Latest Inflation Numbers and Discussion

[milford]

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.

The different strategy is because they McDs are primarily franchised and In-N-Out is not. Each franchisee can set whatever price they want, although corporate will give them guidance on the pricing based on their market/area. Also once you become franchised you can forget about quality and you have to rely on branding.

 

[GenXguy]

"January wholesale prices rise more than expected, another sign of persistent inflation"

Wholesale prices rose more than expected in January, according to a Labor Department report Friday.

The report comes just days after the consumer price index showed inflation holding stubbornly higher despite Federal Reserve expectations for moderation through the year.

The producer price index, a measure of prices received by producers of domestic goods and services, rose 0.3% for the month, the biggest move since August. Economists surveyed by Dow Jones had been looking for an increase of just 0.1%. PPI fell 0.2% in December.

https://www.cnbc.com/2024/02/16/january-wholesale-prices-rise-0point3percent-more-than-expected.html

 

[Montecfo]

The full year PPI declined of course.

 

[Chuckanut]

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.

No doubt about this: If you are not using the McDonald's app, you are paying too much. But, it is confusing and, IMHO, drives me to just make a sandwich at home. Thus, I visit McD's only when on a road trip where their locations, quick service and descent cheap coffee fit well with my drive 2 hours - stop 20 minutes for rest routine. I repeat that routine over and over again until I am done driving for the day.



I also do not like the fact that their points expire.

 

[Montecfo]

Headline PCE and core PCE inflation rates both declined in January compared to December as expected.

PCE excluding food and energy (so called core PCE) was up 2.8% in January versus 2.9% for December.

Headline PCE was up 2.4% in January versus a 2.6% reading in December.

Goods inflation declined from a year ago (yes, deflation) while services prices rose enough to more than offset.

Overall good news on the inflation front.

"Key Fed inflation measure rose 0.4% in January as expected, up 2.8% from a year ago"

https://www.cnbc.com/2024/02/29/pce-inflation-january-2023-.html?__source=androidappshare

 

[GenXguy]

Headline PCE and core PCE inflation rates both declined in January compared to December as expected.

PCE excluding food and energy (so called core PCE) was up 2.8% in January versus 2.9% for December.

Headline PCE was up 2.4% in January versus a 2.6% reading in December.

Goods inflation declined from a year ago (yes, deflation) while services prices rose enough to more than offset.

Overall good news on the inflation front due to stubborn inflation.

"Key Fed inflation measure rose 0.4% in January as expected, up 2.8% from a year ago"

https://www.cnbc.com/2024/02/29/pce-inflation-january-2023-.html?__source=androidappshare

That should be "goods prices declined". That's deflation. A decline in inflation is just disinflation.

Also, "Both the headline and core measures remain ahead of the Fed’s goal for 2% annual inflation."

Rate cuts are being pushed back due to stubborn inflation.

 

[Montecfo]

I'm just glad that you now acknowledge that foods prices are declining, nosediving and probably un-skyrocketing.

 

[Gumby]

I figure someone's must be wearing out by now, so here's another.

 

[GenXguy]

I'm just glad that you now acknowledge that foods prices are declining, nosediving and probably un-skyrocketing.

I acknowledge some food prices are apparently going down for some people, I just haven't seen it. It's ironic, the only non-sale food price I had seen drop was months ago, with eggs, yet they have gone back up significantly lately.

 

[ShokWaveRider]

What's with Eggs though? I paid $3.12 this week for a dozen Extra Large, the last time I think it was $1.56! Are chickens on strike?

 

[GenXguy]

What's with Eggs though? I paid $3.12 this week for a dozen Extra Large, the last time I think it was $1.56! Are chickens on strike?

Continuing Avian bird flu outbreaks.

The store brand white large eggs are $3.99 a dozen at my local chain grocery store.

 

[Gumby]

What's with Eggs though? I paid $3.12 this week for a dozen Extra Large, the last time I think it was $1.56! Are chickens on strike?

Avian flu has not gone away entirely.
https://www.aphis.usda.gov/aphis/ou...pai-2022/2022-hpai-commercial-backyard-flocks

 

[Wile E. Coyote]

I acknowledge some food prices are apparently going down for some people, I just haven't seen it. It's ironic, the only non-sale food price I had seen drop was months ago, with eggs, yet they have gone back up significantly lately.

I have not seen anything of the sort. I live in a HCOL area.

I pay $9.99 for the Organic Pasture Raised eggs that taste like eggs. These have more than doubled since 2019.

Everything is a double or triple. In fact, almost everything I buy has at least doubled. So, it really does not matter that they think they have inflation under control (except for housing, food and fuel). The prices rose so dramatically (and are not declining); they may have stopped rising astronomically (for now).

 

[Wile E. Coyote]

Please clarify - do you mean you haven't seen food prices dropping, or you haven't seen egg prices increasing?

Where I live I have not seen food prices drop.

Gasoline dropped from $6 to closer to $4; but, they are starting to rise again.

 

[jim584672]

Walmart had Quaker Oats go from $5.68 to $4.98 and now up to $5.24. Pre-pandemic it was like around $3.28 if I remember right.

 

[GenXguy]

I have not seen anything of the sort. I live in a HCOL area.

