Latest Inflation Numbers and Discussion

[Closet_Gamer]

Great thread ... and of course like so many other things, life is 10% what happens and 90% how we repond to it.

The rising rates that may cause a (painful but I think necessary) recession are also what is fueling our other thread on great bond buying opportunitiies.

Personally, I hope the yield curve normalizes by raising long rates rather than lowering short ones. I don't know if we need 5.5% yields on 6 month CDs but I do think getting 10 and 30 year debt solidly north of 6% would create a healthier economy.

It would also allow young people to build retirement portfolios rooted in a bit more security and require less stock market exposure. Who among doesn't wish for a minute to be teleported back to the 1980s and given a chance to lock in 30 year bonds at those rates?

I always remember that in the mid-90s DW's wealthy aunt sent a bit of money out into the family. We got a surprise $5k ... which we put into a 5 year CD earning 6.75% and that became the first brick in our emergency fund. I hope my kids get similar opportuntities.

 

[CaptTom]

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.

You're right, of course. But if I happened to pick a stock from a company which then goes bankrupt, I wouldn't call it a stock market crash. Just a bad personal decision. Likewise, if I pinch pennies and spend less this year than last year, it's not deflation, it's because I started pinching pennies. My personal budget is no indicator of inflation.

On a side note, inflation does have me spending less in some ways. I look at the price of some things (e.g.; snack foods) in the supermarket and say "F You! I'll eat something else!"

 

[jldavid47]

Volker raised rates to 16%. That's a lot of economic pain; he reduced rates just before Reagan's re-election...

You might want to check the actual data before posting a statement like that.

The Fed Funds rate peaked in June, 1981 then declined into February, 1983. Then a series of rate hikes occurred into August, 1984 before declining again.

https://fred.stlouisfed.org/series/fedfunds

 

[Bigdawg]

On a side note, inflation does have me spending less in some ways. I look at the price of some things (e.g.; snack foods) in the supermarket and say "F You! I'll eat something else!"

You are making my point. Inflation in mortgage rates. Not mine. I'm 5 years into a 2.87%. Used or new cars? A 3 yr old and a one yr old both paid off. Gas? Got rid of the diesel BMW (was $6/gal) and paid $2.86 today with the VW gas. Food, lodging and transpo make up 80% of the avg persons budget. Stated inflation was up 3.7% for the 12 months ending in Sept. Not mine. So, yes. I do care about MY inflation but also the national (and international) inflation rate(s). Real estate is local and inflation is too.

 

[Montecfo]

I think there are folks who kind of want the inflation drama and revel in it a bit.

Most of us are rightly concerned about it but understand that our plans are solid enough that inflation will not derail them. Plus we make smart alternative choices.

I always thought people conditioned themselves to complain about the weather or traffic by hearing their parents or grandparents doing so.

It can be kind of cultural to seek the therapy of voicing complaints about everyday things.

 

[JoeWras]

For those of us who had unavoidable inflation hit them hard (for me: roof replacement, water heater replacement, driveway repair), it seems like "therapy" from others to gleefully recount their non-inflation.

Oh yes, I planned for those events. I just didn't expect them to be 160% of the plan I made 4 years ago.

 

[CaptTom]

Sure, we all love to complain about the weather, inflation and other things we have no control over. But that's just idle chit-chat.

To me, what justifies serious discussion is the dichotomy I see between reality and the "official" numbers people bat around. Believing those numbers can lead to action, at both the personal and governmental levels. I think it's worth pointing out the discrepancies. An educated electorate and all that.

 

[Bigdawg]

Sure, we all love to complain about the weather, inflation and other things we have no control over. But that's just idle chit-chat.

To me, what justifies serious discussion is the dichotomy I see between reality and the "official" numbers people bat around. Believing those numbers can lead to action, at both the personal and governmental levels. I think it's worth pointing out the discrepancies. An educated electorate and all that.

appreciate your levelheaded approach. There is another thread on examples of high (and low) inflation items. Although my current personal inflation is low, I know we will eventually get bitten by high prices. 12+ years from now we will need a new HVAC. 20+ years from now we will need a new roof. Thankfully DW and I have multiple COLA pensions. I respect the effort and concern for those folks who don't have those reserves and have to find a way to fund an unknown inflation threat.

