Latest Inflation Data and report

[ExFlyBoy5]

I just got my wake up call on my cc. They are offering a "Plan It" option to finance my recent steak dinner. 15-25% interest to finance a meal. While I am plenty savvy to ignore this, it does not bode well for the masses.

I saw this morning that Delta is offering some sort of deal like this. I don't know the specifics, but I would guess it means more butts in seats and yet more debt being piled on consumers.

 

[foxfirev5]

I saw this morning that Delta is offering some sort of deal like this. I don't know the specifics, but I would guess it means more butts in seats and yet more debt being piled on consumers.

Thanks for bringing this up. DW and I just noticed the same offer on our Delta AMEX cards. Suddenly it's everywhere. Time to batten down the hatches.

 

[ExFlyBoy5]

Thanks for bringing this up. DW and I just noticed the same offer on our Delta AMEX cards. Suddenly it's everywhere. Time to batten down the hatches.

You know what...I think I saw it on the Delta site when I was looking up some fares. I know it wasn't there yesterday...

 

[Retch The Grate]

So it seems pretty strongly that the current inflation is supply side driven, there's been no particularly strong linkage between QE and customer goods inflation. Investment assets (Real Estate, Stocks, Crypto) all seem more directly impacted by QE than the price of beef at the supermarket. So it appears we've got asset bubbles fueled by QE in investment assets, along with supply chain driven price increases in consumer goods at the moment. With any luck the supply chain issues will work themselves out as we come out of the pandemic. The asset bubbles, I'm less sanguine about. Overall I'm certainly on the "we need to get consumer inflation under control" but don't think it is particularly clear what the federal government can really do to change that in the short run.

 

[Montecfo]

With earnings growth and the recent selloff, I understand the S&P is back at pre-covid PE. So the asset bubble is normalizing.

That's good news.

I do agree that Covid forcing a switch to massive purchases of goods instead of services is a big driver of inflation. But massive deficit spending and mandates by government has also played an important role as has cheap money from the Fed.

But those drivers have begun turning which will drive inflation lower. But it will take time and jawboning to reduce it.

 

[Magus]

So it seems pretty strongly that the current inflation is supply side driven, there's been no particularly strong linkage between QE and customer goods inflation. Investment assets (Real Estate, Stocks, Crypto) all seem more directly impacted by QE than the price of beef at the supermarket. So it appears we've got asset bubbles fueled by QE in investment assets, along with supply chain driven price increases in consumer goods at the moment. With any luck the supply chain issues will work themselves out as we come out of the pandemic. The asset bubbles, I'm less sanguine about. Overall I'm certainly on the "we need to get consumer inflation under control" but don't think it is particularly clear what the federal government can really do to change that in the short run.

Wasn't just QE - which was way more massive this time and very quickly compared to 2008-2015. We also sent every family around $10k in free cash and massively boosted unemployment bennies, which has boosted demand much higher than pre-pandemic for a lot of different kinds of items. Plus government stimulus was way, way larger and energy is skyrocketing due to significant reduction in exploration in the US (due to a number of reasons).

1) QE 2) Government direct spending 3) Government transfer checks 4) Supply chain issues 5) Energy costs skyrocketing which increases input costs. The only one of these going away - maybe - is #4. I don't think they'll reverse QE at all, simply raise rates to where the bond market has already increased over the last 6 months, but I'd be absolutely shocked if the Fed's $9T balance sheet drops at all, much less significantly.

In 2008-2012, we had relatively small QE, government direct and transfer checks and supply chain issues improved as labor and energy costs plummeted. This is a very, very different situation than then, which is why I have believed for over a year and continue to believe they are way behind the 8 ball when it comes to inflation.

Lastly, the US government debt is $30T today, well over 100% of GDP vs ~70% then. We as a country simply can't afford for interest rates to go up much.

 

[Koolau]

No matter what the underlying cause, inflation is what happens when there's not enough supply to meet demand. When there's too much money sloshing around but not enough "stuff", then prices go up.

You and I as individuals may be frugal, but we cheer others to "blow the dough". Therefore, we are also guilty. It's the "collective karma".

Okay, ya got me. I love to hear RobbieB talk about the boat he wants. I'm still awaiting, with baited breath, his report on the "bigger boat" he needs. YMMV

 

[Koolau]

I just got my wake up call on my cc. They are offering a "Plan It" option to finance my recent steak dinner. 15-25% interest to finance a meal. While I am plenty savvy to ignore this, it does not bode well for the masses.

I saw this morning that Delta is offering some sort of deal like this. I don't know the specifics, but I would guess it means more butts in seats and yet more debt being piled on consumers.

I'm betting my BFF (you know, the one half a mil in debt at 77) would be all over this. He doesn't worry about how much interest he is paying. He worries only about how much he is able to borrow AND what will be his monthly payment. YMMV

 

[Closet_Gamer]

I have been, and remain, concerned that inflation will run hard and long on the back of many forces -- including the self-fulfilling prophecy that companies can raise prices under the banner of "inflation" and employees can-and-do get pay bumps under the same rationale.

