Latest Inflation Numbers and Discussion

[MichaelB]

Doesn’t the BLS publish an annual CPI revisions report on their site somewhere?

I don’t see a report but there is a BLS web page for seasonal adjustments with explanations, methodology and lots of data, here https://www.bls.gov/cpi/seasonal-adjustment/home.htm

 

[audreyh1]

Looks like you have to contact them to get the info.

I’ll wait for Tuesday’s report, thanks.

 

[GenXguy]

It's good to see it adjusted in the right direction - down.

 

[Chuckanut]

I have been reading and listening to a few people who are working on trying to predict what’s going on with inflation and prices. The current trend seems to be this: The producers of consumer products want the price increases of the broken supply chain days to stick in the minds of consumer and become the new normal prices. Consumers along with some major retailers are resisting this.

https://www.forbes.com/sites/danpon...inues-its-purpose-leadership/?sh=548a388e4549

In another of its bold moves that underscores the company’s commitment to purpose-driven and ethical business practices, French grocery giant Carrefour has halted the sale of Pepsi products due to unacceptable price increases. The move is in addition to their late 2023 decision to physically highlight the sneaky tactic of “shrinkflation” in their grocery stores. This two-pronged approach by France’s second-largest grocer is not just a retail strategy; it's a loud message about the role of corporations in society and the importance of purpose-driven, ethical leadership.

I believe Walmart has started to pressure producers to curtail price increases and in some cases reduce prices.

https://www.reuters.com/business/re...oduct-suppliers-ask-higher-prices-2023-02-10/

But now with the cost of cardboard cases declining by 40-50%, the cost of transportation falling by 25-30% and the cost of raw materials declining significantly, "retailers like Walmart will say 'hey you already had three rounds of price hikes last year, why are you giving us another?'" said Burt Flickinger, managing director at retail consulting firm Strategic Resource Group.

Perhaps we need a buyer’s strike for a few quarters to drive home the point

 

[Fermion]

I think the high prices now to build a house (believe me, it is EXPENSIVE to build new right now) have hit lumber prices.

I had to purchase a few 2x6 8 foot boards for framing out the last part of our house build, a coffee nook area. I was shocked the boards were $6.20 each. These had been as high as $13 each just a couple years ago. I think they are actually cheaper than they were in 2018.

Kind of makes me just want to build everything out of 2x6 instead of using anything else (plywood has not come down nearly as much)

 

[CaptTom]

...But now with the cost of cardboard cases declining by 40-50%, the cost of transportation falling by 25-30% and the cost of raw materials declining significantly...

Interesting. I know the price spikes due to supply chain issues have eased, but I didn't know it was by that much.

Makes all the pundits look kinda silly screaming doom and gloom about both "inflation" and "deflation," when a lot of it was just two sides of a temporary spike.

I agree that consumers and retailers need to send a message to manufacturers that we're on to their game and won't put up with their BS any more.

Of course that won't happen. But I can dream.

 

[audreyh1]

I have been reading and listening to a few people who are working on trying to predict what’s going on with inflation and prices. The current trend seems to be this: The producers of consumer products want the price increases of the broken supply chain days to stick in the minds of consumer and become the new normal prices. Consumers along with some major retailers are resisting this.

https://www.forbes.com/sites/danpon...inues-its-purpose-leadership/?sh=548a388e4549


Perhaps we need a buyer’s strike for a few quarters to drive home the point

The Carrefour bit I believe was due to a new French law that basically requires retailers to negotiate annually and to push back. https://www.ft.com/content/752e1aa1-6818-4402-aa8f-ed01ea9ad7eb

But it also sounds like Carrefour has been on the bandwagon a long time.

 

[audreyh1]

January 2024 CPI release: https://www.bls.gov/news.release/cpi.nr0.htm

3.1% over the last 12 months. 0.3% for January.

 

[Gumby]

CPI 12/31/23 = 308.417

Annualized inflation rates (<1yr not seasonally adjusted)

Last 1 year > + 3.09%
Last 9 mos > + 2.22%
Last 6 mos > + 1.78%
Last 3 mos > + 0.97%

I'm happy with the trend. The average annual inflation rate over the past 20 years has been 2.6%, and I expect we will soon be there.



