This morning’s inflation rate was terrific.
Or terrible.
What you saw depended upon where you looked.
Wall Street looked at the core rate, which came in at 0.1% (actually 0.149%, but that gets rounded to one decimal place — hence, 0.1%).
Futures blasted off on that number, but as my colleague Bill King mentioned last night, its an quadruple witch option expiration day, you needed a pretty awful number to derail the expected expiry moon launch.
There can be little doubt that consumer inflation — up 2.7% year-over-year — is slowing with the economy. The core CPI remains elevated at 2.2% year-over-year — slightly above the Fed’s comfort zone of 2.0%.
Credit for the lowered core rate goes primarily to Owners’ Equivalent Rent (OER), which rose a scant 0.1%. Housing is 42% of the the CPI (33% of the core), with the Owner’s Equivalent Rent 24% of CPI, and over 30% of the core rate. Did Housing prices suddenly get much cheaper? There’s little evidence of that. So far, the ongoing slide in prices is relatively measured — orderly, even. And we saw that Mortgage rates ticked up significantly over the past month, which further pressures home prices. Of course, utilities — excluded from OER — are ever higher. (Ironically, we came across this headline this morning: Heating bill delinquencies jump — and its now well past heating season).
So how did OER moderate so much? My guess: Excess supply. All of those condos, purchased pre-built, all of the speculators who couldn’t find a chair when the music stopped, and those oh-so clever home flippers — these folks have become involuntary landlords. En masse, they are renting these properties; that huge surge of supply is keeping rental prices down.
Meanwhile, BLS reports that Energy prices are up 71% on an annualized basis in the past 3 months (Compound annual rate 3-mos. ended May ’07). The headline number for CPI was the biggest since the Katrina impact
(1.2%) in September 2005. Indeed, you have to go back to April 1999 to find a
higher headline number sans weather disaster.
At the same time, the core CPI has grown at a 1.6% annualized rate over the same three month period.
This discrepancy has led to the media finally acknowledging the absurdity of inflation ex-inflation. An article in yesterday’s USA Today (of all places) noted:
"When it comes to measuring inflation, consumers and economists often don’t speak the same language.
When consumers think of inflation, they often focus on prices of things they buy regularly, such as food and gasoline, which have been going up significantly in price this year.
But when economists, including Federal Reserve officials, talk about inflation, they often focus on a measurement of price pressures called "core" inflation. Core inflation excludes costs of food and energy goods, the very items that are the most visible prices for most consumers. Many economists will be focusing on the core when the government releases its monthly producer price index today and the closely watched consumer price index Friday."
The risk of focusing on the core is that Fed risks losing credibility in the eyes of the public. Future inflation expectations are not nearly as muted as the Fed’s benign core rate.
Of course, none of this should matter to traders. The momentum remains strong, and the overall psychology still disbelieves the market. In fact, a few recent sentiment measures are so bearish that its all but impossible for a top to form here. (I’ll go into some details on this later).
The melt up to Dow 14,000 continues . . .
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Sources:
Consumer Price Index Summary (PDF version)
CONSUMER PRICE INDEX: MAY 2007
BLS, Friday, June 15, 2007
http://www.bls.gov/news.release/cpi.nr0.htm
Food, energy costs’ exclusion debated
Barbara Hagenbaugh
USA TODAY, June 14, 2007
http://www.usatoday.com/money/economy/inflation/2007-06-13-inflation-usat_N.htm
LowRisk Investor Sentiment at Extreme Bearishness
Traders Narrative, June 14th, 2007
http://www.tradersnarrative.com/lowrisk-investor-sentiment-at-extreme-bearishness-1066.html
wow…..1/3 of Centerpoint’s customers are overdue on this past winter’s heating. Average owed $1500.
Wonder how Christmas/Back to School retailing will play out.
Who knows when the consumer spending fall comes, but when it does it’ll be quick and brutal.
If anyone wants to opine as well….who do you think is moving all that money into the 3-mo T-Bills?
