Latest Inflation Numbers and Discussion

[copyright1997reloaded]

ANother thing people get wrong is that they think 8% CPI is monthly. They think inflation was 8% up from last month. In reality it would be up zero percent over last month, if the CPI (annual) were 8% for June and also 8% for July. But 'zero percent' monthly inflation isn't a sexy headline, I guess.

Nope. This is not how it is calculated.

As an aside, if the latest inflation report (+1.3% MoM) is annualized, it would be over over 15.6%.

The fact that the YoY inflation rate went from 8.3% (April, as announced in May) to 8.6% (May, announced in June) to 9.1% (June, announced in July) means that the RATE of inflation (upward change in price over time) is ACCELERATING.

Next month (August) when we get the July report, we may see a decrease in the inflation rate (i.e. downward rate) because of the recent (in real terms) decline in gasoline prices. The pendants will all be celebrating that we are "past the peak", but the reality will be that prices will still be increasing (overall) at a rapid rate. Even if the inflation RATE dropped to ZERO, we still have the higher prices already accumulated over the last year or so.

 

[MRG]

Here is one for those who do not see inflation. "372% surge in lumber prices during the past two years"



"Lumber futures have declined 33% since May 7, which likely reflects a mix of falling demand as contractors—shaken by the 372% surge in lumber prices during the past two years—back off potential projects and the slow but steady return of supply."

Lumber is a red herring. Did a farmer get more for the trees? How about the mill? Not a dime more for them either, been there done that. All through the production chain nobody made more $ except the retail price went up 300%+..

 

[almost there]

Lumber is a red herring. Did a farmer get more for the trees? How about the mill? Not a dime more for them either, been there done that. All through the production chain nobody made more $ except the retail price went up 300%+..

The entire chain made money. Mills ramping up chasing prices etc. Its not so much who gets the $$$ but more about inflation overall. Like my homeowners ins. went up 25% this year. Due to the rise in const. costs. Just one example..

 

[GenXguy]

Next month (August) when we get the July report, we may see a decrease in the inflation rate (i.e. downward rate) because of the recent (in real terms) decline in gasoline prices. The pendants will all be celebrating that we are "past the peak", but the reality will be that prices will still be increasing (overall) at a rapid rate. Even if the inflation RATE dropped to ZERO, we still have the higher prices already accumulated over the last year or so.

Yeah, I can see that now. It gets reported all over the news that inflation is dropping. And a lot of people with interpret that as prices are dropping and expect to see lower priced groceries, which in fact, will continue to increase quickly, on top of the steep increases we've already seen over the last two years.

 

[corn18]

Inflation is reported in many ways and they all mean different things but the real data is simply the CPI (pick your flavor). The one that really matter to me is CPI-W. That determines the SS COLA which is also my military pension COLA. That uses the actual value of CPI-W average of July/Aug/Sep compared to the same average in the previous year. While inflation may slow down this year, I highly doubt it will go negative in Jul/Aug/Sep. The current SS COLA is projected to be 9%. If the CPI-W does not go up in Q3 (0% inflation), then the COLA will still be 9%. My guess it will be 10%.

 

[Happyras]

I also track CPI-W, as it is the index we used in our contract triple net lease when we sold our business. We are so lucky, as this increases our rental income on that one commercial property, but never goes down. So in our personal inflation rate, we actually look forward to seeing a high CPI-W in August for our annual lease payment adjustment. We get far more monthly from that one rent payment than all of our pensions and SS combined! But personally, the things we spend money on are not outrageously rising with inflation.

 

[Bigdawg]

The one that really matter to me is CPI-W. That determines the SS COLA which is also my military pension COLA. That uses the actual value of CPI-W average of July/Aug/Sep compared to the same average in the previous year. While inflation may slow down this year, I highly doubt it will go negative in Jul/Aug/Sep. The current SS COLA is projected to be 9%. If the CPI-W does not go up in Q3 (0% inflation), then the COLA will still be 9%. My guess it will be 10%.

^So glad DW and I have 2 COLA Military pensions. Additionally DW will have a FERS (COLA) pension someday (10 years in so far) and we both will have COLA SS someday (assuming we make it that far). I can only imagine the stress felt by those folks trying to figure it all out w/out pensions (COLA or not).

