Consumer prices rose 8.5% in March – highest since 1981

https://www.cnbc.com/2022/04/12/consumer-prices-rose-8point5percent-in-march-slightly-hotter-than-expected.html

by arbuge • 4 years ago

424 678 4 years ago

Fuel[1] accounted for a substantial portion of the overall lift, we've actually come in under expected inflation which is why you're seeing markets up today.

Gasoline, unleaded regular - +48.8% (+20.1% over last month)

[1]https://www.bls.gov/news.release/cpi.nr0.htm

chasd00• 4 years ago

Gasoline, unleaded regular - +48.8% (+20.1% over last month)

i called the bottom on oil during the worst of the pandemic but did nothing about it :(

EDIT: i also sold apple at $10/share, i am not good at trading hah

taylodl• 4 years ago

Yeah but that headline doesn't generate as many clicks! War increases inflation! News at 11:00!

typeofhuman9• 4 years ago

Inflation was steadily rising before Russia invaded Ukraine.

Also a US President who is antithetical to the oil/lng industry will drive up the price of oil through the futures market. Demand is still high, Biden has constrained supply, forcing futures prices to go up. Trump was bullish on oil/lng, with the same demand and increased supply, prices went down.

zaroth12• 4 years ago

The market is “up” mostly because the USD is down, not because real values are rising.

USD value is going to be hit extremely hard as it loses reserve currency status. The days of the petrodollar have come to an end. It will be a typical “closing the barn doors after the horses have bolted” response which will only make things worse.

This is actively happening now, the big holders are just trying to do it quietly to get out as much as possible before the US tries to shut it down and USD fully tanks.

As this happens the market valuations will appear to rise in nominal values. If you value the market in gallons of unleaded or dozens of eggs however you will see a different story. There’s only so many years the politicians can claim it’s a “supply shock”.

JumpCrisscross17• 4 years ago

the USD is down

The dollar is approaching a 3-year high [1]. It is up close to 9% over the past year.

[1] https://www.wsj.com/market-data/quotes/index/DXY/

mpalczewski3• 4 years ago

USD is not down. The dxy index has been going up all year. Inflation is a global phenomenon.

xtian• 4 years ago

I 100% agree, but is there anything that can be done if you aren’t a big holder?

antattack• 4 years ago

Due to Covid many of us probably drive a lot less (working from home) so gasoline prices are not a big deal. However people in service sector jobs are likely affected by fuel costs.

typeofhuman9• 4 years ago

Everything you consume is delivered by an 18-wheeler that requires heaps of fuel.

naoqj• 4 years ago

Covid? What’s that?

tomatowurst6• 4 years ago

this really is a "let them eat cake" sort of attitude.

its really shocking just how far detached most HNers are from logistics that is hidden. literally the comfort we enjoy is run by people who don't work from home, who are most impacted by prices.

nightski5• 4 years ago

Hmm, CPI rose to 8.5% instead of the 8.4% estimate. Not sure where you are getting "under expected" from. Also, inflation isn't necessarily bad for markets. What markets don't like is if the fed has to respond.

odonnellryan2• 4 years ago

They are probably referring to core inflation... also fuel contributed massively to inflation in March, which was expected, but not expected to stay high forever.

bachmeier• 4 years ago

The CPI includes energy prices.

matwood4• 4 years ago

YoY which everyone knew was going to be high. Core month to month shows inflation is slowing.

I think a lot of people have this doom fantasy of runaway inflation in the US, but it's likely to slow down quicker than people realize. Monetary supply is tightening (mortgage rates touching 5% now), and the supply chain is slowly getting back to normal. Heck, even gas prices have reversed where I am.

tdehnel• 4 years ago

Is the implication “it’s not that bad”?

I’m sorry but I disagree. Do you have an explanation for why the increased price of gasoline won’t just infect prices for all the goods and services which depend on it?

Any business which needs to move people or goods over the road, or runs equipment/vehicles on gas is going to be affected. Not to mention the fact that consumers will have less disposable income to spend on things. And businesses may have to pay their workers more to account for that loss of disposable income.

Edit: see “wage price spiral”

ceejayoz• 4 years ago

Do you have an explanation for why the increased price of gasoline won’t just infect prices for all the goods and services which depend on it?

It will, but the price of oil has already dropped substantially from the recent peak, and probably will continue to do so.

dahart• 4 years ago

Do you have an explanation for why the increased price of gasoline won’t just infect prices for all the goods and services which depend on it?

The price of gas is known to be volatile, it has gone up in the past without bringing the entire economy along with it, and also has gone down many times without making everything cheaper. The prices of retail goods don’t adjust instantaneously, and gas may well be below what it is now by this time next year. The price of gas might be a small minority fraction of the cost of producing most retail goods as well, so there’s no reason to assume that consumers will tolerate compensatory price hikes that blame gas while the price is falling.

This is the reason that the US Department of Labor excludes the price of gas as one of the core indicators of inflation, because the price of gas does not always reflect inflation, and frequently changes for other reasons independent of inflation.

iso12102• 4 years ago

Today's US gas price is about $4/gal [0], about 15% up on 2011[1], or about 1% per year.

That doesn't sound like rampant inflation, it does sound like a market correction.

Now in reality gas prices globally is high because of Ukraine and Russia, which hides the massive gas deflation over the last decade, but if 2011 businesses could afford gas at $3.50, I'm not sure why 2022 businesses can't afford it at $4. Wages are up about 30% in the same time period (well by 2020) [2]

[0] https://gasprices.aaa.com/

[1] https://business.time.com/2011/12/20/2011-is-priciest-year-e...

[2] https://www.ssa.gov/oact/cola/awidevelop.html

lottin7• 4 years ago

The implication is not that it isn't bad, but that it is a supply and demand issue rather than a monetary issue.

bko2• 4 years ago

Usually if official statistics and what you see are misaligned, its the official statistics that are wrong.

What's your general impression regarding price levels in the US? How much has your grocery bill gone up? How about rent? What about restaurant bills? Services like haircuts? Whats your credit card bill look like, excluding gasoline?

Personally I have seen prices go up well above 10%. Inflation metrics are complicated and there is a huge incentive to keep the official numbers down as they affect trillions in spending in terms of social security and other numbers tied to official inflation.

To put this number in context, Congress gave themselves a 21% increase in House office budgets to account for inflation

JumpCrisscross17• 4 years ago

Congress gave themselves a 21% increase in House office budgets to account for inflation

For staffers. Not members of Congress [1]. Never officially tied to inflation.

[1] https://www.factcheck.org/2022/03/spending-bill-includes-pay...

tomatowurst6• 4 years ago

Across the board? At least 25%, 50% in some sectors like foods.

They keep, and some people on HN, keep calling it a conspiracy when you mention actual inflation is a lot higher than reported, my question is what is this crowd's reasoning? Are they so well off that they are not able to see the rapid rise in prices because they use maids to do the grocery shopping?

Why is it a conspiracy to suggest actual inflation is far above and beyond what is reported by the Feds, who are stuck between a rock and a hard place when it comes to controlling the money markets now?

If they raise rates to match actual inflation they are going to cause the asset bubble to burst. If they don't raise rates than they are going to find hyperinflation that will certainly damage USD's "exorbitant privilege"

ajross5• 4 years ago

Usually if official statistics and what you see are misaligned, its the official statistics that are wrong.

"What you see" is literally what's being measured, though. Typical prices for typical commodities grew less than expected. The outlier is one particular commodity (petroleum) which is experiencing an external shock.

Sanctions on Russia are poorly explained as "inflation", obviously.

Personally I have seen prices go up well above 10%.

On what? Does that not match up with the data in the report? If so, document it! You'll be internet famous, if nothing else.

long_time_gone7• 4 years ago

Personally I have seen prices go up well above 10%.

For what goods/services? Have you been tracking the same goods/services over the past year to make this analysis?

Inflation metrics are complicated and there is a huge incentive to keep the official numbers down as they affect trillions in spending in terms of social security and other numbers tied to official inflation.

You haven't provided anything aside from personal anecdote (without any actual data to support it). Your understanding is built entirely on your own experience, the official numbers are built on a transparent basket of goods that is meant to represent the entire country.

For me, housing costs (most people's largest expense) hasn't changed in 3 years because I have a 30-year mortgage. Does that mean that the 5% CPU measure of housing expenses is false? Of course not.

TameAntelope6• 4 years ago

Going with your experiences over soundly collected data is a very risky move prone to bias and discrimination (only noticing what affects people like you).

Data, when reported by a reputable organization, is going to be substantially more predictive.

mywittyname3• 4 years ago

Usually if official statistics and what you see are misaligned, its the official statistics that are wrong.