Who’s so reluctant to be in paper/hard assets right now?
The crowd think it was terrific:
http://www.rallymonkey.com/video/kenindex.swf
I imagine a lot of people are pilling up a lot of bills. All it’s going to take to start the repayment failures will be a good round of layoffs. I’m more curious about the employment numbers now more than anything.
Paying attention to the inflation figures is a waste of time anymore, it’s a given now.
The core CPI remains elevated at 2.2% year-over-year — slightly above the Fed’s comfort zone of 2.0%.
The Fed’s unofficial target of 1-2% refers to the PCE deflater, not the CPI.
Is Inflation Moderating?
Beginning with the March, 2007 FOMC statement, the Fed has stated that its primary concern is that inflation will not moderate as expected.
This suggests the inflation measure(s) the FOMC consults when determining monetary policy are at the upper en…
Thank God I’ve cut back on food and energy! Who needs it!
This headline just says it all.
Consumer Inflation Soars; Core stays Calm
http://biz.yahoo.com/ap/070615/economy.html?.v=18
I guess the market missed the soaring bit of inflation this morning……
Irony #1: Fed plans to “wach the data”. They have been “watching” it but doing nothing about it.
You just knew today was coming…telegraphed by the PPI and CPI #’s that are so grossly understated even perma bulls have to at least laugh…but no they are too busy saying “I told you so yet again”…..still do not see what I’m being told……
Ciao
MS
Am I being cynical or is the Fed’s only job these days to keep the markets propped up?
Joe,
YES
To clarify a little,
YES to both.
and
I do not consider people who are honestly cynical to be paranoid, tin foil hat ex…
they just have GOOD common sense
Another new econ formula-to calculate your personal inflation
use the gov’t “core” data IF AND ONLY IF
YOU are dead and in the grave buried,
Everyone else…you’re screwed(LOL)
Actually, the Core CPI missed being rounded UP by 0.001%! Yet, the equity markets are joylessly celebrating the 0.1% number tha beat estmates of a rise of 0.2% in the core.
Also, I discussed OER and the effects of oversupply converting to rentals on urbandigs.com about a month ago.
Inflation & Condo Conversions To Rentals
http://www.urbandigs.com/2007/05/inflation_condo_conversions_go.html
What I dont get and what I see is:
*Globally peaking commodity prices
*Oil nearing $70/barrel again
*Strong Global Growth
*Strong Corporate Profits
*A Core CPI that barely missed meeting instead of beating expectations
*A CPI that showed surging consumer inflation
*Rates Still rising globally
My questions, at what point do global rates hit the level to slow growth? How long will the lag take to affect the pace of growth? Why the huge rally today when you look depper into the inflation numbers it doesn’t seem as good as it appears?
I still think inflation is a global concern but global economies are so strong that rates arent rising fast enough to moderate rising prices.
With oil nearing $70/barrel and little geo-political pressures around, it seems global demand is causing the runup and therefore its safe to bet that equities will rise as long as growth is strong!
When you see oil drop big time, you can probably start to worry that rising rates is finally having an affect on growth globally. But when will that be?
You guys……. if you really want to understand inflation, just watch this primer on it from the Fast Money guys!!! They got it nailed.
http://www.cnbc.com/id/15840232/video/377629152
One can make a case that the Fed isn’t heavily focused on “ex food & energy” core inflation. They have created alternate measures of core inflation (e.g. median CPI and trimmed-mean CPI, trimmed-mean PCE) in an effort to remove the problems with the “ex food & energy” core inflation measures Barry often discusses.
In addition, other central banks (e.g. Japan, Brazil, and Australia) have investigated alternative measurements of core inflation.
But what the market tends to focus on is another story…
no account for that..what did they say?
Let’s take a look at a picture of FEAR.
