a small Ohio municipality.

agentofcurrency.blogsp...

Sep 19 08:32 AM

[The Recusant:]

Bexley, Ohio happens to be one of the most wealthy communities in Ohio located on the southwestern edge of Columbus. The CPI coming from Bexley is not done statistically correct in covering all the areas that the national CPI contains and is not an average of prices found in an average Ohio or national community. It is only an indicator of Bexley's local prices. Although the US Bureau of Labor Statistics' CPI is unlikely to show the actual inflation rate in the nation, the Bexley CPI would be even less accurate as an indicator of inflation.

Sep 19 10:10 AM

[The Recusant:]

Ooops, meant southeastern edge of Columbus.

Sep 19 10:11 AM

[wcrxlp edit...:]

Laura Frank's Bexley CPI is an accurate picture of retail prices in Bexley. For sure, the BLS numbers are not an accurate measure of retail prices in Bexley.

Laura's report informs local shoppers about price changes in a real (Bexley) market place.

There is no relationship between what the BLS reports and what Bexley shoppers actually experience. Laura's report deals with reality, not with statistical fictions.


On Sep 19 10:10 AM The Recusant wrote:

> Bexley, Ohio happens to be one of the most wealthy communities in
> Ohio located on the southwestern edge of Columbus. The CPI coming
> from Bexley is not done statistically correct in covering all the
> areas that the national CPI contains and is not an average of prices
> found in an average Ohio or national community. It is only an indicator
> of Bexley's local prices. Although the US Bureau of Labor Statistics'
> CPI is unlikely to show the actual inflation rate in the nation,
> the Bexley CPI would be even less accurate as an indicator of inflation.

Sep 19 02:12 PM

[LKofEnglish:]

is there any other kind of inflation than monetary? give me a break. why not just come out say "the solution is a return to chattel slavery."

Sep 19 02:17 PM

[The Geoffster:]

"We believe that the right to coin money and issue money is a function of government. We believe it. We believe it is a part of sovereignty and can no more with safety be delegated to private individuals than can the power to make penal statutes or levy laws for taxation."
-William Jennings Bryan, 1896

Sep 19 07:33 PM

[HA65MPH:]

Geoffster................ HEAR...GOOD EXAMPLE....AND THIS !
For the LORD your God will bless you as He has promised you, and you will lend to many nations, but you will not borrow; and you will rule over many nations, but they will not rule over you.

Sep 19 07:52 PM

[Old Trader:]

So God is Chinese?


On Sep 19 07:52 PM HA65MPH wrote:

> Geoffster................ HEAR...GOOD EXAMPLE....AND THIS !
> For the LORD your God will bless you as He has promised you, and
> you will lend to many nations, but you will not borrow; and you will
> rule over many nations, but they will not rule over you.

Sep 20 01:53 AM

[Steve Soden:]

Our Government has put a patch on a Depression and going forward there will be all kinds of Bubbles and Collapses.
We will all dream of slow steady growth as long as these stop gap measures stay in place. Berneke will be remembered as the man that started The Second Great Depression.

Sep 20 03:07 AM

[Albertarocks:]

On Sep 20 01:53 AM Old Trader wrote:

> So God is Chinese?

LMAO! There goes a mouth full of coffee all over my keyboard.

You're a sharp old cookie! I can say that because I'm right behind ya partner. Belly is still jiggling.

Sep 20 12:44 PM