Latest Inflation Numbers and Discussion

[Montecfo]

Recession remains my base case. It will happen whether Fed likes it or not.

But it seems to be Fed base case now also.

 

[jim584672]

Recession remains my base case. It will happen whether Fed likes it or not.

But it seems to be Fed base case now also.

I've been hearing this for a year, still no recession.

 

[JoeWras]

I think the " home repairs", "grass cutting", "tree trimmers" part of the economy is rooted in just plain old greed. My neighbor got quotes to have his tree trimmed; his regular trimmer wasn't answering his phone. Bids went for $2400, $1600, and $1200. A week later, his regular guy called, explained he was getting radiation treatments, and called and said he'd be out and would charge his usual $600.

It absolutely is. But that does not make it exempt from being part of inflation.

A little recession would be good to root out these greed loving companies and bring prices back in line.

Oh, and the same can be said for used car dealers.

 

[Chuckanut]

In some areas where government institutions are subsidizing consumer purchases (think heat-pumps and other carbon reducing tech) I think many manufacturers and installers are attempting to redirect much of the subsidies to themselves by upping the purchase and installation prices.

 

[audreyh1]

I've been hearing this for a year, still no recession.

This has been a very long anticipated recession.

 

[USGrant1962]

Don't forget that we did have two quarters of negative GDP growth last year, but that wasn't a "declared" recession.

 

[pb4uski]

^^^ because there is more to it than simply two consecutive quarters of negative GDP growth.

The last 4 quarters have been between 2.1% to 2.7%.

 

[MichaelB]

Don't forget that we did have two quarters of negative GDP growth last year, but that wasn't a "declared" recession.

It wasn’t an undeclared recession either. Employment growth was strong throughout the entire year and strongest during the months of negative GDP growth. The Employment Cost Index rose each quarter and household income increase monthly as well. These are things that typically don’t happen during recessions.

The Dallas Fed published a report explaining this https://www.dallasfed.org/research/economics/2022/0802/

The two quarters of declining GDP definition is a rule of thumb that does not officially define a recession. The National Bureau of Economic Research (NBER) Business-Cycle Dating Committee, which certifies and dates U.S. business cycles, defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

 

[Sunset]

A stray thought that occurred to me recently is that sometimes what we automatically ascribe to inflation is actually due to something else.

I was looking at my car insurance bills, which have increased significantly in recent years, and just put it up to inflation due to repair costs.

But then I started looking at my statements more carefully, and noticed the part where they had started using my age as a factor in determining the costs. That made a lot of sense, since I'm definitely in that age range now.

We could probably have a new thread: pricing on old age - discrimination or actual need.

 

[ShokWaveRider]

We could probably have a new thread: pricing on old age - discrimination or actual need.

There was a thread of one's actual inflation rate and I agree, our actual overall inflation for our small household is nowhere near as high as posted by the powers that be. In fact it is down overall.

Now if I cherry pick Electricity and Insurance, of course it looks higher, but those go up every year regardless.

 

[Montecfo]

I've been hearing this for a year, still no recession.

Expect to keep hearing it. We are just now hitting average time to recession after yield curve inversion. And the economy has a multi trillion dollar tailwind of deficit spending for the Fed to overcome.

Also, JPow just said that soft landing was not the base case.

 

[Montecfo]

I think the " home repairs", "grass cutting", "tree trimmers" part of the economy is rooted in just plain old greed. My neighbor got quotes to have his tree trimmed; his regular trimmer wasn't answering his phone. Bids went for $2400, $1600, and $1200. A week later, his regular guy called, explained he was getting radiation treatments, and called and said he'd be out and would charge his usual $600.

Opportunistic I would say. But it is nothing new. Bids have varied widely as far back as I can remember.

Also varies widely by neighborhood. Again, opportunism.

 

[tmm99]

How did they bring down inflation in the 80s?

 

[MichaelB]

How did they bring down inflation in the 80s?

By causing lots of economic pain. Interest rates rose until a recession took over, causing unemployment of over 10%. It took almost 10 years for employment to fully recover.

 

[audreyh1]

By causing lots of economic pain. Interest rates rose until a recession took over, causing unemployment of over 10%. It took almost 10 years for employment to fully recover.

Looking back, I must have been very lucky to get a job fresh out of college in 1981 (graduated Dec 1980). But at the time I was completely oblivious to all economic goings on.

 

[Montecfo]

Looking back, I must have been very lucky to get a job fresh out of college in 1981 (graduated Dec 1980). But at the time I was completely oblivious to all economic goings on.

Well the economy was still pretty good in Texas at that time.

 

[CaptTom]

There was a thread of one's actual inflation rate and I agree, our actual overall inflation for our small household is nowhere near as high as posted by the powers that be. In fact it is down overall...

Wow. You seem to have won the lottery. I'm curious how you managed this, with both supermarket and restaurant prices through the roof. What major expenses are in your budget which went down to compensate for those?

I should add that, yes, I know individual anecdotes are irrelevant. Inflation has to be some sort of average, across a broad basket of goods and services.

For example, if my transmission fails and I needed a new transmission (or a new vehicle), that would send my "personal inflation rate" way up for this year. Likewise if I stopped traveling for a year, my rate would be much lower. I don't think anyone would equate those things to "the" inflation rate. I would not be a statistically representative example.

 

[11522914]

For example, if my transmission fails and I needed a new transmission (or a new vehicle), that would send my "personal inflation rate" way up for this year.