I’m talking about a chart of the 90 day bill. MZM has been exploding, and that hoard of cash has piled into short term securities, and the 90 day bill rates have collapsed. At these rates, the Fed will HAVE NO CHOICE but to “listen” to the market, and CUT RATES. Insane?? Not really…as the banks are flush with cash from all the scared depositors, the Fed will not be able to drain that much reserves, and will cut rates.
You think this is a melt up…just wait.
You want to see scary? I created a chart of the YTD CPI annualized rate. For the exception of 2 months in 2005, the CPI is increasing at the fastest rate in this decade!
The bond market correctly anticipated this.
Fred – NO WAY the fed cuts rates. Even at 5.25%, one can argue that this is NOT a restrictive fed funds rate.
Given what you said, how can exclude all the other elements out there!
One thing that is broadly overlooked is that housing is an area in which supply surges really can mop up inflation.
We should expect an oversupply of houses to do go things to inflation even if housing contained precisely through the channels Barry talked about.
In particular if people can’t or won’t sell housing for less than they paid then the rental market is awash in supply. This means lower costs for middle-low income workers.
This is not simply an artifact of how the data is constructed but a real effect that should be taken seriously.
Moreover while food and gas expenidtures can move widly for indivdual households rent is slower. Changes in rent growth are thus more significant for households than short term fluctuations in food and gas.
Fred is right .. we are setting up for a perfect goldilock scenario here.
Inflation seems to be behaving well here. Inflationary pressures are in a cyclical downtrend as expected.
My target for S&P 500 is 1600 by year end
Anyone watching VIX?
Inflation cyclical downtrend??…
Just look at the chart in the article…
That’s not a downtrned it’s the begining of an uptrend.
Don’t even look before you post??…
Expected
Ciao
MS
Look at this chart.. Core CPI trending down since last year..
http://www.economicsnapshots.com/archives/2007/images/snap20070223_4.gif
I do read before I post. Atleast I am more civil in my responses.
Inflation is trending down, but not at the pace that the fed or economists would like to see. Lets not forget that the guys that set monetary policy are ivy leaguers, not traders.
However, its hard to argue that inflation will continue trending down with global inflation rising and global commodity prices at levels they currently are trading at. And I dont need to get into the arguments as to why some of these datasets are flawed, and don’t reflect reality. Barry, back me up on this one please.
When rates were way lower 6 months ago, everyone said the same thing about the goldilocks economy. How about some forward thinking here. Do you really expect inflation to trend to levels well within the fed’s stated comfort zone with commodity prices around the world at such high levels?
There are lagging effects of these fundamentals and if inflation was easing as much as you say, the fed would remove their inflation bias in policy and global rates would be falling, not trending higher. While we are still off highs in yields, its a brand new trading range and todays reaction just doesnt seem warranted when you breakdown the FACT that if Core CPI was 0.001% higher, it would have rounded UP to 0.2% and caused a much more muted reaction in equity prices and yields.
Well usually when one make such a claim it’s helpful to have the chart in the post TO BACK UP YOU’RE CLAIM.
I suppose If I have to tell you that then nothing I post will be civil.
Trust me…….as with Fred If I attack you or am not civil to you you will definatley know it.
Nice try though…
Ciao
MS
people from manhatten find and love inflation- in assets, of course. and japan can underwrite inflation forever(?!) since they are energy efficient, for example. i guess that leaves china to wrestle with whether they must spoil the party.
urban-
the same trick was used with the BLS numbers. You report just enough jobs to get the unemployment rate to tick down that precious 1/10th of a point to a “new low”.
It’s just all too “neat and tidy” at times. At least they could make the variables a little more believable instead of being just perfect to accomplish the end result.
Rate Cuts??? PALEEEEEEEZE……go back to the RNC meeting they miss you.
Ciao
MS
If other FCB’s weren’t raising rates and the $USD was strong I’d put the odds of a Fed rate cut at about even within the next few months but as things stand now I’d guesstimate the odds of a rate cut as extremely unlikely to zero; too much risk of weakening the $USD and kicking US inflation into a higher gear.
