Latest Inflation Numbers and Discussion

[MichaelB]

US productivity showed another strong quarterly increase. This is a calculated number and subject to change, but still meaningful. Increases in productivity allow both wages and profits to rise without increasing prices. It’s the primary driver of increases in standard of living.

Here’s the announcement (here)

Nonfarm business sector labor productivity increased 4.7 percent in the third quarter of 2023, the
U.S. Bureau of Labor Statistics reported today, as output increased 5.9 percent and hours worked
increased 1.1 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.)
The increase in labor productivity is the highest rate since the third quarter of 2020, in which
productivity increased 5.7 percent.

and below is a chart of the last 2 years compiled by Jason a furman.

 

[Car-Guy]

US productivity showed another strong quarterly increase. This is a calculated number and subject to change, but still meaningful. Increases in productivity allow both wages and profits to rise without increasing prices. It’s the primary driver of increases in standard of living.

Here’s the announcement (here)


and below is a chart of the last 2 years compiled by Jason a furman.

It's too bad that doesn't say anything about the "quality" of that productivity increase.

 

[Montecfo]

Jobs report came in soft at 150K jobs, less than the 170k forecast. Prior months were revised downward by an eye popping 101k jobs, and unemployment rose to 3.9% versus an expectation to hold steady.

The separate household survey which is used to compute unemployment, showed a decline of 348k jobs.

The jobs growth trend has been steadily down over the past year (see graphic in article).

Other measures of softness included a reduction in the work week and and less that forecast wage growth.

https://www.cnbc.com/id/107328444?&view=story?__source=androidappshare

Separately the ISM services purchasing managers' index (PMI) came in softer than expected, though it remains in growth mode.

These reports point to a more benign interest rate environment.

 

[explanade]

They did mention though that the UAW strike, which is now over, may have lowered the jobs number.

 

[Montecfo]

They did mention though that the UAW strike, which is now over, may have lowered the jobs number.

Yes. It also lowered the forecast.

The big news in my view was 100k downward revision of prior months. And then give decline in jobs embedded in the HH survey.

 

[explanade]

So people may notice and express dismay at higher prices for every day products that they buy or consume, including on this thread.

But they've not modified their behavior for certain discretionary things:

Here’s what Starbucks reported for its fiscal fourth quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:

* Earnings per share: $1.06 vs. 97 cents expected

* Revenue: $9.37 billion vs. $9.29 billion expected

The coffee giant reported net income attributable to the company for the quarter ended Oct. 1 of $1.22 billion, or $1.06 per share, up from $878.3 million, or 76 cents per share, a year earlier.

Net sales climbed 11.4% to $9.37 billion.

The company’s same-store sales rose 8%, fueled by higher average checks and a 3% increase in customer traffic to its cafes. Analysts surveyed by StreetAccount were expecting same-store sales growth of 6.8%, but the company’s domestic locations outperformed.

Starbucks launched its fall menu, including the pumpkin cream cold brew and iconic pumpkin spice latte, in late August. With a legion of dedicated fans, those drinks typically drive customers to its locations while they are available.

“We had a remarkable fall launch that led to record-breaking average weekly sales,” CEO Laxman Narasimhan told analysts on the company’s conference call.

U.S. and North American same-store sales grew 8%. The average check in Starbucks’ home market rose 6%, while traffic ticked up 2%.

Outside North America, same-store sales increased 5%, driven entirely by more customer visits.

And in China, Starbucks’ second-largest market, same-store sales rose 5%. Customer traffic increased 8%, but the average ticket fell 3%.

https://www.cnbc.com/2023/11/02/starbucks-sbux-earnings-q4-2023.html

So despite higher prices, greater traffic than last year, resulting in greater sales compared to last year. And US same-store performance was greater than other regions of the world.


Also wonder if miles driven has changed much since pre-pandemic when gas prices were much lower.

Certainly people have noticed the higher prices but presumably demand is keeping the prices higher.

 

[MichaelB]

So people may notice and express dismay at higher prices for every day products that they buy or consume, including on this thread.

But they've not modified their behavior for certain discretionary things:
./.
So despite higher prices, greater traffic than last year, resulting in greater sales compared to last year. And US same-store performance was greater than other regions of the world.