My total living expenses for 2021 & 2022 were virtually the same and the lowest 2 years since I retired 4 3/4 years ago. Yet, I didn't feel anything changed much in my standard of living. I attribute it to shopping wisely due to increased sales prices and buying in bulk when prices were good, raising deductibles to reduce insurance costs, reduced cell phone costs, increased CC rewards through excellent offers and using those rewards for several awesome trips, negotiations with certain providers for lower costs and eating out less, a lot less. Found out cooking at home is much cheaper and quite enjoyable. We also had very low medical costs.

I was on track through the middle of September to match 2022 expenses.
Then I went ahead and spent ~14k to get the house exterior repaired and painted, the wood deck stained and some interior painting.

So I agree, my personal inflation rate is much higher this year.

 

[CaptTom]

...I attribute it to shopping wisely due to increased sales prices and buying in bulk when prices were good, raising deductibles to reduce insurance costs, reduced cell phone costs, increased CC rewards through excellent offers and using those rewards for several awesome trips, negotiations with certain providers for lower costs and eating out less, a lot less. Found out cooking at home is much cheaper and quite enjoyable. We also had very low medical costs...

Nice!! It's amazing how easy it is to tighten up the budget a bit once you give it a try. And of course there's an element of luck. Low medical bills one year, but then a bunch of home maintenance the next would distort your numbers.

To me, though, that's not inflation. I never heard, and would never advocate, the concept of "personal inflation." Inflation, to me, is what the economy at some scale is doing. It can be looked at by region, but not by individual. There has to be some averaging, the way I've always heard the word used.

 

[RobLJ]

Our living expenses have not moved up much, other than beer prices and steak (which I have once a month). I have beer multiple times a day. Housing, used car, and car prices moved the inflation rate most--most of us here have houses and cars.
We on the blog are not representative of most in the US, which the inflation rate represents. It is true that my inflation rate went up since we hiked the Tour du Mont Blanc and both air and housing costs went up for it, since all the people who booked before/1st year of COVID were cashing in their unused funds. 2-3 times the normal numbers of people were on the trail as opposed to 5 years ago.
But I'm a victim of inflation! (Not). Most of our costs are close to fixed costs; have solar, an EV and a PHEV. Groceries are the main flux, but minimal. I'm lucky as hell.

 

[RobLJ]

How did they bring down inflation in the 80s?

Volker raised rates to 16%. That's a lot of economic pain; he reduced rates just before Reagan's re-election (edit: due to the recession, I should clarify, although the raises probably contributed to Carter's loss of re-election and the decreases almost surely led to Reagan's re-election). Never underestimate how the Fed can mess you up, when you are young (I was young). But 16% rates will reduce inflation, eventually, as they did. Tall Paul.It took the Fed quite a while to crush inflation, but crush it Paul Volker did.

 

[RobLJ]

In grad school, I bought a 1920's bungalow for 50k in Riverside because the woman selling it had inherited it and my beard reminded her of her nephew. Yes, that was the key; she had inherited two old houses from her aunts dying that year. We were renting the house next door, and I talked to her while she was clipping the 60 year old roses, by the way, which is just random chance, so she asked me if I wanted to buy it. DW laughs about it; I just thought she was some nice old woman who reminded me of my grandmother, so as a Southerner I was just making chit-chat even though I'm an introvert.
The rate should have been 15% but because Riverside CA had approved a mall area there downtown (by the Mission Inn), then investors bought all the old downtown area before the project was scrapped, they subsidized rates, so my rate was "only" 10%. When we sold, I had to give Riverside 1/2 of the profits, which was OK. We bought in 1982 or 3; it's so long ago I can't remember the exact year.

We have been in a low interest environment for so long, it is interesting, but I do think the economic pressures will bring the inflation/interest rates down, if only just due to demographics. I will probably be wrong about inflation and interest rates--even the professional economists are almost always wrong unless the rates are flatlining.

 

[Montecfo]

Volker raised rates to 16%. That's a lot of economic pain; he reduced rates just before Reagan's re-election (edit: due to the recession, I should clarify, although the raises probably contributed to Carter's loss of re-election and the decreases almost surely led to Reagan's re-election). Never underestimate how the Fed can mess you up, when you are young (I was young). But 16% rates will reduce inflation, eventually, as they did. Tall Paul.It took the Fed quite a while to crush inflation, but crush it Paul Volker did.

Trouble was there were earlier abortive attempts. That is why it took so long.

 

[Chuckanut]

To me, though, that's not inflation. I never heard, and would never advocate, the concept of "personal inflation." Inflation, to me, is what the economy at some scale is doing. It can be looked at by region, but not by individual. There has to be some averaging, the way I've always heard the word used.

Thank you for saying that. I am in agreement. It reminds me of those who when discussing controversial issues talk about “your personal truth”. Opinions, life experiences, and such can be very personal. And they are relevant in many if not most discussions. But, just because the local Zippy Mart sold me stale doughnuts several times last year, does not mean all Zippy Mart owners are crooks and scoundrels.

 

[Bigdawg]

Thank you for saying that. I am in agreement. It reminds me of those who when discussing controversial issues talk about “your personal truth”. Opinions, life experiences, and such can be very personal. And they are relevant in many if not most discussions. But, just because the local Zippy Mart sold me stale doughnuts several times last year, does not mean all Zippy Mart owners are crooks and scoundrels.

CaptTom and Chuck, Both can be true. I pay attention to THE inflation rate and I also monitor MY personal inflation rate. Just like I monitor the overall stock market AND my personal portfolio. Both are important and relevant, but for different reasons.