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May CPI at +0.4%, exceeds consensus

Comments (41)
  • permanent
    , contributor
    Comments (119) | Send Message
     
    That won´t change the course of the FED because the economic data is still poor. They will have to except higher Inflation and we will have to pay the price.
    17 Jun, 08:38 AM Reply Like
  • d.chavo
    , contributor
    Comments (38) | Send Message
     
    Its much higher than that. The cheapest item on McDonalds $1 menu is $1.49. Everything at the 99 Cent store is $1.19 and higher. These numbers are fudged to fit the status quo. Most importantly the real cost of inflation cant be accurately measured cant be done because the govt. doesn't count the toilet paper roll that went from having 160 sheets to having only 120 now or the box of cereal that used to give three bowls but not only gives two. Look what Disney World does each year to there admission. Nuff said!!
    17 Jun, 08:52 AM Reply Like
  • User7766461
    , contributor
    Comments (137) | Send Message
     
    "Most importantly the real cost of inflation cant be accurately measured cant be done because the govt. doesn't count the toilet paper roll that went from having 160 sheets to having only 120 now or the box of cereal that used to give three bowls but not only gives two."

     

    Actually the government does pay attention to changes in quantities and qualities of items used in their market basket analysis to determine CPI. Maybe do a little research...

     

    Comments like yours are always good for a laugh.

     

    If you are looking for conspiracy you should find more interesting subject matter to leech onto than CPI calculations.
    17 Jun, 11:11 AM Reply Like
  • june1234
    , contributor
    Comments (2550) | Send Message
     
    A 2003 $1.50 gallon of gas is now $4. Food prices at all time highs. Medical costs rose double digits per yr from mid 90's to 2009 "only" gone up by 5% per yr since. Call it whatever you like but not 2% inflation.
    17 Jun, 12:17 PM Reply Like
  • JasonC
    , contributor
    Comments (3204) | Send Message
     
    Food "at all time highs" is pretty meaningless, isn't it, since that is true for any positive rate of inflation, at all times. The rate of inflation for the "food at home" category in the CPI from April 2004 to April 2014 is 2.6%, a total increase of 29%. That category has an 8.2% weight in the overall CPI. For restaurants, another 6% about with a 2.9% rate of inflation over the last 10 years. These are barely higher than the 2.35% rate for total CPI.

     

    Motor fuel is indeed higher, but it only took 3.25% of consumer spending at the low prices a decade ago, which has grown to 5% now. The rate of inflation there in the last 10 years was 7.4%, but it takes less than 2% of the consumer's dollar extra, compared to 10 years ago. Notice, the portion did not double - one because other prices rose, two because fuel demand is not completely inelastic and it did respond to the relative price change.

     

    As for medical care, the inflation rate in that series is 3.5% over the last 10 years, and it grew from 6.1% of spending to 7.6% now. Remember we are measuring how much the consumer spends on the item, not how much other organizations do.

     

    All told, the categories you mention, including food where the change is not that much larger than overall inflation, grew in spending share from 23.6% to 26.4% over the last 10 years. They are only a quarter of consumer spending, in other words, and only the fuel portion grew appreciably faster than overall CPI (medical inflation is only about 1% faster over the stretch etc) - and from a very low base of less than 1/30th of all spending.

     

    It is cherry picking. It is also revealing that you have to include the 2004 to 2008 period to get even that much, because the big change in fuel prices happened well before the market top and recession. Prices have been quite subdued since, despite the policy mix that the inflationists allege as causing the problem. (The fuel price problem was caused by war, not the Fed, etc).
    17 Jun, 01:04 PM Reply Like
  • dnorm1234
    , contributor
    Comments (868) | Send Message
     
    >Look what Disney World does each year to there admission. Nuff said!!