 

[corn18]

^So glad DW and I have 2 COLA Military pensions. Additionally DW will have a FERS (COLA) pension someday (10 years in so far) and we both will have COLA SS someday (assuming we make it that far). I can only imagine the stress felt by those folks trying to figure it all out w/out pensions (COLA or not).

It's friggin' awesome. If the COLA is 9% for 2023, that would mean a total of 16.17% for 2022 and 2023. We can control the personal inflation pretty well, although it will suck if we have to move or buy a car/truck. I think we can go 10 years without needing a new car as we bought all new ones right before retiring. No plans to move. That and my mortgage being fixed means inflation is a positive for my model.

SS is a weird one because it uses labor rates and not inflation if you are not retired yet. Since pay is going up slower than inflation, there isn't as big of an increase in projected SS benefits as there is for my pension. 2021 labor rate growth was anemic, so my SS benefits only went up $76/year.

 

[GenXguy]

SS is a weird one because it uses labor rates and not inflation if you are not retired yet. Since pay is going up slower than inflation, there isn't as big of an increase in projected SS benefits as there is for my pension. 2021 labor rate growth was anemic, so my SS benefits only went up $76/year.

That's another way SS benefits are effectively being cut, just like how tax thresholds were not indexed to inflation means lower net benefits after taxes when adjusted for inflation, which makes this an even bigger issue with today's soaring inflation. And big SS benefit cuts could be coming down the road.

I'm relying mostly on my investments, which are down, while my expenses are climbing even faster than government inflation figures.

 

[tmm99]

I was watching ABC World News Tonight from two days ago and it said that inflation has hit the 40-year high. Consumer Price Index is 9.1% higher than a year ago. The typical households in America spent $493 for the same services in June than a year ago.

 

[GenXguy]

Year over year CPI was 5.4% a year ago, and year over year was 9.1% in June 2022, so 3.7 percentage points higher is a 68.5% increase in the inflation rate from a year ago. I'm sure that would confuse a lot of people more than they already are.

 

[Mulligan]

Year over year CPI was 5.4% a year ago, and year over year was 9.1% in June 2022, so 3.7 percentage points higher is a 68.5% increase in the inflation rate from a year ago. I'm sure that would confuse a lot of people more than they already are.

Yes math can be crazy… We could have 100% inflation one year, then 0% for 2 years running and Fed would say it was transitory and inflation was gone. But if it was say, 6% for three years running, they would be fighting it hard and saying inflation was rampant. For that period of time, my wallet would rather have had the latter scenario than the former, ha.

 

[Koolau]

Yesterday I went to Walmart to pick up my prescriptions and there’s clothes everywhere marked down to super cheap prices and the store is a mess with racks of clothes everywhere. I have never seen that many clothes in a store so cheap.

I can't even identify with buying clothes. Last time I went to Walmart to buy tidy whities, they no longer carried my brand/size. Had to go to Target. Other than that, I've got enough clothes to last the rest of my life. YMMV

 

[pb4uski]

... SS is a weird one because it uses labor rates and not inflation if you are not retired yet. Since pay is going up slower than inflation, there isn't as big of an increase in projected SS benefits as there is for my pension. 2021 labor rate growth was anemic, so my SS benefits only went up $76/year.

That's another way SS benefits are effectively being cut, just like how tax thresholds were not indexed to inflation means lower net benefits after taxes when adjusted for inflation, which makes this an even bigger issue with today's soaring inflation. And big SS benefit cuts could be coming down the road.

I'm relying mostly on my investments, which are down, while my expenses are climbing even faster than government inflation figures.

I thought that it used labor rates until you reach your FRA and then inflation once you are at your FRA.

Can it really be a cut if it has always been that way?... or just a whiner whining?

 

[copyright1997reloaded]

I can't even identify with buying clothes. Last time I went to Walmart to buy tidy whities, they no longer carried my brand/size. Had to go to Target. Other than that, I've got enough clothes to last the rest of my life. YMMV

Besides, clothes are optional in Hawaii.