AFAIK however the Fed and other central banks have, until quite recently at least, placed no restrictions on expanding money supply, to the point where it could be argued they have lost control over that variable (credit creation is in too many hands). It is not clear, to me at least, that it really matters where short-term nominal interest rates are set — as long as players can convince themselves they stand to gain more from an asset’s appreciation than the carry on (easily acquired) credit the game will probably go on.
In any case, to the degree any central bank is a key player now, it would appear to be the Bank of Japan rather than the US Fed; the former is the one I’m watching, not the latter.
JMO
From the official report:
http://www.bls.gov/news.release/cpi.nr0.htm
“During the first five months of 2007, the CPI-U rose at a 5.5 percent
seasonally adjusted annual rate (SAAR).”
ferd-are you referring to this?
http://wallstreetexaminer.com/blogs/winter/?p=830
manhattan guy-
You assume WAY too much. You’ve no idea……
and yet again when faced with something that you cannot answer you pull out your wallet.
but thanks for the input……
Ciao
MS
The quest for the truth on the subject of inflation is well spread few examples:
In France two months ago the « staff of the public owned INSEE » that is the department of statistics compiling the French statistics was picketing in order to have the truth divulged on the subject of inflation.
In Russia yearly money supply is running at around 60 PCT the local authorities are recognising an inflation of…7 pct
The main idea was to drive unemployment down (sacrifice of the Philips curve)
The conclusion is inflation and perverse effects. See LBO which will drive unemployment up, see speculative funds in commodities driving the price of raw material up at a time of slower growth, see excessive supply in the real estate, see excessive indebt ness which will provide for future imbalances.
The perverse effects of the excessive money supply may counterweight its benefits.
The mantra provide for capital gain and do not disturb the core inflation measures through increasing incomes may have run its course.
yes, i read russ winter and find him informative and entertaining. i don’t understand the daily machinations of global central bank monetary authorities enough to know exactly what they are experiencing, thinking?!, but i would guess that poor people, of which there are FAR more than rich ones, are NOT!!! having a “party” with inflation. this may be of significance in china, for example.
“Moreover while food and gas expenidtures can move widly for indivdual households rent is slower. Changes in rent growth are thus more significant for households than short term fluctuations in food and gas.”
This is simply untrue. They are not more significant – a dollar is a dollar is a dollar. However, they are more predictable and comfortable for people – like the Fed – who are in the statistics business. This is the point where credibility unwind becomes a risk. If nothing else, they ought to adopt a different terminology than ‘core inflation’ so they don’t keep confusing the issue.
There is no inflation!
Food just suddenly costs more, that’s all. And gas. ANd well, everything else, but since you can’t afford to buy it, we had to drop the prices….
MS,
Please cut out the petty crap like, “Trust me…….as with Fred If I attack you or am not civil to you you will definatley know it.” This is unnecessarily provocative.
You tend to attack the blogger instead of debating the blogger’s ideas or arguments … which is counter productive and sends thread content into unnecessary negative territory.
I would request that you help elevate the debate. You can blow off steam without steam rolling other people.
ERROR BAR ??
any first year science student is taught any data point is TOTALLY MEANINGLESS without an error bar.
I just cannot understand why businessmen, economists, and journalists cannot grip the _essential_ concept of the error bar. Is it harder to understand than, uh, say, CDOs, hedge funds, credit default swaps, etc etc ????
Anhow, anyone know what the error bar is on the CPI number ?
I learned from BP some months ago that the error bar on the monthly BLS numbers is larger than the value itself. My hunch – same here. The monthly CPI number is little better than a random number, constrained to lie within certain bounds.
The consequence – the “market” is making decisions based on NOISE, essentially _random numbers_. Its running around in the dark like pissed Keystone Cops.
(extra points for those who caught on to the drunken walk analogy)
Anyone else but me think this is absolute LUNACY ?