See, I think the opposite. If your numbers differ from the US gov. official ones, you're either doing something wrong, or measuring a different thing.

The BLS in particular aims for consistency in reporting. They ask people what they bought, and for how much, then they go around collecting real world pricing information about products.

No other entity is putting that much work and effort into collecting pricing information. So anyone reporting different numbers is less accurate than the official BLS ones.

Even people who complain that they under-report "real" inflation use BLS numbers, but they change the weights on the various categories such that categories experiencing the highest inflation are also weight the highest.

ChrisLomont8• 4 years ago

Usually if official statistics and what you see are misaligned, its the official statistics that are wrong.

Nope, a few people's unmeasured selection bias is no where near as accurate as a professional methodology done like the official numbers.

there is a huge incentive to keep the official numbers down

Also false. If the numbers were gamed, there would be significant arbitrage employed in markets to extract value from the lie. There are ample papers analyzing this, and no one has found a way to do it, since the numbers are the best possible.

Also the numbers are done in many places, from Goldman Sachs, to the Billion Prices project at MIT, to the Bureau of labor and Statistics, and so on.

If you really think the numbers are gamed, do this experiment (I have, it's easy to do, and then you'll never claim the numbers are gamed again since you methodically checked them).

Take BLS listed inflation for a decent period of time, say 20-30 years. Make a basket of goodssplit by how most people buy: energy, housing, food, eneterainment, etc.

Pick a list of goods, say same sized apartments, houses, foods, etc.

Look at prices now. Write them down. Hide that list so you don't cheat.

Look at ads from the beginning of the period. Get prices.

Compute.

Now add say 1% to BLS annual inflation numbers, and compute.

Viola! BLS and rest are very accurate. People's unmeasured selection bias beliefs are not.

esoterica• 4 years ago

Usually if official statistics and what you see are misaligned, its the official statistics that are wrong.

This is QAnon tier logic. “All my friends voted for Trump, therefore the vote count was fabricated!”

bluedino• 4 years ago

How much has your grocery bill gone up? What about restaurant bills?

What's interesting is although fast food prices have went up, it doesn't seem like casual dining chains have gone up. So even though steak prices have doubled at the grocery store, they've stayed the same at the chain steakhouses.

kirbyfan64sos• 4 years ago

I think the article's own title is incorrect?

Headline CPI in March rose by 8.5% *from a year ago*

Another notable piece:

core inflation appeared to be ebbing, rising 0.3% for the month, less than the 0.5% estimate

which matches the other commenter mentioning that the gas prices were a massive contributor to this.

throwaway4good4• 4 years ago

Core inflation is 6.5% yoy which is very high. The other figures are month to month and are noisy and have a seasonal component.

throwaway4good4• 4 years ago

The core inflation tells you that this is more than a fluke in energy prices.

I would say it is due to loose monetary and fiscal policies (duh).

Maybe we are in for a 70es rerun; and the 70es inflation spiral didn't really end until Paul Volker, Thatcher, and Reagan changed the economic policies.

Also stopping the inflation spiral helped bankrupt the Soviets who were a great benifitter of the rising commodity prices ... just a hint.

TradingPlaces2• 4 years ago

Seasonally adjusted data are adjusted.

mc32• 4 years ago

The administration’s own people are owning up to inflation although conveniently attributing all of it to Putin.

It’s an amazing turnaround from the unisonic voice of “it’s transitory”, ‘printer go brrrrrrt’ is a conspiracy, don’t you worry…

stjohnswarts2• 4 years ago

Yeah I'll concede this. Job numbers are often similar. They jump a lot month to month. Unless there is some crazy spike that you just can't ignore, it's better to use a trendline.

iambateman• 4 years ago

While it’s confusing, it’s the industry standard to express inflation percentages on an annual basis.

vernie• 4 years ago

Also bigger number means more clicks.

mFixman• 4 years ago

That's how you know you are talking about a first-world country. My dear home country had an official (likely underreported) inflation rate of 5.5% in March alone.

tommiegannert• 4 years ago

Nah, this headline is just wrong.

The standard way to formulate YoY changes is what GP said, or "Consumer prices rose 8.5% in the year ending in March".

The MoM change for March is a hefty 1.2% in its own right.

ren_engineer• 4 years ago

"if you don't include food, energy, housing, or healthcare prices, inflation isn't that bad!"

JumpCrisscross17• 4 years ago

don't include food, energy, housing, or healthcare prices

Straw man. Core inflation includes housing and healthcare.

If one can’t understand why food and energy inflation aren’t cleanly a monetary phenomenon in the midst of Russia, an energy exporter, invading Ukraine, a food exporter, I’m not sure how to help.

sam0x172• 4 years ago

furthermore, if you're a house-owning boomer who bought their first house for $25k and it is now worth $1m+, inflation can be seen as quite good

nebula8804• 4 years ago

So what you are telling me is that if you own your home, drive an electric car, grow at least some of your own food and try not to get injured you can pretty much beat the system? Thats the dream!

noelsusman2• 4 years ago

Oddly enough healthcare has actually experienced some of the lowest inflation of any category over the last year.

Mikeb85• 4 years ago

I think the article's own title is incorrect? > Headline CPI in March rose by 8.5% from a year ago

How do you figure? YoY is the best way to measure these things since there's seasonal changes that happen month to month.

BaseballPhysics3• 4 years ago

TBH, I'm pretty surprised that core inflation seems to have not grown as much as expected. That's actually very good news, given that core inflation is lifted by fuel prices (since increased fuel prices influence prices across the economy).

This... seems like a good news story?

Obviously the Russian invasion of Ukraine has royally messed up fuel and food prices, but that's a specific shock that's independent of larger macroeconomic issues.

anecd0te• 4 years ago

Inflation is typically reported year over year

colinmhayes11• 4 years ago

Exactly, the headline implies that prices rose 8.5% this month, not since last year.

butlerm4• 4 years ago

Some news outlets falsify their inflation reporting as a matter of course. Consumer prices obviously did not rise 8.5% in March, they rose 8.5% over the preceding twelve months ending in March.

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

TSiege3• 4 years ago

This is a serious issue mostly fueled by rising energy prices. I wish our politicians could think of better solutions than what's going to be proposed like expanding ethanol use in gasoline, when it will actually make matters worse. See tweet https://mobile.twitter.com/SarahTaber_bww/status/15113297700...

Any reason Biden can't use the war time production act to force American oil producers to up production (which is still short sighted) instead of making matters worse?

typeofhuman9• 4 years ago

The current administration does not want to relieve the pressure. They are against oil/lng. They openly oppose the industry and want everyone to be driving electric cars and have windmills powering everything.

toomuchtodo• 4 years ago

Good? I mean, has nothing been learned from the oil crisis in the 70s? If you don't want your economy held hostage, electrify it and use clean energy domestically produced to power it. The US has had ~50 years to plan for this.

Make carbon more expensive and rebate that to folks by income (carbon tax). Push people away from fossil fuels, and then you won't be held hostage by fossil producers in the future. Cheap oil isn't a right.

mjhay2• 4 years ago

I wish that were true, but it is not. The Biden admin has expanded drilling and has been generally pro-oil, despite their green rhetoric.

TSiege3• 4 years ago

I wish that was the case but their entire approach to war in Ukraine triggering a European energy crisis is selling American LNG to them. And they've been begging American oil companies to pump more oil

barathr• 4 years ago

SPR is being tapped: https://www.cnbc.com/2022/03/31/oil-markets-us-strategic-pet...

sparrish• 4 years ago

Biden can't use the war time production act... cause we're not at war.

infamouscow2• 4 years ago

But Trump can use it... cause we're not at war?

TSiege3• 4 years ago

Sorry it's called the "Defense Time Production Act" and he's already used it. https://www.lawfareblog.com/understanding-bidens-invocation-...

typeofhuman9• 4 years ago

Limiting the production of oil in any sense is going to increase the price. Biden has said no more drilling on public land and imposed new regulations on pollution.

https://www.marketwatch.com/investing/future/crude%20oil%20-...

Here we can see the price of oil futures going back a few years. We can see they start an upward trend once Biden gets into office. and long before the Ukraine conflict.

There are two parts of this, what Biden has done, and what people fear he might do.

There is a trade off between using goods now, and using them later. The higher the return for using them later, the higher the return for using them now has to be in order to justify consuming it.

If Biden says, no more drilling on public land, you are right, that would not impact supply immediately, but it would impact the expected supply and price of oil in the future. Which means that in order for the oil to be consumed now, the price has to be higher.

If you add to that the expected regulations to come in the future, further restricting or taxing fossil fuel use, it pushes this even higher.