Real PCE, or personal consumption expenditures after inflation, have continued to increase. Inflation has not stopped consumer spending in the US.

Also wonder if miles driven has changed much since pre-pandemic when gas prices were much lower.

Miles driven is increasing but still below pre-pandemic levels. Perhaps due to work from home? (link here)

Certainly people have noticed the higher prices but presumably demand is keeping the prices higher.

As long as people keep spending business will raise prices. The pace of increase is slowing but the trend upwards continues.

 

[braumeister]

I saw one this morning that just about blew my socks off. Our favorite (local) ice cream was $4.95 a year ago and now $7.29 for the same size container. Good thing it's a rare treat!

 

[Chuckanut]

So people may notice and express dismay at higher prices for every day products that they buy or consume, including on this thread.

But they've not modified their behavior for certain discretionary things:



https://www.cnbc.com/2023/11/02/starbucks-sbux-earnings-q4-2023.html

So despite higher prices, greater traffic than last year, resulting in greater sales compared to last year. And US same-store performance was greater than other regions of the world.


Also wonder if miles driven has changed much since pre-pandemic when gas prices were much lower.

Certainly people have noticed the higher prices but presumably demand is keeping the prices higher.

I have to admit the number of people who are willing to plunk down six to eight dollars for one coffee drink amazes me at time. And that's for a drink they take out and consume someplace else.

That said, when friend gather together for coffee at our favorite place, I pay nearly $4 for a cup of brewed coffee. It does come with refills. And we occupy a table for at least 1.5 hours.

 

[W2R]

I have to admit the number of people who are willing to plunk down six to eight dollars for one coffee drink amazes me at time. And that's for a drink they take out and consume someplace else.

That said, when friend gather together for coffee at our favorite place, I pay nearly $4 for a cup of brewed coffee. It does come with refills. And we occupy a table for at least 1.5 hours.

$8.00 for a cup of coffee is a lot, I agree! At least in your case you get refills and only pay half as much so that's just $2.00/cup or less.

After I retired I tried every coffee known to mankind to find out which was my very favorite of all, since I figured I deserved great coffee after all those years of working. I finally settled on Taster's Choice instant. It only costs me $0.09/cup from Amazon. Yes, I admit that I'm stingy but it really doesn't taste all that bad to me, and I prefer drinking my morning coffee at home.

 

[latexman]

Some good news on inflation released this morning.

CONSUMER PRICE INDEX - OCTOBER 2023

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.2 percent before seasonal adjustment.

The index for all items less food and energy rose 0.2 percent in October. The all items less food and energy index rose 4.0 percent over the last 12 months, its smallest 12-month change since the period ending in September 2021.

Details are here.

 

[Montecfo]

CPI flat for Oct

The consumer price index (CPI) came in at 0.0% for October compared to the prior month. The annual figure was 3.2%. Both figures were below expectations.

The core CPI, which excludes volatile food and energy costs came in at 0.2% for the month and 4.0% annually. Both figures were below expectations and the annual figure was lowest since September, 2021.

Bottom line is inflation readings have continued to moderate.

Equity markets are reallying and bond yields declining in reaction to the news.

"Inflation was flat in October from the prior month, core CPI hits two-year low"

https://www.cnbc.com/2023/11/14/cpi-inflation-report-october-2023.html

 

[CaptTom]

I have to admit the number of people who are willing to plunk down six to eight dollars for one coffee drink amazes me at time...

It always amazes me. But I discount that when considering inflation. Buying the right brand of coffee is a fashion statement. Inflation is irrelevant when it comes to coffee. It's more of a BTD item.

[Disclaimer: recovered caffeine addict here.]

The consumer price index (CPI) came in at 0.0% for October compared to the prior month...

Since I'm quick to call BS when these figures don't match reality, I should say that this time, they appear correct.

Prices really have stabilized. Some products which had gone unreasonably high (IMHO) have actually come back down a little, although not quite to where they were before spiking. Others remain near their peak. I'm hopeful that we'll get back to where customers start to drive down demand for the products which had opportunistic price increases.