I pay $9.99 for the Organic Pasture Raised eggs that taste like eggs. These have more than doubled since 2019.

Everything is a double or triple. In fact, almost everything I buy has at least doubled. So, it really does not matter that they think they have inflation under control (except for housing, food and fuel). The prices rose so dramatically (and are not declining); they may have stopped rising astronomically (for now).

Where I live I have not seen food prices drop.

Gasoline dropped from $6 to closer to $4; but, they are starting to rise again.

Thanks for the clarification. That sounds worse than I've seen, which is pretty bad, although gas prices are back up to about $4/gal at many gas stations.

 

[MichaelB]

Also, "Both the headline and core measures remain ahead of the Fed’s goal for 2% annual inflation."

I suspect he left that out so you’d have something to post.

Rate cuts are being pushed back due to stubborn inflation.

Your one key is off tone. Inflation is definitely not stubborn. Just the opposite. This Fed chart of 5 year core PCE shows a steady, sustained decline in the data of inflation.

If PCE inflation were to remain at this level the Fed could legitimately say it’s objective was achieved and the economy is back on course.

https://fred.stlouisfed.org/series/DPCCRV1Q225SBEA

 

[Ronstar]

....Are chickens on strike?

I don't think so, but the overall workforce is quasi-on strike. During Covid, businesses closed and workers became unemployed. Many people stayed home after businesses fired up after Covid. Job re-creation exceeded and continues to exceed available work force.

Bring in the law of Supply and Demand. Reduced workforce supply with increased workforce demand has caused an increase in business labor expense. And generally labor is business' biggest expense.

We're going to be stuck with inflation until labor workforce is restored to a level equal to demand.

I hate to get scientific about it - chickens on strike sounds more fun.

 

[MichaelB]

A reminder this thread is not to discuss individual prices. There’s another thread for that, here https://www.early-retirement.org/forums/f27/examples-of-current-inflation-add-yours-114205-54.html

 

[Surewhitey]

Continuing Avian bird flu outbreaks.

The store brand white large eggs are $3.99 a dozen at my local chain grocery store.

Store brand here is on sale, 18 for $1.99. I also got a trimmed, very tasty tri tip for $5.99/lb. I'll live on steak and eggs for those prices.

Everything else is stupid spensive...

 

[GenXguy]

I suspect he left that out so you’d have something to post.

Your one key is off tone. Inflation is definitely not stubborn. Just the opposite. This Fed chart of 5 year core PCE shows a steady, sustained decline in the data of inflation.

If PCE inflation were to remain at this level the Fed could legitimately say it’s objective was achieved and the economy is back on course.

https://fred.stlouisfed.org/series/DPCCRV1Q225SBEA

I posted about the stubborn inflation based on the article referenced by Montecfo in the post I responded to:

Officials have said in recent days that they expect to begin reversing the increases at some point this year. However, the timing and extent of the policy easing is uncertain as recent data has indicated that inflation could be more stubborn than expected.

“Hot January inflation data adds to uncertainty and pushes back rate cut expectations,” said David Alcaly, lead macroeconomic strategist at Lazard Asset Management.

 

[SecondCor521]

There was a very interesting (well, interesting to me) 538 video podcast a few weeks ago that talked about this subject. (Sorry, I don't have a link.)

They reported that people are able to emotionally absorb / get used to about half of the annual rate of inflation per year.

So if inflation is at 8% one year, the people can be OK with about half of that, so they adjust to 4% that year. The next year they absorb an additional 2%, the next year an additional 1%, etc. Maybe another way to say it is that the people who are complaining about high prices this year will complain half as loudly or half as often next year.

So I see both sides: yes, the data says it is definitely getting under control, but it was bad for a short while and people still need time to adjust to the new reality.

 

[MichaelB]

So I see both sides: yes, the data says it is definitely getting under control, but it was bad for a short while and people still need time to adjust to the new reality.

I think that’s a good observation.

 

[Qs Laptop]

T

Rate cuts are being pushed back due to stubborn inflation.

While it is true there were some back in November that thought that rates would be cut in March, they were rare. The likelihood of rate cuts has been sometime in June or July for the last 5-6 weeks now.

Here's the consensus of when the market thinks the rate cuts will happen, first graph is from February 15th, second graph is from today.







Source: https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html


As for stubborn inflation, I'm not seeing it. Of course prices are not coming down much, if at all. But as far as inflation not going away, it is on a glide path to lower rates almost every month.

 

[GenXguy]

As for stubborn inflation, I'm not seeing it. Of course prices are not coming down much, if at all. But as far as inflation not going away, it is on a glide path to lower rates almost every month.
View attachment 48690

Well, those terms come from the so-called experts on the matter.

But I noticed in your graph, both lines are well above the 2% target, so I'm still seeing stubborn inflation, and it's not dropping as quickly as it was, so that's where the concern is. The Fed has expressed concern over this as well. I don't think anyone is saying inflation is as bad as it was. Although, services inflation is still very high.

Of course prices are not coming down much, if at all.

Prices coming down would be deflation, so I don't expect to see that happen on most things. So any continued inflation will just pile on to the high prices that are already baked in.