Marcello – your point is well taken, but keep in mind that this “noise” number is consistent with previous numbers in the series, with coincident related series (PPI, beige book, etc.), and with component trends (eg. OER contained by rental vacancies).
rebound-
grow up….
You should be addressing that to the people who you feel I’ve attacked.
I tend to discount people’s incessant cheerleading since neither of the two that you feel I’ve attacked can come up with anything other than: Look at the size of my wallet (it’s bigger than yours) and see I told you so.
Get thicker skin……effing pansies
Ciao
MS
rebound-
grow up….
You should be addressing that to the people who you feel I’ve attacked.
I tend to discount people’s incessant cheerleading since neither of the two that you feel I’ve attacked can come up with anything other than: Look at the size of my wallet (it’s bigger than yours) and see I told you so.
Get thicker skin……effing pansies
Ciao
MS
Speaking of attacking arguments and bloggers, about six months ago, an intrepid pundit was so concerned about the economy that he stated the S&P 500 would be at 1225 mid-year and the 10-Yr yield would be at 4.375%.
http://bwnt.businessweek.com/fearless_forecasters/2006/index.asp?
This same pundit used his macro economic analysis to predict the stock market collapses of 2005 and 2006 as well.
http://www.businessweek.com/magazine/content/04_52/b3914408.htm
http://www.businessweek.com/magazine/content/05_52/b3965416.htm
So why do y’all want to read what he thinks about the latest economic data? Comedic value?
Estragon
well, one needs an error bar to determine whether something is “consistent” or not ;-)
my impression is that all these numbers ALWAYS lie within a limited range, no matter what happens. And from the jitteriness of the numbers and the few cases where the error bars _were_ reported, it seems the error bar is about the size of that range.
so, really, the CPI (or PCE, or whatever) ticking up or down within that error bar range is just random fluctuations. i.e. bouncing around in the noise.
but again, without a meaningful error bar, I really don’t know for sure. Neither does anyone else.
yet somehow the “market’ thinks it does…
Here’s an idea:
Next time you’re at the supermarket, tell them you don’t have to pay for your groceries, since you’re a “core consumer”.
And try that at the gas station too.
too much debt and bad lending has gone on in recent years. housing market has been the first to show that paying back debt is problematic unless asset prices keep increasing and so allow refinancing. smells like deflation coming to me. i expect that to be what everyone’ll be talking about a year from now.
risk-free treasuries above 5% are a steal here. as are 2008-09 eurodollars if you can trade futures. last time there was a hint of deflation, the Fed slashed rates all the way to 1%…with core inflation moving lower recently, it won’t take much of a move further down for them to be considering cuts again.
Typepad is a mess today — I’ll repost the missing pieces once it lets me
is there a correlation between the price of crude (set on the open market based on supply and demand) and the FOMC’s interest rate? Can the FOMC impact the supply/demand dynamic of commodities? I think they are correct to focus on core.
Treasury’s 10-year inflation-protected securities (TIPS) are today priced for the consumer price index to increase at an annual pace of 2.44% over the next 10 years, below the peak of 2.50% on April 6.
Mike E., test it yourself. You can download historical Excel files for both at the St. Louis Fed site, tab down to the “FRED” link at the bottom of the page.
So I guess if crude goes to $200 and gas to $6 and grains to the sky, since I can’t afford to buy anything else, the core CPI will plummet from no demand, and the market can go to 20,000.
What’s wrong with that picture?
random thoughts…..
I sense that prices are soft. I leave items that I can live without sitting on the shelf and genearlly within a week or two, they are on sale at the old price.
I believe that gasoline prices can be driven down by consumers if we changed our consumption patterns with price.
Certainly a general consumer boycott of Exxon or other targeted major would put downward pressure on prices.
Another way is to reduce the quantity and increase the frequency of gasoline purchases. What the gougers love is for people to panic and fill-er up in anticipation of further price increases.
If we all cut the amount of fuel we purchase in half while doubling the number of transactions to obtain the required quantity of fuel, the refiners might not be able to unload their inventory and would begin cutting prices.