So because it is expected that the price of oil will be more expensive in the future, both because of what Biden has done already, and because of what he has promised to do, then the price of oil has to increase now. Do you understand what I'm trying to convey?

FURTHER EXPLANATION

Let's say you have 10 barrels of oil to sell. You can sell those barrels now for $100 dollars, or you can sell them in a year for $200 dollars.

The more the price of oil in the future increases, so too does your incentive to wait to sell.

In response to this, the price of oil has to increase in the present, to compete with the prices promised in the future.

So if the future price rises to $250, the present price might increase to $130 in order to incentivize producers to sell now, rather than wait for higher returns in the future.

What Biden has done is send signals that in the future, the supply of oil will be lower, and the price higher, which incentivizes producers to wait for those higher returns, which as a result increases the prices now, in order to compete.

tootie5• 4 years ago

Tough to say because Biden is also pushing policy to curb demand and EVs are rising rapidly. I'm not sure if markets have fully absorbed the world of falling supply and falling demand. Or if they actually believe demand will fall appreciably in the near future.

roamerz3• 4 years ago

Yup hard to say. Thankfully citizens are seeing the reality of his anti-American policies and will make their displeasure felt at the polls this November.

wiz21c• 4 years ago

Limiting the production of oil in any sense is going to increase the price.

That's a fallacy. If you limit the production, then you have less oil. The fact that the price increase is due to competing, individual, interests.

If you limit the production, limit the demand too. Doing it with the price is the worst possible way to do it because speculation turns on...

nukemaster• 4 years ago

This is extremely reductionist. It's like saying untying a balloon doesn't cause it to deflate, the deflation is caused by the random motion and collisions of the air molecules.

brandmeyer• 4 years ago

Are you arguing for a command economy? Doing it with prices is the best possible way, because it empowers distributed decision-making.

rgbrenner3• 4 years ago

Completely wrong. When covid hit and the lock downs started, oil demand took a nose dive, and shortly afterward producers reduced output because of the lack of demand. The reduction in demand was more than the entire oil production of the united states: 15m barrels per day.

During the recovery, consumer demand increased at a faster rate than the production increase... leading to rising prices. It continues to be higher than world production. Right now, demand is back to pre-pandemic levels, but production is still a few million barrels (per day) short.

You can see that clearly in the first chart on this page: https://www.eia.gov/outlooks/steo/report/global_oil.php

JacobThreeThree2• 4 years ago

but production is still a few million barrels (per day) short

That fits perfectly with what OP said. If the production wasn't limited, there would be more production.

tomatowurst6• 4 years ago

and right at the top of CNBC we see

    BREAKING Stocks rebound on hope inflation is peaking, Nasdaq adds 1%

On top of the defaults with China now looking like it won't be able to avoid Russia's fait down the line, with no end in inflation (prices keep going up across the board), with Shenzen and Shanghai in indefinite lockdown impacting supply chains, with BRICS + OPEC signaling they want alternative to USD + crypto/stablecoins impacting financial markets.

We are headed for unprecedented market deflation.

eunos• 4 years ago

Shenzhen lockdown already ended.

laluser• 4 years ago

Not ended. They were eased. https://apnews.com/article/covid-technology-business-health-...

ShivShankaran• 4 years ago

That's because most of retail and individual investors had puts or shorted the market. The institutional traders are not going to give up their profits so easily and stock always moves to crush the retailers

bequanna• 4 years ago

most of retail and individual investors had puts or shorted the market

Most retail investors absolutely do not own puts nor are they net short the market.

The actual situation over the past few months seems to be the exact opposite of what you mention. It would seem that institutional investors have been using their retail facing market commentators to urge the public to "buy the dip" while the institutional smart money is selling every uptick:

- https://www.zerohedge.com/markets/jpmorgans-resident-permabu...

- https://www.zerohedge.com/markets/pain-trade-remains-higher-...

tomatowurst6• 4 years ago

it seems they read wallstreetbets as well

spacemadness• 4 years ago

They make up some correlation to sell a daily stock news update. They have no idea why it went up. It hasn’t even recovered from yesterday. Day to day movement means nothing most of the time and the stock market is detached from how the average American experiences the economy anyway.

pgwhalen2• 4 years ago

Rule of thumb: if an equity market move is ever less than 1.5% in either direction, the headlines about why it happened are completely made up. Financial news has to assign a narrative even when there is none.

tomatowurst6• 4 years ago

I've favorited this comment but why 1.5%? Why not 2 or 3%? I guess that is a big enough move to suggest some shift in fundamentals or some major event in FANG

mrfusion• 4 years ago

A local restaurant just got rid of their paper menus because it was too expensive to reprint every time they wanted to raise prices …

enraged_camel• 4 years ago

Yeah, I haven't seen a paper menu in months. Everyone does QR code menus now. I hate them.

unglaublich• 4 years ago

No sane person WANTS to look at a display when they try to relax in a restaurant or cafe.

sdfasfdasdfasdf2• 4 years ago

I have been to restaurants where you see the menu using a QR code and also place an order and pay over the website. I do not like this because, first it seems like its more self serve and there's no service really except bringing the food from the kitchen and I am still expected to pay the same 10-20% tip and second, I am afraid we are perhaps headed towards restaurant analytics, impressions/views for menu items etc, and perhaps the online retailer behavior of not being able to pay without adding a card on file and all the dark UX patterns that come with it.

rootbear• 4 years ago

I saw paper menus disappearing before inflation started going up. I took it as a Covid measure - no physical menus that needed to be disinfected after each customer used them.

323• 4 years ago

Quite a lot of people are starting to say that measuring inflation with a single number is like measuring the temperature of the whole US with a single number - "today the temperature in US is 81 F".

davidjgraph• 4 years ago

And that's wrong because the units are outdated?...

wincy• 4 years ago

It’s wrong because there’s a freak snowstorm in Seattle and it’s 39°F there right now and it’s 81°F in Kansas City. So the average temp between those two place is 60°F which tells us nothing useful about either place.

z2• 4 years ago

Which is potentially useful if the aggregate is weighted appropriately and whatever insights respect the implications of using an aggregate. It's even more useful with the additional information that temperatures in the US tend to be highly correlated between areas.

Some useful insights if you have enough data points would be where in the year you are, which season it is, if it might be an El Nino or la Nina year, and over the long term if there are any secular trends like global warming...

gsk22• 4 years ago

It's nothing like that.

People live in one place and only care about the weather at that place. Whereas consumers need products from all sectors of the economy, so an aggregate inflation indicator makes sense.

Sure, it's not perfect, since every household spends their money differently, but everyone needs food, housing, energy, etc.

helen___keller3• 4 years ago

I think it’s an apt metaphor. If you lived in a big city in the 2010s, you’ve probably read years worth of headlines about low inflation, all while experiencing a rapidly inflating cost of living.

CPI is like climate news, not weather news, and should be understood as much.

stusmall• 4 years ago

I like the analogy. Recent inflation hasn't hit my household as hard while its crippling for others. We work from home and rarely drive far when we do leave the house. We eat frugally and cook almost all our own meals. Finally we own our home and are locked in at our mortgage rate. Inflation has been hammering energy, food and housing costs. We've felt some of the food increases but the rest, not really.

Meanwhile imagine a family that rents their home, commutes long distances to work and has growing kids. They are probably drowning. Comparing these cases feels a lot like averaging together the temperatures of Seattle and Houston.

long_time_gone7• 4 years ago

Quite a lot of people are starting to say

Who? What are their credentials? What improved measure have they created?

Kon-Peki• 4 years ago

I'm wondering if these people are suggesting a completely different approach, or if they are just starting to realize that BLS publishes a huge number of inflation measures [1]:

Price indexes are available for the U.S., the four Census regions, nine Census divisions, two size of city classes, eight cross-classifications of regions and size-classes, and for 23 local areas. Indexes are available for major groups of consumer expenditures (food and beverages, housing, apparel, transportation, medical care, recreation, education and communications, and other goods and services), for items within each group, and for special categories, such as services.

[1] https://www.bls.gov/cpi/overview.htm

Gareth3213• 4 years ago

Those people don’t understand how the CPI is calculated. A basket of goods is used to project what an average person would spend on goods and services. Do people in New York spend more on the same basket? Of course! But the percentage change is fairly uniform in a connected economy like the US. The measurement is intended to calculate the macro effect of inflation; not Bob’s impact, who lives in Ohio, owns three cats, and exclusively eats tuna from a can.

An analogy is the BMI. This is intended as a population metric, but is often used by the individual. It’s less useful for the individual, but still actually pretty useful. If your BMI is above 30, you’re probably unhealthy. You might be a pro wrestler with huge muscles, but you probably aren’t.

refurb• 4 years ago

If anyone wants to listen to a prescient conversation about the feds actions post-2008 and inflation today, take a listen to this podcast.

