Latest Inflation Numbers and Discussion

[ShokWaveRider]

Walmart cola yesterday $0.96, today $1.18, only 22.9% in one hop.

Was $0.72 last year. I am sure it does not cost more to make.

 

[milford]

Walmart cola yesterday $0.96, today $1.18, only 22.9% in one hop.

Another data point, went to buy eggs at Aldi this week and the brown eggs I usually buy went up from $3.50 to $4. I think we'll be in for a surprise for the next CPI print.

 

[ExFlyBoy5]

Was $0.72 last year. I am sure it does not cost more to make.

What makes you think it doesn't cost more? Sugar is more expensive. Plastic to make the bottles is more expensive. Fuel to get the materials to the manufacturer and then to the store is also more expensive (and diesel is VERY expensive right now). Oh, and the employees are being paid more. So it most certainly costs more to make.

 

[audreyh1]

Corn syrup, they don’t use sugar. But farming costs increased substantially with oil prices jumping which affects fertilizer prices among other things. And plastics.

 

[jim584672]

Companies can raise prices without regard to what it costs to make the product. That is how they make money in inflationary periods.

 

[Chuckanut]

Corn syrup, they don’t use sugar. But farming costs increased substantially with oil prices jumping which affects fertilizer prices among other things. And plastics.

IIRC, most fertilizer is now made from natural gas. And, Russia is a world leader in fertilizer production.

Diversification seems to be more important than some previously thought.

 

[audreyh1]

I know that fertilizer prices jumped this year in the US.

Yes global conflict as well as pandemic effects have shown widespread weaknesses in the global supply chain and second sourcing. Used to be multiple sources for components and raw materials was de rigueur, but that got blown off by multinational businesses in recent decades.

 

[Freedom56]

Here is the interview with James Bullard of the Federal Reserve on Bloomberg TV regarding inflation.

-November move of 75 basis points ‘more or less priced in’
- Fed has option of pulling anticipated 2023 hikes into 2022

"As for December, he didn’t want to “prejudge” what he would support at that meeting, though he did reiterate comments from a few days ago that the Fed could pull anticipated tightening into 2022 from 2023, leaving open the possibility of a 75 basis-point hike."

This would put the Fed Funds rate at 4.5%-4.75% which is what the market started pricing in today after his comments.

https://www.bloomberg.com/news/arti...must-follow-through-on-anticipated-rate-hikes

 

[milford]

Companies can raise prices without regard to what it costs to make the product. That is how they make money in inflationary periods.

Exactly and they will continue doing so because its also a chain reaction when one part of the chain raises prices (from raw materials to finished goods/services) other parts of the chain will follow in raising prices as well.

Consumers are also conditioned and willing to pay higher prices right now. Something needs to collapse in order to slow the inflation cycle down.

 

[ExFlyBoy5]

Companies can raise prices without regard to what it costs to make the product. That is how they make money in inflationary periods.

Sure they can. But I was making note of the SPECIFIC example. And call it sugar or corn syrup...makes no matter to me and is irrelevant they both cost more to produce and procure.

 

[youbet]

Companies can raise prices without regard to what it costs to make the product. That is how they make money in inflationary periods.

Well, pretty much. Unless the demand curve for their product is perfectly inelastic, the quantity sold will decline as they raise prices. Eventually, further price increases will actually reduce total revenue. And all that Econ 101 crappola those college guys and gals know about.

But yes, if your product trades in a competitive marketplace, your product's price will be determined by supply and demand. Your profit will be determined by your product cost. It's usually not the other way around. If you can't keep product cost reasonably below price (to cover overhead and profit), well, bye-bye.........

 

[Chuckanut]

Well, pretty much. Unless the demand curve for their product is perfectly inelastic, the quantity sold will decline as they raise prices. Eventually, further price increases will actually reduce total revenue. And all that Econ 101 crappola those college guys and gals know about.

But yes, if your product trades in a competitive marketplace, your product's price will be determined by supply and demand. Your profit will be determined by your product cost. It's usually not the other way around. If you can't keep product cost reasonably below price (to cover overhead and profit), well, bye-bye.........

+1

Youbet, another post like the one above and I will have to add you to my list of Dangerous Radicals Who Infest This Site.

 

[Beststash]

It's pretty clear that most of the inflation is based on corporate profits. Maybe time for a temporary excess profits tax. It is not right that some corporations would profit from the current crisis while everyone else suffers.

 

[NW-Bound]

THIS!