 

[MichaelB]

It’s not possible to reconcile one’s personal experience and anecdotes with the published CPI numbers. CPI is not a measure of individual price changes, it is the change in price level vs economic activity for the entire economy. Prices for individual goods and services are continually changing as producers and retailers seek to maximize profit and consumers look to maximize purchasing power. This isn’t inflation, it’s normal economic activity.

The primary measures of inflation like CPI and PCE, are actually quite good at capturing and measuring inflation over time, but these numbers do not make good “snapshot views” or point in time measures. Like double entry accounting, a mistake would show in another account. If inflation were understated, as some here suggest, that would mean real economic activity is also overstated, which would mean employment and wage data are also overstated. This would show up in unemployment numbers, which are not survey based, or payroll tax collections, with are tracked and reported daily. Those accounts, however, are very much in sync with the inflation reports.

 

[W2R]

For those of us who had unavoidable inflation hit them hard (for me: roof replacement, water heater replacement, driveway repair), it seems like "therapy" from others to gleefully recount their non-inflation.

Oh yes, I planned for those events. I just didn't expect them to be 160% of the plan I made 4 years ago.

Wow! What a year it has been for you. I got both my roof and water heater replaced this year, but didn't have to have my driveway repaired. Guess I was luckier than I thought! Know that at least one reader here understands, and hopes next year has lots fewer "lumpy" expenses than this year did.

 

[Dtail]

in the past 2 years, have replaced the oven, hot water heater, pool heater, refrigerator and washer dryer. This can be an issue when appliances are all original from 16 years ago.

 

[Dash man]

Wow! What a year it has been for you. I got both my roof and water heater replaced this year, but didn't have to have my driveway repaired. Guess I was luckier than I thought! Know that at least one reader here understands, and hopes next year has lots fewer "lumpy" expenses than this year did.

I was shocked at the cost of replacing a roof this year, and even more shocked at the estimates I’m receiving for replacing the siding. At least my solar installation was lower than expected.

 

[Fermion]

I was shocked at the cost of replacing a roof this year, and even more shocked at the estimates I’m receiving for replacing the siding. At least my solar installation was lower than expected.

The biggest advantage of building your own house (really building, not just hiring a contractor) is that you are no longer shocked by the cost of anything. You become numb and opening the wallet becomes muscle memory.

 

[W2R]

I was shocked at the cost of replacing a roof this year, and even more shocked at the estimates I’m receiving for replacing the siding. At least my solar installation was lower than expected.

Sympathy headed your way from New Orleans! These "lumpy" expenses are harder to cope with, when even small things like a gallon of gas or a bag of snacks, cost so much these days.

I think I'm done with "lumpy expenses" for this year, but who knows what surprises life may have in store for us at any time.

in the past 2 years, have replaced the oven, hot water heater, pool heater, refrigerator and washer dryer. This can be an issue when appliances are all original from 16 years ago.

Ouch! I remember buying all new appliances when I bought the house, back in 2015. Even then it was like a punch in the gut! Oh well, at least you won't need any more new appliances for quite a few years.

 

[Breedlove]

Oh we know the feeling , we decided to put a concrete slab down behind the house . No more rotting decks . A load of concrete last March 1500.00 now 1725.00.. The answer everything is going up. The crew that did the job was saying that business is falling off quickly. Matter of fact they were asking if there was anything else they could do like power washing , hauling dead trees . Etc.

 

[Chuckanut]

Oh we know the feeling , we decided to put a concrete slab down behind the house . No more rotting decks . A load of concrete last March 1500.00 now 1725.00.. The answer everything is going up. The crew that did the job was saying that business is falling off quickly. Matter of fact they were asking if there was anything else they could do like power washing , hauling dead trees . Etc.

I saw a graph the other day that showed that the demand for trucking is falling. The author claimed the use of trucking to move goods is a leading indicator and thus a predictor of a recession in the not too distant future. I don’t know.

