Latest Inflation Numbers and Discussion

[sengsational]

I kinda enjoy the fact that I don’t worry about getting lice when I have my hair cut. The licenses were put into place for good reasons.

Before Yelp and other such consumer empowering technologies, licensing was probably more important. There are plenty of places where consumers are not empowered, and can benefit from regulation.

First time in a few months I bought a 15 pack of a regional beer the other day. It was up almost 10%..

Ever since normal grocery stores began carrying locally produced beer, there was almost no difference in price between them. I could have written a pricing model that had one number (abv) and one boolean (IPA or not) and landed with $0.50 of the price. Nobody was trying to use price to get share. But recently, like maybe in the last 6 months, some local breweries seem to be breaking the price floor with a regular price $2 below the others. And occasionally I see a sale price now, which basically hadn't happened until now.

 

[Gumby]

I love it when the free market works as it should. Here in CT, we do not have a free market for alcohol. There are state minimum prices.

 

[38Chevy454]

I love it when the free market works as it should. Here in CT, we do not have a free market for alcohol. There are state minimum prices.

Ohio has the same state controlled minimum price, so the same brand beer is essentially the same price anywhere you buy it. Liquor is the same controlled pricing as well, but has to be a state licensed store. Beer and wine can be purchased at grocery store for example, but liquor is separate.

 

[Koolau]

Ohio has the same state controlled minimum price, so the same brand beer is essentially the same price anywhere you buy it. Liquor is the same controlled pricing as well, but has to be a state licensed store. Beer and wine can be purchased at grocery store for example, but liquor is separate.

I'm old enough to remember when alcohol wasn't sold on Sundays - in fact grocery stores were not even open on Sundays. I guess some things are changing. YMMV

 

[Gumby]

Here in Connecticut, until the law was changed in 2010, you could not buy alcohol at all on Sunday or after 8pm any other day. We were the penultimate state to have that restriction. Indiana held out on Sunday sales until 2018.

 

[Chuckanut]

I remember when just about everybody had Sunday off. The exceptions tended to be people who worked in medicine, public safety, and public utilities. It was a lot easier to plan a family get together when 95% of the attendees had Sunday off. A neighbor of mine has a nephew who works for Chic-Fill-A (sp?). The lad says his #1 fringe benefit is knowing he always has at least one day off on the weekend. IMO, this young fellow has the heart of a ER lion.

Back on topic, I am a skeptic on inflation being brought down much below 4%. Until we seem some concern out of D.C. about the deficits its' hard to imagine inflation going into the 2 to 3 percent area. Plus, we have that dang war in Europe. Just my 2¢. YMMV.

 

[Koolau]

Back on topic, I am a skeptic on inflation being brought down much below 4%. Until we seem some concern out of D.C. about the deficits its' hard to imagine inflation going into the 2 to 3 percent area. Plus, we have that dang war in Europe. Just my 2¢. YMMV.

I'm afraid that you are correct. Though there has been downward pressure on prices, I think that's about gone now. Even though I believe we're headed into recession, I don't see that "fixing" inflation (not down to 2%, anyway.) DC is the main issue in my opinion as well, but YMMV.

 

[MichaelB]

Back on topic, I am a skeptic on inflation being brought down much below 4%. Until we seem some concern out of D.C. about the deficits its' hard to imagine inflation going into the 2 to 3 percent area. Plus, we have that dang war in Europe. Just my 2¢. YMMV.

I have no idea what inflation will be a year from now or how long it will take to get back to below 3%, but I have no doubt that a recession could make that happen in short order. Not so in Europe, where inflation is driven much more by external factors, but here in the US it’s good old fashioned supply and demand.

 

[Popeye]

On Bloomberg TV today they were discussing this. The guest used the “S” word, as in stagflation by years end. She expects flat GDP and stubborn inflation.

 

[JackJester]

Back on topic, I am a skeptic on inflation being brought down much below 4%. Until we seem some concern out of D.C. about the deficits its' hard to imagine inflation going into the 2 to 3 percent area. Plus, we have that dang war in Europe. Just my 2¢. YMMV.

Yep. I use 4% as my starting point in FIRECalc. Seems like it's just the times we live in. My folks always told me about the 10% mortgage they had in the late 70s. Mine was in the 3-4% when I started and paid it off before FIRE...lucky I guess.

 

[Montecfo]

I ran across some analysis recently. The gentleman pointed out that the inflation stats still show real estate costs rising when they have been falling.

He expected that to be reflected in the numbers beginning this fall. He said with inflation adjusted accurately for this inflation the headline rate would be 2%ish.

Oh it was Barry Sternlicht, Starwood Capital Chairman and CEO.

This vid is 4 min plus and he includes a nice chart. At end he explains how high rates also drive down tax receipts, leading to fiscal challenges. That is right at the end.

https://youtu.be/rsXRtobbgV4

Jeremy Siegel made the same point in January about housing data lag in Fed inflation figures.

 

[copyright1997reloaded]

I ran across some analysis recently. The gentleman pointed out that the inflation stats still show real estate costs rising when they have been falling.

He expected that to be reflected in the numbers beginning this fall. He said with inflation adjusted accurately for this inflation the headline rate would be 2%ish.

Oh it was Barry Sternlicht, Starwood Capital Chairman and CEO.

This vid is 4 min plus and he includes a nice chart. At end he explains how high rates also drive down tax receipts, leading to fiscal challenges. That is right at the end.

https://youtu.be/rsXRtobbgV4

Jeremy Siegel made the same point in January about housing data lag in Fed inflation figures.

Also true when inflation was ramping up, that it was being understated because of how housing costs are calculated. Yet that didn't seem to bother the "transitory" crowd.

