Consumer Prices

A few looks at how recent prices changes are impacting various sectors:

Jan_cpi

via Brian Jacobs

The year over year gains are nearing the post Katrina levels of October 2005:

Core_cpi_yoy

Courtesy of Barron’s/Econoday

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What's been said:

Discussions found on the web:
  1. cinefoz commented on Feb 20

    Thank you for not referring to price increases as inflation. It’s time to raise the level of the game.

    Price increases are a function of supply and demand. Inflation is a function of the money supply, broadly defined. Interest rates can affect inflation. They can not affect price changes caused by supply and demand factors.

    While the grocery buyer just notices higher prices and doesn’t care why, central bankers should be able to tell the difference.

    As long as competition keeps down the inflationary expectations so feared by central bankers, low interest rates are a non event. The weak dollar is self correcting over time (probably a long time as it appears now).

  2. michael schumacher commented on Feb 20

    ^^^^^ OMG

    reality vs. perception(wrong) above……

    Is it too hard to multiply today’s CPI?

    Apparently so.

    Ciao
    MS

  3. SPECTRE of Deflation commented on Feb 20

    A lagging indicator that’s already baked into the cake. Tell me where prices will be in a year.

    Can anyone point to any FED Release that shows a rampant expansion in the monetary base? Are workers salaries increasing faster than the rate of current inflation? If not, we are headed down the rabbit hole.

  4. Joe Klein’s conscience commented on Feb 20

    SPECTRE:
    Doesn’t it make you all warm and fuzzy inside because “B-52” Ben and Paulson both said previously that the housing/mortgage crisis was contained(when we all knew it wasn’t). They are saying the same thing about inflation. Inspires a lot of confidence in the two of them, doesn’t it?

  5. SPECTRE of Deflation commented on Feb 20

    Thank you for not referring to price increases as inflation. It’s time to raise the level of the game.

    Price increases are a function of supply and demand. Inflation is a function of the money supply, broadly defined. Interest rates can affect inflation. They can not affect price changes caused by supply and demand factors.

    While the grocery buyer just notices higher prices and doesn’t care why, central bankers should be able to tell the difference.

    As long as competition keeps down the inflationary expectations so feared by central bankers, low interest rates are a non event. The weak dollar is self correcting over time (probably a long time as it appears now).

    Posted by: cinefoz | Feb 20, 2008 11:53:55 AM

    Great post and agree 1000%. Inflation, deflation are a function of growth or constriction in the supply of money and credit. I don’t see a huge expansion in the supply of either which leads us to deflation unless this fact changes. The FED like any organism will protect itself when it must.

  6. SPECTRE of Deflation commented on Feb 20

    Joe Klein’s conscience, I try not to listen too hard on what the FED says so much as what they actually do. To date they are not expanding money supply or credit. In the end, they won’t destroy themselves no matter what folks say. Just look at the Great Depression concerning what I mean.

  7. SPECTRE of Deflation commented on Feb 20

    This tidbit is another example of the constant drumbeat of daily vaporizing of credit/debt in the system. I know some think that the FED can just print the money, but it doesn’t work like that. If I am wrong, please show me the evidence in any of the reports the FED puts out concerning the monetary base or credit expansion.

    From Bloomberg: U.S. Thrifts Post Record $5.24 Billion Quarterly Loss

    U.S. savings and loans posted a record $5.24 billion loss in the fourth quarter of 2007 as housing-market distress continued to take a toll, the industry’s regulator said.

    The loss stemmed from $4.07 billion in “goodwill” writedowns and $5.12 billion set aside for anticipated loan losses, the Treasury Department’s Office of Thrift Supervision said in releasing industry earnings figures today in Washington.

    “Looking forward, I think 2008 is going to be a very difficult year for the industry,” OTS Director John Reich said.

    The fourth-quarter loss followed a $656.7 million gain in the preceding three-month period and $3.14 billion of net income in the fourth quarter of 2006, according to the OTS report. Thrifts’ net income for 2007 was $2.87 billion, down from $15.85
    billion a year earlier, the agency said.