Here’s an article about the falling demand for trucking:

https://www.businessinsider.com/fre...rtions-trucking-jobs-labor-demand-2023-8?op=1

 

[Gumby]

.... business is falling off quickly...

.... demand for trucking is falling. ....

Enough of that and prices eventually will drop in response.

 

[Markola]

Rents are coming down in many markets. https://www.businessinsider.com/rea...ments-affordability-price-outlook-2023-9?op=1

 

[Koolau]

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.

Yeah, I've got a bunch of stuff that needs done in the condo and I'm sorta waiting for a recession to find a less expensive handyman to do some w*rk for me that I can no longer do. God forgive me - even though I'm actually not "hoping" for a recession. YMMV

 

[Koolau]

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

Yeah, if you don't "declare" it, I guess it didn't happen. Pretty good trick. I'm sure other Pols were taking notes on that little slight-of-hand.

 

[Koolau]

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.

I still give thanks that Megacorp was in a business where they could keep me on even though the inflation was raging and the economy was in the dumper. I was blessed, indeed. YMMV

 

[Koolau]

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.

Yeah, anything where you "must" buy something will send your personal inflation rate to the moon. It's "easy" to cut back on eating out but not so easy to wait to repair a broken drain pipe. (I know form personal experience on the latter.) YMMV

 

[Koolau]

It’s not possible to reconcile one’s personal experience and anecdotes with the published CPI numbers. CPI is not a measure of individual price changes, it is the change in price level vs economic activity for the entire economy. Prices for individual goods and services are continually changing as producers and retailers seek to maximize profit and consumers look to maximize purchasing power. This isn’t inflation, it’s normal economic activity.

The primary measures of inflation like CPI and PCE, are actually quite good at capturing and measuring inflation over time, but these numbers do not make good “snapshot views” or point in time measures. Like double entry accounting, a mistake would show in another account. If inflation were understated, as some here suggest, that would mean real economic activity is also overstated, which would mean employment and wage data are also overstated. This would show up in unemployment numbers, which are not survey based, or payroll tax collections, with are tracked and reported daily. Those accounts, however, are very much in sync with the inflation reports.

I suppose you are right about all this. Having said that, some areas, while they contribute to the overall numbers, simply do not match the "average" numbers. I live in such an area. For many reasons, our inflation in the Islands has been higher and that is not unusual for us - even in "stable times."

One bright spot: Last evening, I bought gas from Costco and only paid 4.20 (yeah, I know, but I really do mean $4.20, not, well, you know.) That's 20 cents lower than my last fill up in May. Of course the vehicle sat for 4 months except one of our pastors drove it for me once a month. We've been driving it for 3 weeks, so it was down to 1/4 tank. Still, it cost $50+ to fill the tank. BUT that's better than most of the other stations in town which are charging $4.60 to $4.90.

So, I guess I'll consider that as my Inflation "Bright Spot" for this month. Otherwise, everything else is still on a tear, price wise. Of course, YMMV.

 

[MichaelB]

There was a very good interview with Chicago Fed President Austan Goolsbee in todays FT. It’s behind a paywall, here. He didn’t mince words.

He cautioned against tying forthcoming monetary policy decisions to a narrow set of data.

“There is a lot saying that inflation is trending down compared with what it has been and that’s what we want,” he said. “It’s undeniable this is a trend. It wasn’t a one-month blip . . . we have to hope and keep an eye out to make sure that continues.”

But he was much more sanguine about the jobs data, saying that large monthly gains while wage growth was slowing was most likely an indicator of improving labour supply rather than a cause for concern.

However, he said, the Fed had been “rapidly approaching” a point where the policy debate was shifting away from how high to raise interest rates to how long they needed to be maintained at this level. Nothing in the data in the past six weeks had changed that.

 

[JoeWras]

I think a little "maintaining the level" would be a very good thing.

The rates aren't crazy now. People got used to free money. 2009 reinforced the idea that after a quick raise, the rates will crash to zero again. Really, we don't want that because it is bad news. We want stability, then a slow drift down to balance inflation in the 2 to 3 percent range.