But I'm hopeful that we're all suffering an extreme case of recency bias.
Everything is the way it is, right until it isn't.

I think the Fed could chop the head off this inflation with just a few interest rate bumps. People are incredibly sensitive to marginal costs.

Bump interest rates a point and a load of home buyers fall out of the market, taking the froth from the housing market.

Bump rates and the spread between banks/credit card companies borrowing vs. lending rates tightens, and a whole bunch of crazy lending offers come out of the market.

Bump rates and suddenly savings/CDs are no longer borderline insane choices. Start giving people a few % of risk-free return, and a lot of froth will come out of the bond/equity markets. The wealth affect suggests there will be knock pull backs in other spending.

Rates would help a lot on the demand side.

That plus some of covid nonsense getting sorted out to get supply moving again, could reverse these trends in a pretty significant way. The cost of a shipping container for my company is up 10x. There wasn't a war that destroyed all the shipping containers. They are tied up at ports all over the world. Relax some of the covid mandates, and suddenly things start flowing more smoothly.

At least that's one hope.

 

[JoeWras]

Whatever caused this shock is starting to bake in inflation, no matter the cause. I was absolutely shocked by our restaurant bill last Friday. We haven't had a serious restaurant meal in 2 years. We finally ventured out and it was surprising. Up 20%, and a bunch of sides had new up-charges as they created a "premium" category (shrinkflation).

So that begs the question: what will drop? It won't be restaurant food and service. So I look at cars.

When the supply issue of cars is resolved, what will be the end number "from here to there" of car prices? Will it be up 5%, 10%, 20% or 30% from March 2020?

Car prices are one thing that should come down when supply restraints resolve. MSRPs are unlikely to drop. Actual transaction prices will and should drop -- dramatically -- if this is only a supply constraint shock.

I'll be following this closely.

 

[Samsung4321]

I'll be following this closely.

Container freight rates 2022 Jan:
. from West Coast of North America to China/Eastern Asia: $1,100
. from China/Eastern Asia to West Coast of North America: $15,000

 

[freedomatlast]

Car prices are one thing that should come down when supply restraints resolve. MSRPs are unlikely to drop. Actual transaction prices will and should drop -- dramatically -- if this is only a supply constraint shock.

I'll be following this closely.

Me too. Although far from a necessity, I'll be in the market for two new vehicles when the lots are full and discounts from MSRP are the norm again.

 

[Montecfo]

Fed governors this week pushed back on the idea that they would raise rates a half point at the next meeting, as some were recently predicting.

That's good. A measured approach is appropriate as are clear expectations for the markets.

 

[daylatedollarshort]

Prior to the pandemic, interest rates had been dropping worldwide for years. Now post pandemic, inflation is high in the U.S., but also rising worldwide - Inflation has risen worldwide recently with U.S. increase among largest | Pew Research Center. I'm not sure how much impact what the Fed does is going to impact a worldwide issue.

 

[karen1972]

I am actually starting to think inflation won't be as big a problem as some expect in the next few months.

Major things like
1. The people who took the advanced child tax credits are getting much smaller refunds.. that will help contain demand in the next few months.

2. People are ready to go back and spend on travel /experience and less on stuff. If people get out of the house they will also feel less need to remodel.

3. Locally I've been seeing some signs of relief on the supply side. Dealerships around me are starting to ever slowly fill back up their inventory, sales guy had said now only about 70% of cars are sold on receiving of shipment vs 100% they were at. Meat prices seem to be coming down, both wholesale and retail. Seeing more typical sales like pork butt for 99 cent/lb. The local wing spot said at the height premium wings were $175/case and they have dropped to about $125/case.

Obviously that doesn't solve the price of oil and such but maybe it will be enough to slow inflation back to reasonable levels without the fed having to go super crazy overboard.

 

[Koolau]

I am actually starting to think inflation won't be as big a problem as some expect in the next few months.

Major things like
1. The people who took the advanced child tax credits are getting much smaller refunds.. that will help contain demand in the next few months.

2. People are ready to go back and spend on travel /experience and less on stuff. If people get out of the house they will also feel less need to remodel.

3. Locally I've been seeing some signs of relief on the supply side. Dealerships around me are starting to ever slowly fill back up their inventory, sales guy had said now only about 70% of cars are sold on receiving of shipment vs 100% they were at. Meat prices seem to be coming down, both wholesale and retail. Seeing more typical sales like pork butt for 99 cent/lb. The local wing spot said at the height premium wings were $175/case and they have dropped to about $125/case.

Obviously that doesn't solve the price of oil and such but maybe it will be enough to slow inflation back to reasonable levels without the fed having to go super crazy overboard.

Having seen this movie before, I'm guessing that ONLY the fed going super crazy overboard will nip our current inflation. In essence, only a recession is likely to return inflation numbers to something like normal - as is the usual "cure." But I'm not an economist and don't even play one in the "movie." I'm just a guy midway through my 30 year retirement so YMMV.