No doubt the headlines will scream doom and gloom if a product category which had gone up 300% suddenly falls back by 10%, but the reality is some selective deflation going forward is expected, and a good thing.

 

[Fermion]

Do things every really come back down? I know wood products did come back down but for example, yesterday I had to buy a 90 degree galvanized 4" pipe duct connection for our new dryer installation. I had just purchased one at North40 for $7.49 three weeks ago, and when I went back they were $9.99. A massive increase ($7.49 was already expensive) but will it just stay $9.99 for a decade while everything else catches up or will they mark them back down to $7.79 or whatever inflation would have justified?

 

[Montecfo]

Do things every really come back down? I know wood products did come back down but for example, yesterday I had to buy a 90 degree galvanized 4" pipe duct connection for our new dryer installation. I had just purchased one at North40 for $7.49 three weeks ago, and when I went back they were $9.99. A massive increase ($7.49 was already expensive) but will it just stay $9.99 for a decade while everything else catches up or will they mark them back down to $7.79 or whatever inflation would have justified?

Lots of prices have fallen, yes. Those tied to commodity prices especially.

Fuel, vehicles, construction materials, airfares among others.

 

[38Chevy454]

I'm happy to hear that inflation is moderating. I still get burned up whenever I buy anything because of the higher prices now vs just 2-3 years ago. These cost increases are here to stay I believe, understanding some slight volatility in commodities. So celebrating the current Oct inflation result is like being happy that the game is over, even though you lost.

 

[Northforker]

I'm happy to hear that inflation is moderating. I still get burned up whenever I buy anything because of the higher prices now vs just 2-3 years ago. These cost increases are here to stay I believe, understanding some slight volatility in commodities. So celebrating the current Oct inflation result is like being happy that the game is over, even though you lost.

Agreed, I see no chance of price DEFLATION on big tickets items like vehicles, and major appliances other than clearance events.

Can anyone recall the MSRP of vehicles EVER going down YOY for the same make and model?

I remember buying a new 1987 F150 Lariat pickup for about 10k, that same truck today is 65-70k.

 

[audreyh1]

Can anyone recall the MSRP of vehicles EVER going down YOY for the same make and model?

One huge difference is that during 2021 and 2022 dealers were adding markups well in excess of the MSRP. So as this practice reduces, vehicle prices will drop.

 

[Car-Guy]

One huge difference is that during 2021 and 2022 dealers were adding markups well in excess of the MSRP. So as this practice reduces, vehicle prices will drop.

I hope so. I'm looking to buy another new high end truck early next year. If they don't come down to a more reasonable level, I may even buy a "slightly used" model. That's something I haven't done in decades. Just hate being so blatantly ripped off.

 

[JoeWras]

MSRP won't come down, but incentives are already starting to peculate on some brands.

What happens is the transaction price will drop as dealers start dealing again, and manufacturers have kickbacks.

Just don't get too excited about it.

Used cars, however, are coming down... except at the bottom end which includes older cars.

 

[MichaelB]

One huge difference is that during 2021 and 2022 dealers were adding markups well in excess of the MSRP. So as this practice reduces, vehicle prices will drop.

Exactly. I’m not sure how this is measured but it is real.

I looked at the MSRP for a Subaru Legacy, 2019 and 2024, same model with a similar configuration and the list price has risen by less than 10%. I have no idea how much the actual selling price has changed, but in ‘20 and ‘21 dealers were charging for everything - including the glue on the sticker in the window.

 

[audreyh1]

I think I can safely assume that vehicle sales reflect the actual price to the customer which is shared with sales tax, vehicle registration etc. entities, and nothing to do with MSRP.

 

[audreyh1]

Wow, that was quite a rally today!

 

[MichaelB]

Wow, that was quite a rally today!

Let the good times roll!

 

[Montecfo]

Agreed, I see no chance of price DEFLATION on big tickets items like vehicles, and major appliances other than clearance events.

Can anyone recall the MSRP of vehicles EVER going down YOY for the same make and model?

I remember buying a new 1987 F150 Lariat pickup for about 10k, that same truck today is 65-70k.

Price deflation on vehicles has been happening for quite some time.