It was recorded in 2009.

https://www.econtalk.org/meltzer-on-inflation/

It’s an interview with Prof Meltzer from Carnegie Mellon who has done extensive research on the federal reserve system.

Cliff notes:

- As a result of the 2008 crisis the fed expanded the money supply to a degree never seen before

- Rather than drive inflation, the “new money’s” effect was muted due to skittish banks who would decide to just take the funds and hold as cash/treasuries (maintaining strong reserves) until more positive economic indicators emerged (this process could be paused if economic sentiment turned negative)

- Once economic forecasts turn more optimistic, the money will be deployed (through lending) into investments and assets leading to inflation in those prices

- Eventually the excess supply will spill over into consumer spending in the classic indicators of inflation like CPI

- However the fed will be under immense political pressure to not drive the “fragile” economy into a recession so any tightening will be far too late and inflation will overshoot targets by a large degree.

- Similar to the 70’s, until strong monetary contraction is brought in, inflation will run very hot despite other efforts to control it

Pretty accurate so far.

calvinmorrison2• 4 years ago

And yet people on hacker news or other high income forums seems to say "Just buy a EV".

It's the "Let them Eat Cake" of 2022. Poor people driving economy boxes and living in a 4th floor walkup apartment with 3 roommates aren't buying an EV... even if the savings are better long term.

It's the "Buy a better pair of boots they'll last longer".

And yet - people seem oblivious - like Marie Antoinette that the poor class can't simply upgrade to solar and use an EV and avoid the gas prices which hit their bottom line pay every week in the form of higher prices and higher costs to travel.

Who cares about bread when it costs so much to drive to the gas station? Let them get an EV

memish6• 4 years ago

Here are some other helpful tips. mustache twirl

Try forgoing expensive medical bills.

Try not eating.

You only need some organs.

https://www.youtube.com/watch?v=9ssNtIvD5sc

ajross5• 4 years ago

Poor people driving economy boxes and living in a 4th floor walkup apartment with 3 roommates

People living in 4+ story apartment buildings have extensive options for transit that don't involve driving their personal "economy box" around. And to the extent they do, the "poor class" in the USA continues to pay lower prices for gas than any other industrial democracy, including in places like Australia and Canada with comparable per-capita driving statistics.

That argument seems like a canard. Yes, higher gas prices suck. They suck rather less than land wars in Europe though, so... what's the option here? I know there's a partisan angle there that says something about fracking, but needless to say short term inflation isn't well treated by half decade infrastructure projects. Gas is going up because Russia invaded Ukraine, and there's nothing anyone in the west can do about that right now regardless of whether they drive an EV or not.

(Won't lie though, that I'm totally loving the Tesla right now.)

gtk402• 4 years ago

I lived in an apartment in suburban Atlanta that was 4 stories in a county with no public transit whatsoever. Plenty of places in the U.S. have little or no public transit in the US but also have the density to support apartment buildings.

prescriptivist• 4 years ago

Plenty of people live in in multi-story walk-up units in small and medium sized New England cities that have mediocre (if any) public transit that becomes nonexistent if you have to commute for work.

helen___keller3• 4 years ago

Who are “people”?

scop• 4 years ago

“we can take advantage of the next generation of electric vehicles [so] that a typical driver will save about $80 a month from not having to pay gas at the pump.”

- President Joe Biden, March 31, 2022

fullstop4• 4 years ago

It's the "Let them Eat Cake" of 2022. Poor people driving economy boxes and living in a 4th floor walkup apartment with 3 roommates aren't buying an EV... even if the savings are better long term.

The people living in these situations likely rely on public transportation and don't even have an economy box. Gas prices will still hit their bottom line as transport costs rise for food and other goods.

sfblah2• 4 years ago

It depends on the level of poverty we're talking about. A decently large percentage of undocumented migrants from Central America own cars, for example.

calvinmorrison2• 4 years ago

That's certainly not true. Maybe in New York or DC. But there are lots of cities in this country that lack basic public transportation. Even in Philadelphia where we have a pretty good network of routes, a astounding number of people commute out of the city via car to work.

That people are arguing only implies you are bourgeoisie, and feel the need to explain how these poor people are really effected by X and Y and Z. I have people on my team where their weekly bill for travel to work has doubled in the last two years. It hits peoples bottom line quite clearly.

micromacrofoot• 4 years ago

You're the only one in this entire comment thread saying this.

TradingPlaces2• 4 years ago

Chart with components. The big news for me is that durables, which were leading inflation for a year, are now a net drag in the month-over-month https://twitter.com/lookinggdlouis/status/151388254299014759...

jmyeet• 4 years ago

Here are the weightings of CPI [1]. It's not quite that simple (eg there are seasonal adjustments) but it's a good rough estimate. You'll note that Shelter (Housing) is 32% and Energy is 7%. Two key events YoY:

1. We went from Covid discounts in housing to a corection and a surge in the other direction. Housing is certainly a problem but the impact on inflation is slightly exaggerated because of that swing; and

2. A war started in Ukraine and this allowed energy companies to arbitrarily raise prices for massive profits that have little to do with actual or potential supply issues.

Housing takes a long time to turn around. I honestly think we need to start punitively taxing property held by corporations (including LLCs), foreign-owned property and illegal hotels (ie AirBnB) as these are restricting access to a necessity for no real benefit.

As for energy, as much as many in the US in particular like to blame this on Biden. It's worldwide. The real problem though is profiteering by oil companies. It maddens me when I see governments suspending taxes to reduce the hit but somehow the energy companies can't take a hit? They're making absolute record profits. But no one even speaks about that.

Where Biden is responsible is in the same way every US president is, regardless of party. And that is in promoting a reckless foreign policy and dangling NATO membership to Ukraine to keep it aligned with the West when it was (and is) never going to happen for exactly the reasons we're seeing now. Of course, Russia is to blame for a completely unjustifable and horrific invasion and everything that comes from that but both of these things can be true at the same time.

Put it this way: you park your car in a crappy part of town and leave your Macbook on the hood and there's a good chance it'll be stolen. Sure the thief is responsible but you also could've taken more care. And no, that's not victim-blaming.

[1] https://www.pewresearch.org/fact-tank/2022/01/24/as-inflatio...

Workaccount22• 4 years ago

Taxing those land/dwelling holding corporations just creates a pass-through situation where the end-user ends up footing the cost of those taxes. It ultimately just raises prices even more.

The best fix (and proper one) is for states/feds to step in, override zoning, and start mass construction of new multi-family housing.

colinmhayes11• 4 years ago

Taxing those land/dwelling holding corporations just creates a pass-through situation

Rental prices are almost completely demand based because supply is completely inelastic in the short run and only barely elastic in the medium/long run. Landlords are already charging as much as the market will bear, they can't just unilaterally raise prices, people will move and they won't fill their units.

BitwiseFool• 4 years ago

"Consumer prices rose 8.5% in March, slightly hotter than expected and the highest since 1981"

The qualifier "slightly hotter than expected" reeks of media manipulation. 'Spin' at best, 'propaganda' at worst. It seems obvious to me that the reporters are trying to dampen or downplay this obviously negative news. Whereas this exact same news could be harped on and used like a weapon against the policy of the current administration. But don't worry, this was "expected" and only slightly worse than our central planners predicted. Keep calm and carry on.

zzleeper2• 4 years ago

Nonsense. 8.5% is literally slightly hotter than the expected 8.4%. From yesterday's Axios:

Details: Analysts surveyed by FactSet expect the release to show 8.4% inflation over the last year. That would be the highest inflation rate since December 1981. The rate was 7.9% for the year that ended in February.

From this morning (6am) Morning Brew:

Good morning. Today’s consumer price index reading is expected to show that March prices surged 8.4% over last year. You know who’s not contributing to inflation? The Brew. Today, we’re launching a revamped referral program with cheaper “prices” on swag items…that were already free to begin with.

So the NEWS of the release is that it was 8.5% instead of 8.4%. That's why they pointed it out. Everything else was already priced in by markets.

nonameiguess• 4 years ago

This is a weird comment. "Expected" doesn't mean it's good. It was expected because March already happened and forecasters had a pretty good idea of what the retrospective measure would be based on their own measurements.

zzleeper2• 4 years ago

Open question: won't inflation lead to mechanically higher stock prices, specially if it's demand driven?

Say we give duplicate the amount of money in the economy(M1 M2 etc) and prices immediately double. Won't that also double firm revenue, profits, dividends, and thus firm value in nominal terms?