     

    Same supply of Disney Worlds, increased global demand for its usage. Why should they maintain their admission price?
    17 Jun, 01:05 PM Reply Like
  • SivBum
    , contributor
    Comments (1608) | Send Message
     
    And don't forget rent/housing:

     

    The seasonally adjusted increase in the all items index, which was
    the largest since February 2013, was broad-based. The indexes for
    shelter, electricity, food, airline fares, and gasoline were among
    those that contributed. The food index posted its largest increase
    since August 2011, with the index for food at home rising 0.7 percent.
    The increases in the electricity and gasoline indexes led to a 0.9
    percent rise in the energy index.
    17 Jun, 09:03 AM Reply Like
  • Captain Pike
    , contributor
    Comments (551) | Send Message
     
    Iraq and obamacare
    17 Jun, 09:13 AM Reply Like
  • spald_fr
    , contributor
    Comments (2711) | Send Message
     
    We'll be paying $5/gal for gas before the summers done. That ought to improve the government's reporting, positively no doubt. None of these numbers are based in reality.
    17 Jun, 09:46 AM Reply Like
  • Captain Pike
    , contributor
    Comments (551) | Send Message
     
    We shouldn't, supply keeps improving everyday all over the world. The problem is having an institution like the Nymex determine prices (and an administration that has dropped the ball on natgas for 6 years). There is no shortage of oil anymore. Personally I can't wait for a hopefully very successful 3rd gen people's car from Tesla to signal the end to Oil's deathgrip on our economic ecosystem.
    17 Jun, 10:37 AM Reply Like
  • BruceInKY
    , contributor
    Comments (414) | Send Message
     
    I have a retail store with hundreds of items and almost two dozen suppliers. Every month we see price increases on high- and low-volume items, which we by necessity pass on to shoppers. My sales "gains" for the last six months are not due to increased traffic or demand but to increased prices. And my fixed costs are increasing not decreasing.
    17 Jun, 09:24 AM Reply Like
  • SivBum
    , contributor
    Comments (1608) | Send Message
     
    Bruce,

     

    Prices are supposed to go up due to higher material and labor costs. Higher productivity is what slow down the increases. For retail, better inventory management, higher turn overs, more efficient check out, lower shrinkage/waste, web/on-line sales channels vs newspaper/flyer ads, lower utility bills with efficient lights and compressors ... No different today than when I was in business over 30 years ago.
    17 Jun, 09:34 AM Reply Like
  • User7766461
    , contributor
    Comments (137) | Send Message
     
    Cool story Bruce.
    17 Jun, 11:17 AM Reply Like
  • BruceInKY
    , contributor
    Comments (414) | Send Message
     
    SivBum,

     

    Prices are also going up due to higher regulatory and tax burdens. Got a two-man, three part-timer shop so where about as productive as we can be. My suppliers are trying to manage their inventory by forcing me to buy bigger deals that tie up my cash, turn over is about 20% of goods on shelf per month, my business cannot legally sell goods on-line, payback on more efficient fixtures will exceed the terms of my lease by a decade. But thanks for your constructive suggestions, and I hope you use cash at your local retailers since you care about the bottom line...which is oh so different and more complex than it was 30 years ago.
    17 Jun, 05:36 PM Reply Like
  • SivBum
    , contributor
    Comments (1608) | Send Message
     
    Bruce,

     

    30 years ago or 1984, effective tax rates were in the 30% vs ~20% n today.
    http://bit.ly/1pg5thg
    Capital Gains rate was at 20% etc. Book keeping was time consuming without today's software. Retail shops require much more intensive labor -- pricing each item with labels or ink stamp etc and cash register without scanners. Inventory loans were in the high teens if you can get them (30-year bonds were in double digits.)

     

    You are in fat city vs the "good old days".

     

    p.s. And yes, I use cash the other day for petro though there was no cash discount.
    18 Jun, 11:55 AM Reply Like
  • JasonC
    , contributor
    Comments (3204) | Send Message
     
    " that tie up my cash"

     

    Take the discount and find a banker to lend you at today's very low rates, and you will often come out ahead. When sellers offer such large discounts to park inventory with you, they are basically just asking you to borrow for them. If working capital were scarce and expensive that wouldn't be a good idea, and you don't want to park lots of inventory that you won't actually sell, of course. But if it is just a matter of whether it is on your shelves or theirs for 6 months, and you don't have to expand physically to have it on yours, the mere financing cost is pretty trivial these days. Even a 10% volume discount easily swamps half a year's interest...
    18 Jun, 12:28 PM Reply Like
  • Annapolax05
    , contributor
    Comments (17) | Send Message
     