I was there when the first huge outsourcing of tech skills occurred. Fortunately for me, I wasn't outsourced but saw the decision making up close and personal in terms of what organizations/executives did. It worked out for me because those remote/outsourced/other country skills were good at generating code, but not so good at scaling and building mission critical 24x7x365 systems. So I had lots of opportunities to help when things went to sh*t.

Fast forward to me teaching (Computer Science). One of the things I mention to students is the great advantages they have: Free compilers, cheap computer equipment, tons of free software and documentation, instant turn around on source code problems, and so on. All compared to when I learned when it was a multi-million dollar scarce resource in some big data center.

Then I mention the big disadvantage: Their competition, all around the world, has those same things. And they are HUNGRY to better themselves. I have to be careful here about what I say, but suffice it that they aren't worried about their feelings, or how their ancestors were unfairly treated, or how they didn't get the right participation trophy. No, they are out to better their lives, and are willing to work long and hard to do so.

I typically wrap that up that any job that can be done remotely over a phone or zoom or email can thus be done by someone else, in another country, at the cheapest cost for that skill. And that THEY are their real competition.

I've tried to talk my son into becoming a plumber/electrician/trade skill but so far to no avail.

This summer of 2022, my nephew, a CS major who just finished his junior year, found a job as an intern at a local firm. I don't what he did for them, or the name of the company. But I was astounded when my brother told me that his son's hourly pay when annualized was $90K/year.

Holy Moly! I know my brother, and I don't think he was BS'ing me. He said he was shocked too.

 

[jldavid47]

It's pretty clear that most of the inflation is based on corporate profits. Maybe time for a temporary excess profits tax. It is not right that some corporations would profit from the current crisis while everyone else suffers.

Pretty clear? LOL. Take off the tin-foil hat, Sparky. And even if it were true More Profits = More Taxes Paid

 

[karen1972]

This summer of 2022, my nephew, a CS major who just finished his junior year, found a job as an intern at a local firm. I don't what he did for them, or the name of the company. But I was astounded when my brother told me that his son's hourly pay when annualized was $90K/year.

Holy Moly! I know my brother, and I don't think he was BS'ing me. He said he was shocked too.

If I adjust my 1994 intern, it comes to $75k/yr so that seems about right.
Like all things it just really depends on what field/corp you get into as I've seen starting pay $40-$150k.

But the same is true for so many other jobs. My BF is a youtube expert, and in the past 4 years, he has contracted for a $70k/yr job (retail corp), a $100k/yr job (marketing firm), and a $200k/yr job (pharma).

Now as far as inflation goes, my wine at Aldis went back to $2.95 so I'm ok, it jumped up to $3.45 for a few weeks and I was thinking this inflation is getting out of control, but it's been resolved so I'm good.

 

[NW-Bound]

My son, an mechanical engineer, had the misfortune of graduating in the Great Recession. He had a tough time finding work, and had to take a job as a lab technician. Fortunately, his company recognized his work, and quickly promoted him to an engineering post. He has had several promotions in the subsequent years.

On the other hand, his younger cousins graduating in the last couple of years were getting job offers left and right. Even the nephew who was just a junior got the high pay intern job that I described, and he worked from home.

An acquaintance of my wife had to quit her IT job because of the job pressure. After a job search for a few months, she recently landed 3 job offers.

It looks like the job market is still hot. With the wage increase from the few anecdotes that I see, if that is widespread the inflation will not subside soon.

 

[copyright1997reloaded]

This summer of 2022, my nephew, a CS major who just finished his junior year, found a job as an intern at a local firm. I don't what he did for them, or the name of the company. But I was astounded when my brother told me that his son's hourly pay when annualized was $90K/year.

Holy Moly! I know my brother, and I don't think he was BS'ing me. He said he was shocked too.

Yes, this kind of thing isn't super unusual.

Salary by IT Job Role, North America (quick view)
Technology Management: $174,181
IT Sales and Marketing: $156,471
Cloud Computing: $144,533
IT Risk Management: $136,586
IT Architecture & Design: $132,941
Cyber Security: $132,163
Auditing and IT Compliance: $122,788
DevOps Engineering: $122,737
Project / Program Management: $121,666
Business Intelligence & Data Analytics: $119,321
Programming & Application Development: $110,260
Networking & Telecommunications: $93,278
IT Help Desk & Technical Support: $66,652

https://www.itcareerfinder.com/brain-food/it-salaries.html

I made more in 1997 in the IT field than I do today teaching computer science. (Not that I would trade for that life again.)