Thus, if stock prices and home prices are +10% in nominal terms, with inflation close to 10%, doesn't this mean they are just breaking even?

staticman2• 4 years ago

That's not how stock prices worked in the 1970s, so no. A lot of the stock price is essentially driven by social psychology, not earnings.

sidewndr46• 4 years ago

won't inflation lead to mechanically higher stock prices

I'm reasonably certain that is the point of inflation, since everyone seems to measure economic health based off the stock market.

mattnewton• 4 years ago

Prices don't immediately double. My layman's understanding is that it heavily depends on where you put the new doubled money in the economy, and it's resulting velocity. If you give it to banks they might park it in assets, increasing their prices, but then the money "stops" moving through the economy and doesn't have a large effect on things like food prices for instance. If you give it to people who need to make rent now, then they probably spend it immediately, often to people who also spend it soon, and it has a higher velocity and broadly affects prices before being absorbed into a slower moving asset like a bond or long term stock holding.

datalopers• 4 years ago

Stocks gave an 88% aggregate return over 2019-2021. I’d say official inflation numbers are just now catching up.

trgn• 4 years ago

It depends on the underlying valuation of the stock, and the industry sector.

Stocks for retail/commodities/food/oil... will generally keep up with high inflation, since these industries have low margins and profits track closely to prices. There will even be some speculation, so it might pop in these environments, only to come down when clarity returns.

Growth stock will be obliterated in high inflation environment, because they're valued for future profits, which will be worth less because money is worth less.

Business services, entertainment, ... kind of wavers in between.

incomingpain• 4 years ago

Open question: won't inflation lead to mechanically higher stock prices, specially if it's demand driven?

Mechanically higher not-USD things. Crypto, stocks, real estate, gold.

Say we give duplicate the amount of money in the economy(M1 M2 etc) and prices immediately double. Won't that also double firm revenue, profits, dividends, and thus firm value in nominal terms?

It wont evenly distribute amongst crypto, stocks, real estate, gold, etc

Thus, if stock prices and home prices are +10% in nominal terms, with inflation close to 10%, doesn't this mean they are just breaking even?

Oh ya, like you have to compare inflation to GDP to interest rates.

If GDP was 15% and inflation was 10% and interest rates are 10%. Those are some big numbers but not really a giant problem or anything. Social mobility would be fantastic in those numbers.

Reality: GDP is 6.9 with previous of 2.3, inflation 8.5%, and interest rates are 0.5%. YTD S&P500 is -6.75% while 1y is 7.3%

In reality the GDP figure is fake, temporary boost that wont be able to hold on.

lottin7• 4 years ago

In short, yes. Inflation is an increase in the price level, and as such it only affects nominal prices, not relative prices. So the price of goods and services in relation to the price of your work (i.e. your salary) remains constant. Nothing becomes more expensive/cheaper in real terms, as a result of inflation. Although in practice this isn't entirely true.

JumpCrisscross17• 4 years ago

won't inflation lead to mechanically higher stock prices, specially if it's demand driven?

Yes, to a point. Stocks are priced in nominal dollars because revenues are earned and dividends paid in nominal dollars. Endemic inflation screws with an economy, however. That reduces its productivity. First real returns falter. Then investors abandon the market.

kobalsky• 4 years ago

Open question: won't inflation lead to mechanically higher stock prices, specially if it's demand driven?

this has been answered already but I want to add something that wasn't mentioned: if you are thinking about it now, the market thought about it months before you and it's probably already baked in the current price.

so don't expect a 10% increase in 1 year on spy even if everything goes up 10%. that 10% was grabbed by the better informed the moment the money printers were turned on.

shostack2• 4 years ago

Which raises the question of how the bogleheads strategy weathers an inflationary economy. Since apparently that's all Main St. can do.

photochemsyn3• 4 years ago

A major reason gasoline, diesel and natural gas prices are spiking is the push to export more fossil fuels from the USA by the oil/gas industry. This was facilitated by the 2015 decision to eliminate the ban on crude oil exports, which Obama/Biden and Republicans backed. It's simple supply and demand: reduce domestic supply by increasing exports to jack up domestic prices and increase profits. Around the same time at least one major domestic refinery was also closed, adding to the domestic supply restriction.

There is some effort to get the ban re-instated as of 2021:

"Khanna drafted a letter to the White House Monday signed by nine Democrats urging the administration to block the export of U.S. oil, which has been allowed since 2015 when Congress lifted a 40-year-old ban on the practice. Since then, U.S. exports have regularly surpassed 3 million barrels a day, more than the production of major OPEC members such as Kuwait and Iran."

https://financialpost.com/pmn/business-pmn/lawmaker-says-whi...

WesleyHale• 4 years ago

Maybe I'm an idiot, but I don't understand why we'd be exporting oil while also importing millions of barrels from Russia a month. [1]

Certainly it's more cost effective to obtain it domestically than to import it from the other side of the world?

[1] https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...

citrusybread• 4 years ago

different compositions. what we call "oil" actually ranges through so many configurations you might as well think of it the same way we think of juice. sulfur and other impurities can change the game dramatically.

it's also the reason Alberta's tar sands have few importers, because not everyone is capable of refining it (which leads to Canada having to export it, and import foreign oil).

there are refineries in the US that only work effectively on Russian oil -- and I'm sure there's similar issues elsewhere in the world. they can probably adapt but it's not as uniform as we'd think.

photochemsyn3• 4 years ago

Some of it is simply a regional transport issue. The major Russian oil importers appear to be the Pacific Northwest states, by far:

https://www.sightline.org/2022/03/04/pacific-northwest-state...

"The refineries do not rely on Russian oil equally. Nearly 60 percent of Russian crude imported to Washington went to the Tesoro/Marathon Anacortes refinery, and another 29 percent went to the BP Ferndale refinery. Russian crude made up almost 7 percent of all crude refined at the Tesoro/Marathon Anacortes refinery from 2009 through 2021."

Getting oil from Bakken or Pennsylvania would likely be expensive, and also refineries are optimized to process specific grades/types of crude oil. The best solution would be for the US government to prioritize the transition to renewables in Oregon and Washington.

caycep• 4 years ago

Honestly, this was just my gut and I've felt prices were artificially low for the past decade or so - maybe because of globalization and offshore manufacturing, and things are really just catching up to what they're actually worth. You can elect a guy that will "decouple" from China and trash international trade deals...but don't expect low prices 4 years later...

ericmay• 4 years ago

I agree. I think the prices we see now are probably more "correct", and things were just very cheap in the past. But I also think that there's some inflation going on from pent-up savings. Flights, credit card points, hotels, etc. coupled with corporations raising prices to offset losses in 2020-2021. I'm also curious about a race condition with wages and prices. Forget the tech wages because those are probably propping up equity markets and housing markets, but day-to-day stuff where someone was making $15/hour and now they're making $20/hour or more with that change happening over the course of a year and for millions, well, they can afford the higher prices... I'd love to read something more educated on that topic though. I have an intuition (race condition or at least partial race condition) but I haven't studied the specific economics of that. I always assumed you'd get inflation but not corresponding wage increases. I guess if the west is able to prop up currencies, it's fine? Kind of like living in Iceland except everywhere.

For example, I live in Ohio. Can someone explain to me why I would expect a swordfish steak or tuna steak or salmon to be cheap whatsoever? And that's still not pricing in offsets needed from c02 emissions. Chicken on the other hand? Yea that should be very cheap and very fresh.

We need more local suppliers. Grow a victory garden. Last season we had so many onions. I wish I could have had a neighborhood farmer's market. But rules. Regulations. Etc.

throwaway0a5e2• 4 years ago

For example, I live in Ohio. Can someone explain to me why I would expect a swordfish steak or tuna steak or salmon to be cheap whatsoever? And that's still not pricing in offsets needed from c02 emissions. Chicken on the other hand? Yea that should be very cheap and very fresh.

Because global interconnected economy. The same business processes that figure out how to distribute all sorts of widgets to warehouses and supply house shelves and parts departments all over the country are being used to send a steady stream of approximately the amount of swordfish to Cleveland that people in Cleveland buy. It doesn't really cost any more to ship it to Cleveland than it does NYC. It's just a giant customization problem. Thanks to modern communications technology the dozen swordfish steaks that you and eleven other people will buy this week get to your supermarket.

tmp_anon_22• 4 years ago

In the US whenever I traveled during the past decade it felt like consumer goods were much more expensive, CAD, AUD, EUR, purchases all felt more expensive. I wonder if part of this is just the weakening of the dollar as the result of US economic policy over the last twenty years.

jmoak32• 4 years ago

I agree. To see the process of prices deflating happen on a small timeline, look to Japan. After Japan realized their cost of doing business was going to rise due to aging, their markets crashed in the 90s. In response they poured epic levels of investment into mobilizing offshore workers and completely recovered. The lesson the world took away was "money isn't real, maybe we should take on more debt".