 

[aja8888]

I can't even identify with buying clothes. Last time I went to Walmart to buy tidy whities, they no longer carried my brand/size. Had to go to Target. Other than that, I've got enough clothes to last the rest of my life. YMMV

In Hawaii I suppose you can Go Commando most of the time!

 

[Chuckanut]

As people get bigger raises thanks to inflation, they will be contributing more to the SS fund. That also has to be taken into account.

 

[martyp]

Both my pension and my Social Security are COLA’d at least enough to cushion the blow. I also live in Thailand which has a lower inflation rate and now the baht has weakened against the dollar so that now I am getting the most favorable exchange rate in five years. Inflation has been a wash for me.

 

[11522914]

It's friggin' awesome. If the COLA is 9% for 2023, that would mean a total of 16.17% for 2022 and 2023. We can control the personal inflation pretty well, although it will suck if we have to move or buy a car/truck. I think we can go 10 years without needing a new car as we bought all new ones right before retiring. No plans to move. That and my mortgage being fixed means inflation is a positive for my model.

SS is a weird one because it uses labor rates and not inflation if you are not retired yet. Since pay is going up slower than inflation, there isn't as big of an increase in projected SS benefits as there is for my pension. 2021 labor rate growth was anemic, so my SS benefits only went up $76/year.

This link states https://maximizemysocialsecurity.com/tags/cost-living-increases

All Social Security COLAs that occur after a person reaches age 62 are added to their Social Security retirement benefit rate regardless of when they start drawing benefits.

 

[ShokWaveRider]

I can't even identify with buying clothes. Last time I went to Walmart to buy tidy whities, they no longer carried my brand/size. Had to go to Target. Other than that, I've got enough clothes to last the rest of my life. YMMV

Ditto:

The last time I got any form of clothing (other than T's) was in Mexico, we find the quality of their casual clothing and general selection is way better than our local stores.

As for underwear I stocked up in 2000 on a UK trip to M&S and purchased enough to last me forever, I still have lots of unopened packets.

We live in Florida, so T shirts, very (And I mean Very) casual shorts, and quality Zories (Thongs) are the order of every day. I get those from Costco and buy a few pairs at a time, each last about 2 years assuming no blow outs.

I still have LS shirts, Jeans and trousers, maybe a suit or 2 and a raincoat from 2001 when I was W@rking that I have never even looked at. I cannot remember the last time I wore a LS shirt or Suit, all I know is it must have been the early 2000s.

 

[GenXguy]

I thought that it used labor rates until you reach your FRA and then inflation once you are at your FRA.

Can it really be a cut if it has always been that way?... or just a whiner whining?

A cut is a cut, even if it happens every year. But it hasn't always been that way. And inflation certainly hasn't always been soaring, as I mentioned.

And the big cuts that I mentioned are "coming own the road" are yet to come. So I wouldn't say it's always been that way. That's still in the future. Pay attention.

 

[GenXguy]

Ditto:
The last time I got any form of clothing (other than T's) was in Mexico, we find the quality of their casual clothing and general selection is way better than our local stores.

Well, that could differ greatly based on what stores you are comparing in Mexico vs. locally.

We live in Florida, so T shirts, very (And I mean Very) casual shorts, and quality Zories (Thongs) are the order of every day.

Thongs / flip flops - I could never wear those.

 

[John Galt III]

When I took my pension about 15 years ago, as a monthly as opposed to a lump sum, I fretted about inflation screwing it up later. It has screwed it up slowly over the years, but now it is worse, of course. That's why I am ecstatic about the COLA increase I got in my monthly SS this year, and the expected increase next year! Woohoo!

 

[pb4uski]

... the big cuts that I mentioned are "coming own the road" are yet to come. So I wouldn't say it's always been that way. That's still in the future. Pay attention.

Forgive me for my skepticism that you have a crystal ball and are all-knowing.

 

[GenXguy]

Forgive me for my skepticism that you have a crystal ball and are all-knowing.

I'm not going out on a limb when it's been forecast for years that the trust fund will run dry and that incoming SS taxes will come up short on paying the promised benefit. It's going to have to amount to a cut in some way for at least some people, such as cutting SS benefits for people with higher household income and eliminating spousal benefits, but that's not what this thread is about.