    The $5.12 billion in loan-loss provisions surpassed the previous record of $4.2 billion the industry set aside in the second quarter of 1988, the agency said.

  8. michael schumacher commented on Feb 20

    Simple Math will allow you to actually understand where inflation is headed.

    Ah it’s not my job to point that out to you…..

    Merely relying on the Fed to report what the monetary base is or is not doing is totally flawed at best. Just like the readings it gives on inflation….

    It helps if you take a look around you…

    Good luck with relying on a hopelessly flawed data source.

    Ciao
    MS

  9. SPECTRE of Deflation commented on Feb 20

    You have any evidence concerning monetary base or credit expansion, or does looking out the window do the trick? It either stays static, doesn’t move, rises or falls.

    You must create credit faster than it has to be paid back to continue the game. Simple really. Can you point to any indicator that says we are growing faster than the credit/debt is being vaporized?

  10. Ross commented on Feb 20

    Is this a private fight or can anyone join?

    Money supply money supply money supply. We forgot the V as in MxV=GDP. If the Velocity does not stay apace, the C. Bankers can only make it up with more money.

    Sad to say but as someone said “we have a shadow banking system.” You can’t even say we have a fractional system anymore. There is no denominator. Zero, actually less than zero non borrowed reserves. Technically the system is insolvent.

    When the velocity returns,and it will, where is it going to go? Serious question.

    When the velocity returns, and if the money supply isn’t mopped up, we get Hyperstagflation…New word…Superhyperstagflation. Meaning a parabola to infinity.

    Let the hoarding begin.

  11. wally commented on Feb 20

    “Price increases are a function of supply and demand.”

    Economic dogma, I know. Odd, though, that suddenly everything seems to be in shorter supply and greater demand, don’t you think?

  12. SPECTRE of Deflation commented on Feb 20

    “Price increases are a function of supply and demand.”

    Economic dogma, I know. Odd, though, that suddenly everything seems to be in shorter supply and greater demand, don’t you think?

    When you say everything is going up, are you sure about that statement? I know things that we need are going up, but suddenly everything we wanted is going down.
    It’s what happens when money and credit are in short supply.

  13. SPECTRE of Deflation commented on Feb 20

    Ross, as soon as you can find any evidence of growth in the monetary base or credit, I’m on board. What I see happening right now is contraction with the FED sitting on it’s hands. No growth in Money supply/ monetary base or credit. I’m looking at where we are right now, and not what the FED may or may not do in the future.

    You can see how helpful the lowering of the FFR was for mortgages right?

  14. Anon commented on Feb 20

    Why is housing increasing so rapidly? Isn’t this the exact opposite of what we saw during the boom where the use of the “rental equivalent” factor kept a lid on housing inflation when home prices were skyrocketing? I am not arguing inflation or deflation, merely pointing out a potential statistical quirk.

  15. JustinTheSkeptic commented on Feb 20

    Spectre and Cinefiz, we are importing inflation up the ying-yang from China. (pardon the pun)… Not to mention that Russia, and the Middle Eastern Countries are printing money like crazy…

    Besides, doesn’t less purchasing power, and higher prices multiply the problem?

  16. cinefoz commented on Feb 20

    Sorry to read about Sharper Image going under. It is not surprising, though. Before the internet and eBay, you could find really neat and unusual things there. It had a mystique. Now, not so much. Ten seconds of silence, in respect.

    Probably the coolest thing they ever sold was the animatronic monkey head.

  17. Francois commented on Feb 20

    “Ross, as soon as you can find any evidence of growth in the monetary base or credit, I’m on board.”

    Not sure that this qualifies;

    http://tinyurl.com/yvm4ej (The Bankers’ Bailout)

    but someone ought to tell me where all this moolah is coming from, if not from expanding the credit base.

    Excerpt:

    “Through four auctions in December and January, the Fed lent dozens of financial firms $100 billion at rates well below the discount rate, the rate at which distressed lenders formerly had to borrow.”

    “Since last summer, the F.H.L.B. has been extending low-cost credit at an unprecedented rate—$184 billion in the third quarter alone.”