Ironically here in the US the party of "trash international trade to increase local workers' bargaining power" is also the party of "keep retirement age the same at all costs and maintain fixed income QOL".

As we see globalization unwind from international policy and as working populations age (China peaked @ ~1 billion workers, and is declining), we are guaranteed to see prices rise as workers can demand much, much more (to the dismay of those on fixed income).

I think it'll be interesting to see this unholy coupling tear apart.

memish6• 4 years ago

I agree with this premise, but we haven't on-shored production yet. It's still mostly offshore.

jmoak32• 4 years ago

You're right, but I think you've missed a detail.

Our stuff was being made in China, until many of our supply chains were severed due to Covid, leading to Chinese defaults, shortages, and an increased cost of doing business. Now a certain amount of stuff simply isn't getting made at all.

The question at play is will they recover to 2019 levels? Will China be able to deal with the defaults of businesses who provided key nodes in the supply chain while juggling their 0-covid strategy? What will happen to the cost of doing business when China loses 20% of its workers over the next decade or so due to aging?

I've been a broken record about this but I highly recommend The Great Demographic Reversal. It provides a high level view of the forces at play in our world and is a real eye opener.

caycep said prices were artificially low but that's not quite right - prices were as low as they deserved to be because China had workers and we were able to make deals to mobilize them. In the coming decades I'm not convinced we will have that luxury.

Iwan-Zotow• 4 years ago

Putin did it!

throwaway5752• 4 years ago

Inflation in the west is Russia's goal. There is an economic war going on, for those that are not aware.

memish6• 4 years ago

Predictions on where it goes from here?

NDizzle• 4 years ago

"One of these days ... One of these days ... Pow! right in the kisser!"

bryanlarsen6• 4 years ago

The best cure for inflation is to increase taxes. This removes money from the economy, and can be targeted towards the areas of the economy with too much money.

Raising interest rates paid to the Fed are another way of removing money from the economy, but are a broader brush, although the Fed is a much better steward than Congress. Increased interest rates cause stock market declines, so they also tend to act as a wealth tax.

Cutting spending is another way, but it's slow acting. It's more of "don't make things worse" than attacking the core problem of "too much money".

So if you hear somebody screaming about inflation, ask them if they support increased taxes.

AnimalMuppet3• 4 years ago

So if the money I have is worth less, your response is to take away more of my money? Yeah, that may work to stop inflation. It may have a few other consequences, though...

bryanlarsen6• 4 years ago

All inflation cures are painful. The standard cure is recession and high unemployment. Increasing taxes on the rich is much less painful. Better to take a little bit of your money away than to lose your job.

Or you can learn to live with the inflation.

Rock and a hard place is the standard expression for the situation we're in.

carlgreene• 4 years ago

I scream about inflation and I do not support increased taxes. The US government is wildly inefficient with the tax dollars I already give them. Until they can show some discretion I'll tell them to kick rocks whenever there's a tax increase on the ballot.

bryanlarsen6• 4 years ago

So given the choice between recession, increased taxes or inflation you choose recession? That's a valid choice, as long as you acknowledge it.

vorpalhex2• 4 years ago

How does increasing taxes bring down fertilizer, meat, gas and housing?

bryanlarsen6• 4 years ago

It doesn't work against transitory, sectoral inflation, no. But HN consensus and the top comment here insist that the inflation is general and permanent.

jl2718• 4 years ago

You’d think so, but, actually the opposite.

Tax collection pays the interest on the debt. Higher taxes means more debt load.

The government, like any modern public company, does not care about profit. They operate to maximize cash flow. Income is from taxes, but most cash flow comes from debt leveraged on that income. More income, more debt. Less income, less debt.

drnonsense42• 4 years ago

Meat prices are up close to 30% for me in NYC since January. I am aware meat prices don’t dictate inflation numbers but I’m really having a hard time believing any official estimates at this point. The actual Covid numbers over the past ~1.5 months (use imagination) look extremely “smoothed downwards” as well, not that they were ever accurate (although certainly the US was one of few countries willing to or capable of providing public numbers). The underrated thing about Trump was his administration wasn’t capable of hiding their incompetence.

Tarucho• 4 years ago

Who benefits from this? Is wealth distribution changing?

wonderwonder• 4 years ago

Inflation outpacing traditional stock market returns. Even if you do everything right; if you earn an average salary you are doomed.

defterGoose• 4 years ago

...and all so Bezos can take a 50's popgun ride and pop bottles.

euph0ria2• 4 years ago

Edit: Read counter-arguments in comments to this below.

And shadowstats.com puts it to 17.15%:

March 2022 CPI-U annual inflation hit a 40-plus year high of 8.54% [up from 7.87% in February], the steepest inflation pace since December 1981; March 2022 ShadowStats “Corrected” Alternate CPI estimate hit 17.15%, up from 16.05% in February], the steepest inflation rate since June 1947 (in 75 years).

arcticbull24• 4 years ago

Shadowstats is completely worthless. They literally just added a fixed 5% to the actual CPI numbers over the entire period without any justification. If you took their average inflation rate to any commodity over the period they claim, the price would be about 10X higher than it is. It's a tinfoil hat conspiracy site.

euph0ria2• 4 years ago

How does Shadowstats calculate it differently: http://www.shadowstats.com/article/no-438-public-comment-on-...

Counter-arguments: https://en.m.wikipedia.org/wiki/Shadowstats.com#:~:text=A%20....

gruez4• 4 years ago

If you deflate nominal GDP with shadowstats numbers, you'll find that GDP has been continually dropping for the last few decades. That seems hard to believe.

schemescape• 4 years ago

Just eyeballing the ShadowStats chart (because accessing the raw data requires a subscription), they're claiming that the inflation rate has been hovering around 8% since roughly the year 2000. That implies that the cost of living in the US has increased over 5x since 2000.

jchonphoenix• 4 years ago

At least in the bay, it kind of has if you include housing... 2000 was a low point and we're at a high point now.

FYYFFF• 4 years ago

When you print more money in a year than in an entire century, its going to cause inflation. Trump printed 3+ trillion and gave most of it away to the banks and Wall St. That money found its way first into the bond and stock markets, then mid last year into consumer assets. We are never going back. Trump's tariffs and his tax breaks will be with us until your great, great-grandkids are 50... Electing a idiot who lost his entire inheritance, is not smart. Be smarter America.

shostack2• 4 years ago

I'm confused why this administration isn't hammering that point. If you eat the entire bag of Halloween candy in one night, you will face consequences. Cause and effect.

mardifoufs• 4 years ago

Because everyone can see right through that narrative. Blaming trump for policy decisions that the democrats were extremely supportive of, to the point where they were pushing for much more spending is ridiculous. They scolded the Republicans for not going far enough and the entire negotiations were very public. Not only that but they came up with even more bills and grand spending plans the moment they were elected.

Blaming trump for everything just won't work, not when you have control of the house, senate and the presidency. What is even more ironic was that Biden repeatedly attacked trump for deflecting blame, and promised the "adults in the room" won't make excuses. If by the mid terms nothing has changed, the electorate won't be receptive to the mental gymnastics required to connect the situation to Trump.

The only thing they will see is that Biden's admin is completely impotent and everything is worse than it was 2 years before. (Even covid numbers are incredibly higher under the Biden admin). So let's hope a miracle happens in the next 6 months because this is has been a slow motion disaster, and no amount of "actually this is perfectly normal but even if it wasnt the presidency cannot be blamed" damage control will magically make things better.

TYPE_FASTER• 4 years ago

After reading the definition of how the gas price factors into the CPI [0], I don't think fuel use is included because it's a price index, not a use index. As average mileage improves[1], and WFH continues, I wonder if usage will either plateau or decline[2][3], resulting in the price of gas having less of an impact.

[0] https://www.bls.gov/cpi/factsheets/motor-fuel.htm

[1] https://www.epa.gov/system/files/styles/large/private/images..., from https://www.epa.gov/automotive-trends/highlights-automotive-...

[2] https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W...

[3] https://www.statista.com/statistics/188448/total-us-domestic...

gruez4• 4 years ago

I don't think fuel use is included because it's a price index, not a use index.

Theoretically this should be adjusted via lowering the basket weight for fuels (if consumption indeed does drop).

thepasswordis3• 4 years ago

I'd just like to add to this: I find it absolutely reprehensible that The White House is trying to blame this on Russia, even coining a phrase "the putin price hike".

Inflation is hurting Americans, and the war in Ukraine is killing Ukrainians. The idea that these people would try to use one of these things to advantage themselves politically instead of addressing the suffering that their policies are causing (and changing course) is reprehensible to me.

