Latest Inflation Numbers and Discussion

CaptTom said:
Well, I won't. A little deflation would be a good thing, IMHO. Think of it as a correction, after a wild ride of excessive inflation.
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Agreed! We could have some deflation for a while to provide a "correction" to some of this recent very high inflation, and our running average will still be well above the target 2% core PCE. But, that seems like a dream that will never happen to any meaningful degree.
 
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GenXguy said:
Agreed! We could have some deflation for a while to provide a "correction" to some of this recent very high inflation, and our running average will still be well above the target 2% core PCE. But, that seems like a dream that will never happen to any meaningful degree.
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I can see why anyone wants things cheaper, but deflation would mean a very bad economy, so not a good thing.
 
CaptTom said:
Well, I won't. A little deflation would be a good thing, IMHO. Think of it as a correction, after a wild ride of excessive inflation.
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If you like deflation, why stop at a little? Wouldn't you prefer prices to steadily decline?

I mean if a little is good...
 
There are only 2 types of inflation, too much or not enough, and there’s only 1 type of deflation, which is too much.

Deflation would have a severely negative impact on the US economy. Every aspect of the economy is heavily leveraged, and deflation increases the real value of debt.
 
MichaelB said:
There are only 2 types of inflation, too much or not enough, and there’s only 1 type of deflation, which is too much.

Deflation would have a severely negative impact on the US economy. Every aspect of the economy is heavily leveraged, and deflation increases the real value of debt.
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I completely agree. But I find interesting that some folks see lower prices but miss the rest of the picture.
 
I would settle with continued inflation, just slightly above 0%, until the 10 year average settles at the 2% target rate.
 
Aerides said:
I can see why anyone wants things cheaper, but deflation would mean a very bad economy, so not a good thing.
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Apparently you have quite a a few who agree with you.

I still don't see it. Yes, I know high-net-worth investors do well with continuous inflation. Frankly, it wouldn't break my heart if the folks who have been suffering these past couple of years caught a break, and those who have benefited from that suffering had to tighten their belts a bit.
 
Inflation has run well under 3% for the past decade, whether you look at PCE or CPI.

So not much above the Fed's current target.

It is easy to forget that the Fed spent MOST of the last decade fighting deflation with price growth well under 2%.

I think if most of us were offered that level of inflation for the next 10 years we would take it.
 
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Montecfo said:
Inflation has run well under 3% for the past decade, whether you look at PCE or CPI.

So not much above the Fed's current target.

It is easy to forget that the Fed spent MOST of the last decade fighting deflation with price growth well under 2%.

I think if most of us were offered that level of inflation for the next 10 years we would take it.
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But let's start 3 years back and add the next 7 years to get our 10 years of 2%.
 
Montecfo said:
Inflation has run well under 3% for the past decade, whether you look at PCE or CPI.

So not much above the Fed's current target.

It is easy to forget that the Fed spent MOST of the last decade fighting deflation with price growth well under 2%.

I think if most of us were offered that level of inflation for the next 10 years we would take it.
Click to expand...

And my understanding is that that long stretch of under 3% is more outlier than some decades-long norm.
 
CaptTom said:
Apparently you have quite a a few who agree with you.

I still don't see it. Yes, I know high-net-worth investors do well with continuous inflation. Frankly, it wouldn't break my heart if the folks who have been suffering these past couple of years caught a break, and those who have benefited from that suffering had to tighten their belts a bit.
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I would rather prices go up 3%, and the stock market go up 7%. It's kinda simply that for me.

The alternative? Prices go down, and so does my NW.
 
Aerides said:
I would rather prices go up 3%, and the stock market go up 7%. It's kinda simply that for me.

The alternative? Prices go down, and so does my NW.
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The alternative for me is prices just go up much more slowly.

Switzerland had 5 years of deflation, and the economy still grew.
 
Japan was in deflation for a while, until recently.
To learn good and bad things about deflation, we just look into their economy.
 