    Great examples of hidden inflation above. To add another big one- work & materials quality. Companies are going to keep finding ways to do more with less. Not to make things cheaper for consumers but ONLY for producers. We'll be buying things every 5 years that were suppose to last 10.
    17 Jun, 09:26 AM Reply Like
  • JasonC
    , contributor
    Comments (3204) | Send Message
     
    My car lasts 10 years today and the old ones didn't. My electronics are vastly better - they may not last as long but only because the improvements are so dramatic in 3 years that I voluntarily switch to the newest item. Quality is not going down.
    18 Jun, 12:30 PM Reply Like
  • Captain Pike
    , contributor
    Comments (551) | Send Message
     
    I tried to add to my above comment -- one cause is temporary, one is govt. mandate. There is no demand driven cause, ie no real inflation, a bump in an otherwise smooth road.
    17 Jun, 09:46 AM Reply Like
  • dwarring6
    , contributor
    Comment (1) | Send Message
     
    Inflation is the biggest risk to the markets due to the fact that global central banks do not seem to be prepared to respond to inflation (Consumer or Commodity). The biggest risk central banks have been concerned with up to this point has been deflation. The real question is, how much of the current run up in equities has been a result of easy money policy, and if the Fed is forced to address inflation, how will equities respond? Maybe emerging market will rally short term due to having a lot of commodity based stocks. Middle East unrest and concern with Russia are certainly driving oil prices. What impact will a raise in minimum wage have on CPI over the next few years?
    17 Jun, 10:04 AM Reply Like
  • JasonC
    , contributor
    Comments (3204) | Send Message
     
    Actually the real question is, after 20 years of non-existent inflation, will the usual suspects ever find a new hobby-horse to ride?

     

    Inflation has been lower since the early 1990s - the first time rates hit really low levels in the modern era - than it averaged under Bretton Woods. But the same people have been predicting that rates below 1980s levels would automatically result in a reappearance of 1970s rates of inflation for that *entire* period. It has never happened - we have occasionally touched 4% CPI very briefly and Fed tightening has smack that out every time.

     

    These people predicted when the Fed cut short rates in late 2007 that the result would be rapid inflation. They predicted when the Fed did its emergency support programs in the fall of 2008 that the result would be hyperinflation. They predicted when the Fed did QE1, which only prevented the repayment of those measures from shrinking the monetary base, that the result would be hyperinflation. They were absolutely sure that QE2, actually growing the Fed's sheet again, must positively result in hyperinflation.

     

    They have been continually wrong about the matter, and their only response has been to scream the same thing at increasing volume, hysterically.

     

    They never noticed that the double digit expansion of the private financial sector's market debt out reversed in 2008, and fell for the first time since the 1930s. They do not know that the shadow banking system has been cut in half since 2008. They do not know that the private financial sector shrank its collective balance sheet by $3.5 trillion since then. The private financial sector does not exist, only official policy does, in their eyes. And the demand for money is a constant, so they can read off what must happen to the price level from changes in the monetary base alone (which isn't even the supply, but only one of the determinants of that supply).

     

    They do not know what the capital of the financial sector is. They do not know what levels of leverage the financial sector runs or used to run or can run under new Basel III regulations. They think that major financial institutions can fail without any consequence to total credit.

     

    And still we wind up focusing on their fantasies and the conspiracy theories they need to dream up to explain the empirical failure of all of their predictions - even when the omissions in their thinking and analysis have been spelled out in detail, by people who have gotten every aspect of the financial situation since 2008 correct.
    17 Jun, 11:29 AM Reply Like
  • Gary Jakacky
    , contributor
    Comments (2466) | Send Message
     
    Here come the shadowstats cool-aid folks! The inflation rate is REALLY 80% weekly. It is all a scam!
    17 Jun, 10:05 AM Reply Like
  • tom_t
    , contributor
    Comments (268) | Send Message
     
    You mean you actually believe the number that the government puts out?
    17 Jun, 10:54 AM Reply Like
  • User7766461
    , contributor
    Comments (137) | Send Message
     
    I am a senior financial analyst for a multi-billion dollar mass retailer and the 2.5% 12-month increase in Food Index CPI shared in the June release is in-line with our internal estimates.
    17 Jun, 11:13 AM Reply Like
  • Mike Spelman
    , contributor
    Comments (48) | Send Message
     