There is a daily White House press briefing that I suggest everybody watch (you can 2x speed through it). Here is a link to today's: https://www.youtube.com/watch?v=07-AMwJbXQY

Just the way that they talk about this is so...vile. 8.5% inflation is a nightmare. You're in charge. Take ownership of that, and for the love of god stop trying to use the massacre of innocent people in Ukraine is a political tool for youself.

arcticbull24• 4 years ago

So Russia provides a ton of oil. Oil is an input into basically everything you've ever owned. The instability and lack of supply of oil as a result of the war is driving an increase in the price of oil, which is driving an increase in the price of goods. An increase in the price of goods means a decrease in the purchasing power of the dollar. This is how inflation is calculated.

Ergo, the Russians launching the war in Ukraine significantly contributes to inflation.

Is it solely responsible? Of course not. Does it contribute? Oh most definitely.

thepasswordis3• 4 years ago

Is that what Jen Psaki says every single day in front of the cameras? Because I watch it every single day and so far I don't think I've heard anything remotely approximating "The sanctions we have imposed have caused a minor increase in the cost of fuel, but the overall trend is due other factors."

Every day it's "Putin Price Hike", and absolutely 0 taking responsibility.

caeril2• 4 years ago

Huh? Inflation has been ramping up FAR in advance of the Ukraine invasion. Producer costs were already spiraling so badly that Powell had to concede that the entire FRB was bullshitting us about inflation being "transitory" in the middle of last year.

Hayekian acolytes and hard money advocates have been warning about this on this very site for YEARS, only to be downvoted and shouted down by the dominant Keynesian Central Bank Worshipper HN zeitgeist.

No, these consequences have been in the making since Helicopter Ben launched QE. The supply chain shocks introduced by COVID definitely accelerated things, but the outcome was always inevitable.

Furthermore, the March print only included a small portion of the Ukraine-related inflation, specifically in fuel prices only. It's going to take several quarters for these high energy costs to filter into the rest of the CPI. So if you think this March print is bad, just wait.

billfor• 4 years ago

Russia only provides 7% of the oil to the US according to https://www.factcheck.org/2022/03/examining-u-s-energy-indep..., and Biden has held up fracking leases according to https://www.wsj.com/articles/joe-biden-suddenly-loves-fracke..., and inflation has started long before the Ukraine war (https://www.zerohedge.com/personal-finance/extraordinary-us-...) so yeah the Biden administration bears some responsibility.

mise_en_place• 4 years ago

I think 1.4 Trillion in asset purchases by the Fed has more to do with inflation than Russia invading Ukraine. You could make an argument it impacted wheat prices. But the oil market already priced the invasion in, it’s in backwardation with farther months trading lower and lower.

brightball• 4 years ago

Russian oil was about 8% of the US supply.

EDIT: It was a simple comment, not a lecture of how the global economy works. Point was that there is a hell of a lot more causing inflation than the supply of Russian oil. Much higher prices have had nowhere close to the overall impact on CPI that we are currently experiencing.

usr1106• 4 years ago

Because energy and other resource prices have risen globally Russia has more income today than before Feb. 24 to finance their war. Of course Russian citzens are harmed by the sanctions, but the government's capability to finance their war not so much.

Source: "Der Spiegel" yesterday citing a US research institute.

aww_dang8• 4 years ago

Sanctioning Russia, preventing trade and precipitating the ensuing shortages is another item which political leaders could take responsibility for. Interesting how this has been spun.

rajeshp1986• 4 years ago

The consumer inflation was around 6% before the Ukraine conflict started in March. Its understandable that oil price hike is caused by sanctions on Russia and will affect other commodities too but blaming all the inflation on solely Russia-Ukraine conflict is nothing but a blame game and inability to take control of the situation by WhiteHouse.

Consultant324528• 4 years ago

In 2019 a US military funded think tank wrote a prescription for how the US could provoke Russia into over-extending itself. Ukraine plays a central role. Notably, the "risks" section explicitly says that implementing these provocations could result in Russia feeling the need to push further into Ukraine.

It's an interesting read. I recommend as you read through the recommended provocations, try to figure out which ones we implemented and what was the result. There's quite a few such as withdrawing from peace treaties, arming Ukraine with lethal weapons, and performing military exercises on Russia's border.

https://www.rand.org/pubs/research_reports/RR3063.html

If anyone perceives this as being "pro-Putin" don't bother responding. He's an evil dictator who should be in prison for the rest of his miserable life and I'm uninterested in hearing you parrot the regime's propaganda that if you criticize them you must be pro-Putin.

uoaei2• 4 years ago

Oil supply, while still somewhat volatile, is on a stable runway going forward. The reason prices are still high is no longer the war, but corporate margin-padding (read: price-gouging).

fallingknife2• 4 years ago

Oil price is up 66% vs a year ago, and only 10% since the war in Ukraine started. So this is only responsible for a small fraction of the price increases.

moffkalast• 4 years ago

Well part of it is definitely caused by Putin or at least our response to his atrocities, but wasn't something of this sort definitely expected in any case due to the absurdly high spending and economic cratering that covid has caused worldwide?

Do you think the US is alone in these hikes? The Eurozone is also showing very similar rates. It's unlikely to be something one country can fix by itself.

misiti37803• 4 years ago

It really does suck, but when the choice is between Biden and Trump, two totally incompetent leaders, you cant expect much better.

The US already has a law that requires the minimum age of the president (35). They should change the law and add a maximum age set to ~65. Could solve a lot of our problems.

txsoftwaredev• 4 years ago

Based on just the current state of the economy I would LOVE to have Trump back in office.

throwawayboise• 4 years ago

I'd almost go farther and say 20 years lifetime cumulative limit in federal office.

The geriatric retreads we get to choose from every election cycle is just maddening.

shmatt2• 4 years ago

you mean the guy who had his personal signature added to the free printed money sent to every single US citizen around the world (yes, even expats got the free printed money, nothing inflationary here...)

aarontait2• 4 years ago

The Federal Reserve, which is almost completely independent from the federal government, is the biggest player in regards to controlling inflation. In reality, POTUS doesn't have effective levers for controlling general inflation. However, I agree that their messaging has been absolutely horrible. They could at least create the appearance of doing something about it instead of just dismissing it as the Putin price hike.

dragonwriter5• 4 years ago

The Federal Reserve, which is almost completely independent from the federal government, is the biggest player in regards to controlling inflation.

The Federal Reserve Board of Governors, an executive agency of the federal government that is “independent” within government in the same sense as, say, the FCC, and not at all independent from the government, is actually the relevant actor in inflation-control policy.

memish6• 4 years ago

That phrase sounds like something McKinsey would come up with. Does the White House use McKinsey? Serious question.

TameAntelope6• 4 years ago

There are absolutely former big3 folks working in the current administration, I for a fact know of two.

xadhominemx4• 4 years ago

It’s a catchy political catch phrase man. It’s literally a multi-thousand year old tradition.

sixothree• 4 years ago

You do realize inflation is currently a global issue, and not something completely isolated and controllable by the United States, right?

shmatt2• 4 years ago

So I guess some Americans do think the U.S is just a single isolated bubble in the world

Is this also your take on the car shortage? The fact people are paying 40% higher prices on used cars?

Is your official response to that - Hey, theres a chip shortage in Asia, but who cares? you're in charge! start making the cars without the chips!! start making chips at home!! vroom vroom!!

matheusmoreira2• 4 years ago

start making chips at home!!

This is what every country should do. Reduces interdependency and foments high tech industry.

makomk• 4 years ago

People blame the UK government for the fact that the same thing is happening here, and we're a lot smaller and more tightly connected to other countries than the US is. Of course people in the US are going to think their government is to blame and dismiss what's happening in the rest of the world; the US is big enough that people can easily just never leave it, and it's a lot more realistic for them to be self-sufficient.

curiousgeorgio3• 4 years ago

Why, of course it's Russia's fault. Couldn't be related to this:

https://fred.stlouisfed.org/series/M1SL [1]

[1] Keep in mind, the effects of these changes are often not felt in everyday prices for at least 1-2 years.

butlerm4• 4 years ago

M2 includes M1 and it did not move nearly as much, suggesting that the nominal change in M1 was much larger than the part which had real economic consequences.

https://fred.stlouisfed.org/series/M2SL

colinmhayes11• 4 years ago

The m1 graph is incredibly misleading to the point of bad faith IMO because they changed the definition, causing the spike in April 2020. The M2 graph https://fred.stlouisfed.org/series/WM2NS still shows that the monetary base is expanding (less drastically) without effectively lying.

TameAntelope6• 4 years ago

I agree w/r/t how absolutely... childish... the word choice is, and I think folks trying to argue the merits here are missing the point.