    100 billion here, 100 billion there and suddenly, we’re talking real money…even for the Fed.

  18. Pool Shark commented on Feb 20

    “Inflation in the things we need; deflation in the things we want.”

    What about “Deflation in the things we don’t want?”

    I’ll bet we’re about to see some really cheap HD-DVD players…

  19. SPECTRE of Deflation commented on Feb 20

    All those things from China fall under the want but not need criteria in most cases. So yes, they are importing their inflation, but as trade declines due to our terrible balance sheets, no money or credit to spend from retained earning or personal savings, it’s a self correcting problem.

    We simply don’t need the things they have been making now that the credit bubble has burst. They are stuck with tremendous overcapacity with no pricing power on non essentials.

  20. michael schumacher commented on Feb 20

    Spectre-

    Look it up yourself….plenty of places to see this….

    If you don’t look then you don’t see.

    Ciao
    MS

  21. SPECTRE of Deflation commented on Feb 20

    Through four auctions in December and January, the Fed lent dozens of financial firms $100 billion at rates well below the discount rate, the rate at which distressed lenders formerly had to borrow.”

    “Since last summer, the F.H.L.B. has been extending low-cost credit at an unprecedented rate—$184 billion in the third quarter alone.”

    100 billion here, 100 billion there and suddenly, we’re talking real money…even for the Fed.

    The critical point is they lent with 150% capitalization on those loans. Compared to the EU we are tight fisted as Hell with money and credit.

  22. SPECTRE of Deflation commented on Feb 20

    Pool Shark, ya I saw that Sony won unlike the Beta Max they tried 20 some years ago against VHS. They learned their lesson from that fiasco.

    I saw a HD-DVD format at Best Buy at a ridiculous price. I wonder why? LOL!

  23. SPECTRE of Deflation commented on Feb 20

    I have looked it up so that’s how I know. Trying my best to teach you something.

    Teach a man to fish…of course the man must be willing to learn.

  24. Ross commented on Feb 20

    Ah hell, let’s just call it flation and be done with it.

    Gotta go stock up on flints for my Zippo.

  25. michael schumacher commented on Feb 20

    You’re mistake is thinking that you are going to find something with that sort of verbage to confirm what you think is going on.

    Plainly put………you are not.

    That is the irony of you trying to “teach” me.

    There is plenty of evidence out there that need to be connected and actually analyzed to see what is going on in Fed land.

    Thinking you are going to find a smoking gun is the folly of your ego.

    Ciao
    MS

  26. v commented on Feb 20

    cinebunz, your comment at 1:26 was the funniest thing I have read in years. Thanks for the laugh. ;)

  27. SPECTRE of Deflation commented on Feb 20

    MS, ss I said earlier, peace to you and yours. I will stay on topic as per Barry’s request and my desire. I look very much forward to seeing you post something financial that adds to the topic. I wish you luck!

  28. Will Rahal commented on Feb 20

    I believe that in the future, CPI will moderate.
    Problem is, the acceleration in CPI is having its negative effects on the financial market.
    I charted the difference between the 6-month ann % change vs the 18-month ann % change vs. the SP-500 performance.
    Not surprisingly the relationship is negative.
    See”CPI vs the S&P-500″

  29. Amateur commented on Feb 20

    Inflation it is, pure and simple.

    The monetary growth over two decades was enormous and a slight recent moderation does not cancel the accumulated excess of all kinds of money.

    Fixed assets (like houses and equities) multiplied their monetary price by 7X or 10X.

    Consumer products did not catch up, because they were on a deflationary stage of their own, derived from the Asian incorporation to the economic world.

    Now that the Asian deflation force is moderating, prices of products will multiply, reflecting the past monetary flood.
    And the current flood, as well: short term rates @ 3% are clearly a sign that more money is being printed than wanted.

  30. Pat G. commented on Feb 20

    “While the grocery buyer just notices higher prices and doesn’t care why”

    I do the shopping and I cared. I also noticed that for a period before that prices were steady but amounts were being down-sized. I saw inflation written all over that and still do.

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