 

[Beststash]

Pretty clear? LOL. Take off the tin-foil hat, Sparky. And even if it were true More Profits = More Taxes Paid

It's clear to me. Companies aren't being forced to raise prices because of inflation. They're raising prices because they can. From what I've seen most of the largest corporations have had record profits and profit margins in both '21 and '22. Profit is the money left over after a corporation pays all of its expenses - that includes labor, supply chain costs, and manufacturing costs.

Corporate taxation is another topic. When I say "windfall profit tax", I mean an additional tax above the normal tax rate similar to the excise tax that was imposed on the oil and gas industry in the early 80's.

 

[NW-Bound]

If I adjust my 1994 intern, it comes to $75k/yr so that seems about right.
Like all things it just really depends on what field/corp you get into as I've seen starting pay $40-$150k.

But the same is true for so many other jobs. My BF is a youtube expert, and in the past 4 years, he has contracted for a $70k/yr job (retail corp), a $100k/yr job (marketing firm), and a $200k/yr job (pharma).

Now as far as inflation goes, my wine at Aldis went back to $2.95 so I'm ok, it jumped up to $3.45 for a few weeks and I was thinking this inflation is getting out of control, but it's been resolved so I'm good.

Yes, this kind of thing isn't super unusual.


https://www.itcareerfinder.com/brain-food/it-salaries.html

I made more in 1997 in the IT field than I do today teaching computer science. (Not that I would trade for that life again.)

Here's the context of my earlier story about a junior-year intern making $90K.

As I said, when my son graduated in 2012, he had a tough time getting a job. He interviewed for some jobs which would have paid $65K.

Now, cumulative inflation since then runs 31%. The $65K should be $85K now, for a BSME. When a junior-year intern gets $90K, that means wage raise is running ahead of inflation.

Now, perhaps my nephew was so good that his employer was willing to pay bigger bucks. Or could it be that they simply could not find workers?

If the latter, then high wage pressure means inflation will stay high. Late last year, we read about businesses paying more for labor workers, and even offering some benefits. I don't know if this condition still persists.

My sister-in-law in her visit yesterday told the story of how difficult it was for her to get tires mounted at Costco. Said they were so busy due to lack of workers. No more walk-in accepted, and you need an appointment weeks in advance to get new tires.

 

[Montecfo]

Do we think a .75bp increase in the FED rate is baked in for November?

Yes.

 

[Montecfo]

It's pretty clear that most of the inflation is based on corporate profits. Maybe time for a temporary excess profits tax. It is not right that some corporations would profit from the current crisis while everyone else suffers.

How is that so clear?

 

[Montecfo]

It's clear to me. Companies aren't being forced to raise prices because of inflation. They're raising prices because they can. From what I've seen most of the largest corporations have had record profits and profit margins in both '21 and '22. Profit is the money left over after a corporation pays all of its expenses - that includes labor, supply chain costs, and manufacturing costs.



Corporate taxation is another topic. When I say "windfall profit tax", I mean an additional tax above the normal tax rate similar to the excise tax that was imposed on the oil and gas industry in the early 80's.

This is completely counter productive. Higher US corporate tax rates just motivate companies to leave the US, taking jobs with them.

I do agree that some businesses are raising prices because they can after long periods where they couldn't. But I do not sense this is the major driver of inflation.

But high prices can be the solution to high prices for most products.

 

[Born2Fish]

If the Fed's rate hike/tightening efforts are continued, is it possible (or likely) that many of these businesses that are flush with profits will hold/reduce employment?

Will some companies (or industries) start reporting lower profits as they have to finance production at a higher interest rate to manufacture their product?

The key is for the Fed to stay the course - right?

 

[Beststash]

This is completely counter productive. Higher US corporate tax rates just motivate companies to leave the US, taking jobs with them.

Raise the minimum tax on their foreign earnings which would reduce a corporation’s incentives to shift profits and jobs abroad

I do agree that some businesses are raising prices because they can after long periods where they couldn't. But I do not sense this is the major driver of inflation.

Big corporations can use their dominant market power to jack up prices by hiding under the cover of inflation. It excites them to the point of convulsions. Small businesses can’t set prices the way big companies can. They have to sort of swallow most those costs.

But high prices can be the solution to high prices for most products.

Sure it can but I prefer they make some sacrifices and take as good care of their consumers as they do for shareholders. The sooner these interest rate increases stop the less pain for the consumer.