Of course, we might also cut our consumption by 10 pct.
No response necessary …….
Inflate or die. There is no other way to keep this thing going. The question is how long we can do it without the public picking up on it. Eventually the US dollar is going to completely collapse.
Goldilocks is alive and well:
Oh wait what was that headline:
http://www.signonsandiego.com/news/business/20070615-0622-economy.html
Oh…….
Ciao
MS
Traderboy – “smells like deflation coming to me”
The last decade or so has been characterized by fairly rapid credit growth combined with a deflationary asian supply shock and an increasing current account deficit. The supply shock kept consumer prices in check, so the credit and c/a deficit growth flowed to assets. The asset price inflation has fueled good domestic growth, in part through wealth effects, and also in part through employment of people engaged in the debt and asset creation process. We get asset price inflation, good growth, and consumer price disinflation happening at the same time.
If the cycle starts flowing the other way though, isn’t it at least possible to expect the result to be asset deflation, sluggish growth, and consumer price inflation at the same time? My guess is that the inflation/growth tradeoff may go the way of the Phillips curve. Not totally discredited, but with added caveats.
Not a prediction, but maybe a possibility?
Steve “What’s wrong with that picture?”
Umm… if you quit driving and start eating tree bark, the inflation numbers will capture the “substitution effect”. Gas and t-bones get less weighting, and the price of runners and bark get more.
And the beat goes on.
No wonder Michael Schumacher is so cranky – the market is up strongly yet again today, and he’s falling even further behind with his short position. I’d be cranky too if I had as much “bad luck” in the markets as he has.
But since I’m long, I’m feeling very cheery today. Happy weekend!
“asset deflation, sluggish growth, and consumer price inflation at the same time” –Estragon
I can see that. I can see hyperinflation happening too. And deflation. I’ve thought of a number of scenarios, and most had all three happening in some different order. What I’ve concluded at this point is that there isn’t a discernible trend and stay tuned. I can’t help noticing that the homebuilders and the real estate etf IYR look like they want to roll over and die, and I can’t understand why some of the mortgage lenders haven’t done the same. But I don’t see any of it happening unless we get a sell off in the broader market and that implies negative growth. But none of it will happen if we keep getting these incredible inflation numbers I guess…
Is it just me or does the 0.6% they(Wallstreet and the Fed)take out of the CPI to determine core inflation(whatever that is)indicates that food and energy are rising at an annualized pace of 0.6*12=7.2% That’s what I, the consumer, pays! That’s huge on a year over year basis. The implications are all obvious so there is no need to state anything but I do wonder if the 7.2% increase is a factor in the rapidly increasing credit card debt.
Jesse Livermore wrote that the driver of a bull market was money supply.
There have been 3 main sources of money to drive this market: 1) Low interest rates 2) Foreign Central Banks 3) The Yen carry trade.
Interest rates are rising, the subprime crash has tightened home-lending standards, and the Fed has held steady on the target rate.
Two weeks ago FCBs were net sellers of treasuries and agency paper; last week, they reduced their holdings slightly. FCBs don’t have to stop buying – simply not raising the amounts purchased will have enormous effect. Russia and China are not on the best of terms with the U.S. Other countries have untied their currency pegs.
That leaves the Yen carry trade as the Big Dog to supply money to the frenzy – isn’t it curious how just when they are needed the most, the Yen starts again to collapse.
It seems we have painted ourselves into a corner with nothing but black or white answers – Goldilocks is an illusion because it requires continuing increases in money supply for the Ponzi financing scheme – it either continues or it doesn’t.
Either do or not do – there is no try. Yoda
fed lost credibility? they don’t have one to begin with.
Barry, this is why I stop here all the time though I rarely comment, as always an excellent observation.