Eventually, the lag will be reflected fully. It is that timeframe (and beyond) that I am interested in, not whether the inflation rate will fall over the next 6-12 months...it will unless something wacky happens, like a wholesale walloping of the dollar.

Eh, but each of us must place our own bets. If one things future inflation will find its way back down to 1-2%, then buying those 20 year treasuries at 3.73% or 30-year at 3.6% might not be a bad idea. I'm in the camp that it *IS* a bad idea, because an ever growing debt and no fiscal discipline WILL lead us down the road to a much weaker currency and higher inflation. So while I have a ton of my money in bonds to capture those "higher" yields, I consider these investments as short term rentals to eventually be moved to equities and other inflation hedges.

 

[NW-Bound]

Yep. I use 4% as my starting point in FIRECalc. Seems like it's just the times we live in. My folks always told me about the 10% mortgage they had in the late 70s. Mine was in the 3-4% when I started and paid it off before FIRE...lucky I guess.

The 30-year FHA mortgage on my 1st home was at 14%, signed in April 1980. The 30-year rate reached 18% about a year later. Needless to say, the housing construction business was completely dead.

I don't remember if the 0.5% mortgage insurance was in addition to the 14% I paid, or if it was included. I think I still have the paperwork in the file cabinet somewhere.

 

[NW-Bound]

I have no idea what inflation will be a year from now or how long it will take to get back to below 3%, but I have no doubt that a recession could make that happen in short order. Not so in Europe, where inflation is driven much more by external factors, but here in the US it’s good old fashioned supply and demand.

I will take a recession along with an inflation rate below 3%. That's much better than stagflation.

 

[Montecfo]

I will take a recession along with an inflation rate below 3%. That's much better than stagflation.

Could see that in the fall.

 

[Markola]

I have no idea what inflation will be a year from now or how long it will take to get back to below 3%, but I have no doubt that a recession could make that happen in short order. Not so in Europe, where inflation is driven much more by external factors, but here in the US it’s good old fashioned supply and demand.

Well, those plus pandemic money printing.

 

[Born2Fish]

I will take a recession along with an inflation rate below 3%. That's much better than stagflation.

Could see that in the fall.

Monte - which one in the fall?

Could see "stagflation", or could see "inflation below 3%"?

 

[Montecfo]

Not stagflation.

3% inflation.

Recession likely I think but timing would depend on fiscal policy and whether another shoe drops in banking.

 

[Koolau]

I have no idea what inflation will be a year from now or how long it will take to get back to below 3%, but I have no doubt that a recession could make that happen in short order. Not so in Europe, where inflation is driven much more by external factors, but here in the US it’s good old fashioned supply and demand.

Including the supply of money.

I know it's been going down of late, but it went up a lot before inflation "suddenly" was no longer transient. Actual supply of goods and services vs demand has always been true. Throw in currency manipulation and things get bizarre quickly. I'm sure most folks here know a lot more about this stuff than I do, but IMO, we no longer have true "supply and demand" in the traditional sense of the "law." Gummint manipulation of money has to have an effect - or they wouldn't do it.

 

[MichaelB]

I think the supply of money is one of those things that some people feel must have an impact on economic activity, but in reality it is difficult to delineate. In any event the impact is far greater in the financial economy than the real one.

IMO right now the current real drivers of the economic cycle and inflation are fiscal spending and credit creation, and both point to moderate slowing economic activity. Fiscal spending declined sharply from ‘21 to ‘22 and is flat-ish in ‘23. Credit creation is contracting right now (YTD) as higher interest rates filter through the business cycle. Wages is the other driver, but higher employment and incomes are not leading to more credit, which looks to have peaked around Sept ‘22.

 

[Markola]

I mean, it’s really not difficult to delineate. Governments, including ours, stuffed the economy with emergency cash, conjured from nothing, to combat the pandemic - and inflation soon soared. Even noble intentions during an emergency have consequences. Do you really think there’s a free lunch anywhere in economics?

 

[jim584672]

Looks like Ben Bernanke was right, the "zero lower bound" runaway deflation problem can always be fixed with monetary and fiscal stimulation. What a change a few years makes in monetary theory. A few years ago they had "pushing on a string" concerns that the 0% rate in deflation would make for high real rates that couldn't be cured. I wonder how those people who bought negative yield German bonds are feeling today.

 

[jldavid47]

L I wonder how those people who bought negative yield German bonds are feeling today.

They should feel like idiots.

 

[Mr._Graybeard]

I wonder how much of a factor “skin in the game” plays here. If you have invested time and money in obtaining a professional license, do you value it more and avoid putting it at risk?

The examples you chose- hair styling and false fingernail application- have minimal downside. On the other hand, “reform” in these areas isn’t likely to save our economy either.

I would be very opposed to relaxing oversight of most areas- everything from pediatric oncology to auto brake service to the guy driving a semi next to me on the interstate. Regulation and training have their place. Just ask the investors in Silicone Valley Bank.

I used to work with a newspaper reporter who quit to go to law school. She was a crappy reporter, and she became a crappy lawyer.

The last time I heard, her license was suspended. Some money belonging to a client wound up in her pocket.

She's in Florida now, FWIW to you Floridians in need of legal advice (I don't know if she's still practicing).

 

[NW-Bound]

About my earlier suspicion of Amazon item prices going down, this is confirmed by an article on Bloomberg just now.

Online prices in the US dropped 1.7% in March from a year earlier, the seventh-straight decline and the sharpest retreat in four months.

More than half of the 18 categories tracked by Adobe Digital Price Index showed annual price declines, data released Monday showed. Compared to the prior month, online prices were flat in March.

I think items bought online tend to be of the discretionary category. The demand for these items dries up first when shoppers run out of money, compared to the consumer staples they buy in supermarkets.