Topline CPI last 14 months

Dec 296.797
Jan 299.170
Feb 300.840
Mar 301.836
Apr 303.363
May 304.127
Jun 305.109
Jul 305.691
Aug 307.026
Sep 307.789
Oct 307.671
Nov 307.051
Dec 306.746
Jan 308.417

 

[ShokWaveRider]

Does this mean CD Rates will remain good?

 

[audreyh1]

Does this mean CD Rates will remain good?

Based on the T-Bill rates which have been creeping back up, it’s possible that some CDs will remain good. The online banks have recently been dropping CD rates aggressively however, and I don’t expect them to turn around and raise again. The non-callable brokered CDs have been even lower for a while. You might be better off buying Treasuries.

 

[Car-Guy]

Does this mean CD Rates will remain good?

Steady or rise slightly, IMO. Noticed a couple 1yr at Schwab went up a tenth or so in the past few days. Now at 5%, again. I thought we were done with any upward movement over the past few months, but now I'm not so sure. In any case, I don't see any dramatic movement for a while (months).

 

[audreyh1]

Steady or rise slightly. Noticed a couple of 1yr at Schwab went up a tenth or so in the past few days. Now at 5%, again.

Well that’s good to see as long as they aren’t callable.

 

[latexman]

That trend suggests inflation is under control!

 

[Car-Guy]

Well that’s good to see as long as they aren’t callable.

They are not.

 

[Winemaker]

That trend suggests inflation is under control!

It did come in a bit hotter than expected, that's why the market is down today. Rates will remain unchanged for now, is how I see it.

 

[GenXguy]

Prices rose more than expected. Fed expected to hold off rate cuts. This inflation is a sticky thing to get under control. Still well above the 2% Y/Y target.

 

[Montecfo]

Annual CPI declined from December, so this seems like much ado about nothing.

But good opportunity to possibly lock in somewhat higher yield than yesterday.

 

[MichaelB]

Inflation is both low and stable enough now to allow the Fed to expand its focus to the other mandate, employment, along with its Raison d'être, which is the stability of the banking system.

Employment data is mixed, so the Fed path is ambiguous despite market certainty of near term interest rate reductions. We could soon see a relaxing of QT, which has quietly reduced the Fed balance by more than $1T.

 

[MichaelB]

But good opportunity to possibly lock in somewhat higher yield than yesterday.

This was my first thought this morning, but bond prices haven’t moved much. The bond market seems to think this isn’t a big deal.

 

[Montecfo]

Yeah MichaelB I am looking more are closed end funds already at discount and those have moved down nicely.

 

[yhoomajor]

This was my first thought this morning, but bond prices haven’t moved much. The bond market seems to think this isn’t a big deal.

US 10 yr yield- spiked 14 basis points today.

 

[audreyh1]

T-Bills have moved up quite a bit in the last couple of weeks including some today.

The 26-week T-bill which auctioned at 5.199% 2 weeks ago is now at 5.354%, higher than it has been for a while.

 

[Wile E. Coyote]

Like any insurance product, home insurers price their product based on what they would have to pay out for loss. So if my home value is up, I expect my insurance cost to be up proportionally, regardless of any other factor like an increase in the risk.

And, seriously, if you live in a place where your costs regularly exceed those experienced by people in other places, perhaps it's time to move. What you paid 20 years ago for your house is a sunk cost and should not play a factor in that decision, because it doesn't sound to me as if that loss will ever be recouped. Find a place with costs more closely aligned to your actual current means and move there. You may have to downsize or rent an apartment, but you need to staunch the ongoing hemorrhaging.

I think it is not the home value. If you look at the break out of land value versus structure value the land value rises over time and the structure value decreases. However, most people have "replacement cost" on their insurance (what it costs to rebuild today). So, what you have is wage and building supply increases affecting your home insurance (cost, not value).

 

[Route246]

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.

Agree. Part of normalization also includes weak businesses going away and strong businesses taking up the slack giving them pricing power.

That said, two giants have different pricing models, McDonalds is an example of trying to absorb as much of the consumer surplus (area under the curve) as possible by charging $6.50 for a fish sandwich while providing "deals" on their app which greatly reduces labor cost for those who will not pay for that fish sandwich. It is a curious game of chicken and anyone who looks at a McDonalds menu is instantly confused.

Go into In-N-Out and notice the difference in their menus and pricing. In-N-Out's menu is simple, self-evident and "reasonable" while McDonalds' menu is complex, unreadable and laden with serious pricing anomalies. It is two different strategies and is no wonder that McDonalds is struggling.