Could you lighten up on housing a bit :)
Thanks, Howard
Estragon…this is a really nice, tight post…thanks for dumbing it down one notch. Interesting:
“The last decade or so has been characterized by fairly rapid credit growth combined with a deflationary asian supply shock and an increasing current account deficit. The supply shock kept consumer prices in check, so the credit and c/a deficit growth flowed to assets. The asset price inflation has fueled good domestic growth, in part through wealth effects, and also in part through employment of people engaged in the debt and asset creation process. We get asset price inflation, good growth, and consumer price disinflation happening at the same time.
If the cycle starts flowing the other way though, isn’t it at least possible to expect the result to be asset deflation, sluggish growth, and consumer price inflation at the same time? My guess is that the inflation/growth tradeoff may go the way of the Phillips curve. Not totally discredited, but with added caveats.
Not a prediction, but maybe a possibility?”
Inflation inexorably leads to oversupply, which is the reason it is always a monetary event rather than price event. Cheap credit has been the driver of demand. The housing market is the perfect example as everyone who could, thought they could, or thought they ought to bought a house during the great run, but easy credit inspired housing inflation made profits look easy, so when all those who actually could afford a house had bought, the markets expanded to include those who couldn’t afford a house and speculators. The inevetible occured, and oversupply now threatens to crash the housing market for some years to come.
When easy credit reaches the oversupply point in houses, malls, business starts, and non-residential construction, it turns its inflationary powers to equities, commodities, and financing.
But at some point the debt must be repaid, and if the asset purchased with easy debt was too highly priced, selling the asset is the only way to service the debt.
And the great unwind begins.
winston,
you are incorrect for the the USA….
and the “flat world”
To put it specific….
“But at some point the debt must be repaid, and if the asset purchased with easy debt was too highly priced, selling the asset is the only way to service the debt.
And the great unwind begins.”
WRONG…LIE …WRONG…LIE …WRONG
because…..
Esc alt del – (OR) Default debt…
(you know who)
END OF GAME!!!!!
End of Game summary:
Most people LOSE….
those in control already WON
I’ve posted about inflation yesterday:
Inflation is in danger
Inflation Part II
Here’s that missing post from yesterday. I found it ironic that the market was rallying on supposedly benign inflation news, while these were the headlines. It just goes to show you, that when Mr. Market wants to go higher, he’s going higher. Period.Wh…
Marcello:
By “error bar” I think you mean “95% confidence interval”. The CPI release http://www.bls.gov/news.release/cpi.nr0.htm mentions the standard error and confidence interval. The 95% confidence interval for the monthly change is +/- .12, so a change of .2 could have been generated by an actual change in the range of .08 to .32.
Estragon:
You might mis-understand substitution. A description exists at http://www.bls.gov/cpi/cpigm02.htm. Substitution is described as
* Substitution among brands of products, for example, between brands of ice cream;
* Substitution among product sizes, for example, between pint and quart packages of ice cream;
* Substitution among outlets, for example, between a brand of ice cream sold at two different stores;
* Substitution across time, for example, between purchasing ice cream during the first or second week of the month;
* Substitution among types of items within the category, for example, between ice cream and frozen yogurt;
* Substitution among specific items in different index categories, for example, between ice cream and cupcakes.
The BLS seems to ignore the last type of substitution, which is closest to the tree bark example you gave. The text is difficult to understand, so I would welcome anyone else’s interpretation.
Is housing 42% of the econnomy or 42%of the CPI?
Core and total CPI rose in the last two years because of the housing impact. Why not fall because of the same.
The housing component is so obtuse that only Einstein could explain it in terms understandable by the very intelligent.
Is housing 42% of the econnomy or 42%of the CPI?
Core and total CPI rose in the last two years because of the housing impact. Why not fall because of the same.
The housing component is so obtuse that only Einstein could explain it in terms understandable by the very intelligent.
Is housing 42% of the econnomy or 42%of the CPI?
Core and total CPI rose in the last two years because of the housing impact. Why not fall because of the same.
The housing component is so obtuse that only Einstein could explain it in terms understandable by the very intelligent.