    I like the billion price project from MIT for inflation data. They are also more or less inline with CPI
    17 Jun, 11:31 AM Reply Like
  • User7766461
    , contributor
    Comments (137) | Send Message
     
    I'll have to check it out Mike.
    17 Jun, 11:36 AM Reply Like
  • Gary Jakacky
    , contributor
    Comments (2466) | Send Message
     
    Yes I do and so does anyone else with a lick of sense. Adjustments in quality, shifts to new products, and omission of extremely volatile data series are all very valid statistical techniques that make the CPI meaningful and informative. Plus others have mentioned the billion price index at MIT.
    17 Jun, 06:42 PM Reply Like
  • d.chavo
    , contributor
    Comments (38) | Send Message
     
    "I am a senior financial analyst for a multi-billion dollar mass retailer and the 2.5% 12-month increase in Food Index CPI shared in the June release is in-line with our internal estimates".

     

    >>> And I am Santa Claus. I am white looking, have a beard and am bit tad overweight. This is inline with the internal North Pole estimates of Santa as well.
    18 Jun, 03:07 AM Reply Like
  • 481086
    , contributor
    Comments (3341) | Send Message
     
    http://bit.ly/1pfyolu

     

    whatever, but I think this headline captures the sense of most
    18 Jun, 08:39 AM Reply Like
  • mobyss
    , contributor
    Comments (1884) | Send Message
     
    In 1999 gasoline was about $1 per gallon. Now it's about 3.50. That's an average compounded annual increase of almost 9%. It's a good thing that gasoline is such an unimportant part of our economy and consumer financial health, otherwise it might cause people to question the accuracy of the government's inflation numbers over the last 15 years.

     

    At least I can get a flat-panel TV for 5% less than last year. Of course if I want to hook it up to cable, satellite, or Netflix I'll be paying 5%+ more than last year.
    17 Jun, 12:24 PM Reply Like
  • User7766461
    , contributor
    Comments (137) | Send Message
     
    In 1999 a video rental cost 3$, now i can rent a dvd at redbox for $1. That's an average CAGR of -9.5%! Hooray i can pick out statistics to support my hypothesis!

     

    Wait, what is confirmation bias again?
    17 Jun, 12:43 PM Reply Like
  • mobyss
    , contributor
    Comments (1884) | Send Message
     
    So gasoline prices and video rental prices have the same impact on the consumer and economy?

     

    Do you also think that the price of food and the price of Halloween costumes have the same impact?

     

    Well, I guess maybe we can all stuff Redbox videos into our gas tanks and use that to drive to work. Thanks for clearing that up.
    17 Jun, 02:51 PM Reply Like
  • User7766461
    , contributor
    Comments (137) | Send Message
     
    You are the one who referenced netflix and flat panel televisions.

     

    You should refer to JasonC's comments above, he clearly knows more about the subject matter than you or me.
    17 Jun, 02:57 PM Reply Like
  • dnorm1234
    , contributor
    Comments (868) | Send Message
     
    >So gasoline prices and video rental prices have the same impact on the consumer and economy?

     

    No, gas prices can have a disproportionate impact on individual consumers, it's true. Which is why there's a CPI measurement ex-energy. The price fluctuations of gasoline aren't really representative of the prices in the economy at large.
    17 Jun, 03:58 PM Reply Like
  • mobyss
    , contributor
    Comments (1884) | Send Message
     
    My original post was to point out the absurdity of the government's CPI reports. They exclude food and energy because it is too "volatile", yet gasoline (a very visible form of energy) has actually increased substantially over the last 15 years. No "cloudy volatility" there if you care to look for it.

     

    I mentioned TVs and Netflix because somehow these items which "cost less" now are supposed to show that inflation in low and easy for consumers to adapt to. I probably spend $5000 on gasoline for every $500 I spend on flat-panel TVs. I'll gladly take 0% inflation in the former for 9% inflation in the latter. Unfortunately it's the other way around.
    17 Jun, 04:29 PM Reply Like
  • mobyss
    , contributor
    Comments (1884) | Send Message
     
    dnorm - what "price fluctuations" in gasoline?