The past is past. I'll take inflation going forward of 2 to 3% for the rest of my life, thanks. ZIRP is nobody's friend, and deflation is everybody's enemy.
 
The quarterly employment cost index was released this morning. This is the Fd’s preferred measure of employment cost and viewed as an important driver of inflation.

The total cost of compensation rose 0.9% for the 4Q and 4.2% for the year 2023. This is a good report, it shows that employment costs have fallen and are not driving inflation. It will be a relief for the Fed and adds strongly to the view that rate hikes are no longer on the table.

Some data

https://www.bls.gov/eci/home.htm

https://tradingeconomics.com/united-states/employment-cost-index
 

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Fed rate cut not likely in March. Markets are down.

https://www.cnbc.com/2024/01/31/fed-rate-decision-january-2023.html

WASHINGTON — The Federal Reserve on Wednesday sent a tepid signal that it is done raising interest rates but made it clear that it is not ready to start cutting, with a March move lower increasingly unlikely.
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https://www.cnbc.com/2024/01/31/fed-chief-jerome-powell-says-a-march-rate-cut-is-not-likely.html

Fed Chairman Jerome Powell said Wednesday that the central bank would likely not be comfortable enough with the path of inflation by its March meeting to cut interest rates.
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This is good that they aren't expected to start cutting rates. I think it's too soon for that after all the inflation we've had.
 
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Was just watching CNBC report Chipotle earnings, they beat expectations.

They boasted of higher average transactions. They cited inflation for beef, produce and queso but they raised prices to more than cover.

So they had slightly higher profit margin, over 25% in Q4 2023 vs. just over 24% in Q4 2022.

Price increases didn’t come entirely from inflation and 2022 had higher inflation than 2023, especially the end of 2023.

Also, I don’t follow the restaurant industry but 25% or even 24% profit margin seems high? They are a popular chain — McDonalds struggled to meet expectations in their latest quarterly report.

So some of the higher prices in recent months seem to be occurring because some companies can increase prices, not entirely or even partly due to inflation.
 
That's the way it has always been. Sellers will raise their prices until buyers stop buying. Then the sellers will back off. Eventually, the market finds the equilibrium price.
 
explanade said:
Was just watching CNBC report Chipotle earnings, they beat expectations.

They boasted of higher average transactions. They cited inflation for beef, produce and queso but they raised prices to more than cover.

So they had slightly higher profit margin, over 25% in Q4 2023 vs. just over 24% in Q4 2022.

Price increases didn’t come entirely from inflation and 2022 had higher inflation than 2023, especially the end of 2023.

Also, I don’t follow the restaurant industry but 25% or even 24% profit margin seems high? They are a popular chain — McDonalds struggled to meet expectations in their latest quarterly report.

So some of the higher prices in recent months seem to be occurring because some companies can increase prices, not entirely or even partly due to inflation.
Click to expand...

Hmmm. I wonder if they compensated their servers accordingly. ....... :whistle: :rolleyes:
 
explanade said:
Was just watching CNBC report Chipotle earnings, they beat expectations.

They boasted of higher average transactions. They cited inflation for beef, produce and queso but they raised prices to more than cover.

So they had slightly higher profit margin, over 25% in Q4 2023 vs. just over 24% in Q4 2022.

Price increases didn’t come entirely from inflation and 2022 had higher inflation than 2023, especially the end of 2023.

Also, I don’t follow the restaurant industry but 25% or even 24% profit margin seems high? They are a popular chain — McDonalds struggled to meet expectations in their latest quarterly report.

So some of the higher prices in recent months seem to be occurring because some companies can increase prices, not entirely or even partly due to inflation.
Click to expand...

The 24%/25% is gross profit margin. After that they still have operating expenses (management, advertising, R&D, and probbably more) and taxes and maybe some other things. Diluted EPS is about 1.7% using today's closing price and diluted EPS TTM.
 
Doesn’t the BLS publish an annual CPI revisions report on their site somewhere?
 
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