     

    Over the last 15 years gasoline has increased in price by 9% average per year in a steady upward march. If what you said about "fluctuations" had any validity, you'd see gasoline MAYBE increasing by an average of 2 to 3% a year to match "actual inflation".

     

    Let me know when gasoline spends a few years with -9% per year compounded price changes, then I'll believe in "fluctuations". Let's say in five years, 2019, gas at $2.25? For reference, even if gas did increase in price by 3% a year compounded, it would still only cost $1.81 in 2019 based on the 1999 price, half of what we pay now in 2014.

     

    Too "volatile", too many "fluctuations", too much "fog" in the data - better not count it.
    17 Jun, 04:37 PM Reply Like
  • JasonC
    , contributor
    Comments (3204) | Send Message
     
    mobyss - no, the CPi does not exclude food and energy. There are separate measures that do exclude those, as the most volatile components, if people specifically don't want them included because they want to reduce the month to month "noise". But the base CPI calculation includes *everything* and it weights each item *by the amount actually spent on it*.

     

    People spent only 3.2% of their income on gasoline at old 2004 prices. They spend all of 5% of their income on gasoline at high present prices. Notice, this means if gas prices *double*, it only raises overall prices 5%, and it does that only if people don't react to those higher prices by buying less gasoline.

     

    Meanwhile housing costs people a third of their income. If housing prices fall 10%, it reduces the overall price level by 3.3%. Some items of spending just plain matter more than others - because people spend more on them. Even if those items don't change as often, or people don't buy them as often, or the prices aren't displayed on big signs on every street corner. The only way to track the mutual impact of all the different prices moving in different directions and at different rates at different times, is to actually track *all* of them, not 1 or 2, and then to actually weight *all* of them, and not according to some subjective sense of importance or urgency, but according to their actual weight in people's actual total budgets.

     

    That is exactly what the CPI calculation actually does. You don't have to like it, but that is what it actually does. You can find all the details, in weights and changes in each over any given specific time span, at the Bureau of Labor Statistic website. Stop repeating journalist level spin about the matter and go educate yourself.
    17 Jun, 04:42 PM Reply Like
  • mobyss
    , contributor
    Comments (1884) | Send Message
     
    "Meanwhile housing costs people a third of their income. If housing prices fall 10%, it reduces the overall price level by 3.3%."

     

    Wow, that's great! If housing prices fall by 10%, people's mortgage and rent payments are automatically adjusted down by 10%, which reduces the overall price level by 3.3%. Then, they can obviously use this newly freed up money to pay more for gasoline. I didn't know that!

     

    I need to stop reading journalist level spin about how mortgage and rent payments are almost always fixed regardless of what the underlying price of the housing unit is, and how this causes consumers to be massively squeezed when their housing payment stays the same, their income decreases, and the cost of (not very important) food and energy increase.
    17 Jun, 06:40 PM Reply Like
  • Gary Jakacky
    , contributor
    Comments (2466) | Send Message
     
    Gasoline is an excellent example. Because of energy efficient vehicles, we use less gasoline per unit of GDP, per mile, per hour, what have you. So the increase in the price of gasoline has LESS IMPACT on the CPI than you, frankly, WISH it would have.

     

    You realize of course the price of DODO bird eggs have SKYROCKETED in recent years. Obviously this means the CPI is distorted, skewed, screwed, and worthless.
    17 Jun, 06:45 PM Reply Like
  • JasonC
    , contributor
    Comments (3204) | Send Message
     
    Do you think no one sells gasoline? Every product anyone uses is both bought and sold. And yes, lower housing prices make housing more affordable, just as lower car prices make cars more affordable, or lower electronics prices make those more affordable, etc.
    17 Jun, 11:47 PM Reply Like
  • Captain Pike
    , contributor
    Comments (551) | Send Message
     
    It's not as bad as you think -- http://1.usa.gov/1jwsjNF

     

    We will continue to use less of it going forward and that we still use is for the most part home grown and providing many jobs here. Also the shocks of the past are gone with the switch to North American supplies. If we had a real leader oil would be even less of a concern than it is.
    17 Jun, 01:14 PM Reply Like
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