Yes, Putin's individual actions in Ukraine have had a negative effect on the global economy, and yes that negative effect is creating additional inflation, but "putin price hike" is so obviously a sound-bite crafted explicitly to trick voters into not "blaming" the current administration.

I voted for Biden because I wanted an adult in the Oval Office, and an adult doesn't talk like that, in my opinion. I understand why it can feel necessary to talk like this, but you give up the high ground by doing so, and I think that's a mistake.

hintymad3• 4 years ago

I didn't vote for anyone last year. When I watched the talks given by Biden in 80s, 90s, and 2000s on foreign policies, on racial issues, and on education, and I found him repulsive and couldn't believe the projected image of him being "nice grandpa", "adult", or "moderate".

cheriot2• 4 years ago

Just the way that they talk about this is so...vile. 8.5% inflation is a nightmare. You're in charge. Take ownership of that, and for the love of god stop trying to use the massacre of innocent people in Ukraine is a political tool for youself.

1. The President of the United States does not control inflation, the price of oil, the price of CPUs, the price of new and used cars, or the ports that are backed up. People ask a glib question and get a glib answer.

2. What war in all of human history was not politicized? This really should not be surprising.

I get not liking politics, but being outraged at the state of the world and directing that at whichever politician is in office... is not useful unless you're playing politics yourself.

tenpies• 4 years ago

1. The President of the United States does not control inflation, the price of oil, the price of CPUs, the price of new and used cars, or the ports that are backed up. People ask a glib question and get a glib answer.

Except he does. Sure he is not holding a dial labeled "inflation", but he led a tsunami of poorly thought out policy, wasteful spending, and virtue-signalling.

Even if you lay aside how he was actively demonizing O&G before winning the election, his first action as POTUS was literally to cancel an oil pipeline. Transport costs are a factor in oil prices, you cannot pretend they aren't.

maerF0x04• 4 years ago

Inflation is hurting Americans

This is a nuanced thing tbh.

Anyone with a lot of debt (eg lots of student loan debt) actually benefits from inflation.

Inflation is hurting _fixed income and currency holders_

butlerm4• 4 years ago

Almost anyone with a wage, salary, or rate that doesn't trivially adjust is hurt by inflation - unless of course they have more than enough debt to make up for all of that.

thehappypm6• 4 years ago

I’m not sure why you’re being downvoted because it’s true. I bought a house in 2021 with a 2.6% mortgage interest rate. Inflation is making my payment more affordable in real terms.

matheusmoreira2• 4 years ago

Yes. Inflation hurts anyone trying to accumulate any amount money. They're better off spending it as soon as possible. Much harder to get rich by saving money now and it's not like corporations are in a rush to give matching raises to workers.

gumby2• 4 years ago

Inflation at the moment is a global phenomenon. It’s hard to see how any US policy can be responsible for that, except at the margins.

imtringued4• 4 years ago

Inflation is dead in China.

hintymad3• 4 years ago

Yet multiple media simply repeats the talk point of The White House. Serious question: I wonder why journalists are so aligned with the assessment.

nodesocket4• 4 years ago

Thank you. I'm glad I'm not the only one who is outraged about this. This has little if not zero to with Russia and more about the current administration's horrific economic and fiscal policies.

Just last week they extended the delay on student loan debt repayment? Why in heck? That leaves more money in people's pockets to go out and buy and spend. Let's stop with this Covid charade of outlandish government spending on programs that we don't need. In reality Covid is a prop to push through liberal fiscal policies.

Another example; the current administration pushing hard for Union's at Amazon and Tesla. Once again, rising wages is not the policy that helps reduce inflation. It's literally econ 101; "to make up for the increase in cost, companies must charge more for their goods and services to maintain the same level of profitability."

Bud5• 4 years ago

Which "horrific" economic and fiscal policies, specifically, do you assert are responsible for the current inflation?

Please cite specifics, with sources.

As an aside, your assertion about covid is utterly ludicrous.

quickthrowman2• 4 years ago

Just last week they extended the delay on student loan debt repayment? Why in heck?

Because there’s an election in November.

hintymad3• 4 years ago

This is a graph of US inflation: https://en.wikipedia.org/wiki/File:Inflation_data.webp. I fail to see how this inflation is "the Putin price hike". And what happened in 2021 Jan?

colinmhayes11• 4 years ago

And what happened in 2021 Jan?

People started getting vaccinated and returning to normal? I know a few people got it in december, but January is when things really ramped up.

memish6• 4 years ago

"The Party told you to reject the evidence of your eyes and ears. It was their final, most essential command."

karmasimida• 4 years ago

But this is partly on Putin right?

If he didn't attack the oil price won't go increase further.

bufferoverflow2• 4 years ago

Look at the oil prices right before the war vs right now. Almost the same.

ncmncm2• 4 years ago

My threshold for what must be considered reprehensible White House activity has shifted by an alarming degree over the past 5 years.

Under current conditions, this is just politics. I was never impressed with Biden's integrity, and this does not change my estimation, but anything that might help keep out-and-out grifters out of government is looking like a win, nowadays.

The perfect is the enemy of the good, but likewise the not-great is the enemy of the disastrous. That's where we are now.

Bud5• 4 years ago

This comment is completely slanted and unjustified.

Accurately characterizing this inflation as being partly the result of disruption in the oil markets caused by the war in Ukraine is emphatically not the same as taking political "advantage". It's simply a statement of fact. Not a "political tool".

I think you have an axe to grind and have decided that the Biden Administration would be a nice sharpening stone.

mhitza• 4 years ago

It happens everywhere. In Romania the media quickly spinned the story of inflation to the war in Ukraine.

Even when our current national bank director stated in early January that'll we'll reach double digit measured[1] inflation by summer.

[1] felt the need to emphasis measured because they changed the way inflation is measured last November, to probably show politically better numbers going forward.

overtonwhy• 4 years ago

Wow a new account that's anti government with the immediate hot take getting voted to the top. How refreshing.

thepasswordis3• 4 years ago

Our accounts are the same age.

odonnellryan2• 4 years ago

Inflation will kill Americans. It may kill more Americans than Ukrainians due to the war. That's hard to say but inflation has a strong correlation with increased mortality rates.

oneoff7863• 4 years ago

By what mechanism will a small bump to inflation kill more Americans than the number of casualties in Ukraine?

ajross5• 4 years ago

the suffering that their policies are causing

Not sure what policies you're talking about here? Most of the current inflation drive is (1) a spike to petroleum markets which is impacting shipping speculation (you handwave it away, but yes: this is the biggest current factor), (2) the reheating of the consumption economy in the wake of the pandemic, (3) the slower ramping of the production economy to compensate (c.f. chip shortage), (4) the tail end of the pandemic savings boom caused by in hindsight very generous temporary benefits.

Of those factors, only one is an issue of US government policy. And it was wildly popular, almost 100% bipartisan, and passed during the prior administration.

To wit: in your horror that the Biden administration would blame inflation on Putin, you seem to be rushing to blame inflation on the Biden administration with even less justification! It's topical right now because of a discussion yesterday, but... basically, I'm not completely convinced your argument is being made in Good Faith.

jollybean• 4 years ago

The war in Ukraine is a fundamental driver of inflation.

The other is COVID hangover from money printing and screwed up supply chain.

It's perfectly responsible to highlight the factors that are driving it.

If Biden was lying, it'd be another thing, but he's not.

It's perfectly fair populism.

Putin kicked of a war that is having massive repercussions that are just beginning.

You have Ukranian sympathy, but are you willing to pay 2x heating bill next winter?

Because Germans are going to have to face that, and their sympathy for Ukraine might plummet, there could be riots.

Those are the kinds of things that cause revolutions.

Lendal• 4 years ago

Much has been made about the Russian oil & gas situation and how it affects the prices of every product or service produced downstream of it.

Here's something you might not know. Russia produces 86 billion tons of wheat, Ukraine 25 billion tons of wheat annually. Only China produces more. The yellow in Ukraine's flag symbolizes wheat, it's that important. Much of Russia's wheat has been cut and 100% of Ukraine's wheat shipments have been cut from the world supply. Several countries get almost all their wheat from one of Russia or Ukraine. Not only are their prices skyrocketing, but famine is inevitable. It is coming. Inflation is only the beginning. Famine is the oncoming train, and people have the balls to complain about prices. Just wait. Those countries are going to try and buy US or Canadian wheat, driving up prices yet again.

You're free to complain about politics, but war is now the primary driver of inflation, whether you believe it's politically correct or not.

jcadam5• 4 years ago

Rationing is coming, guaranteed.

zacharytelschow• 4 years ago

war is now the primary driver of inflation

“Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” -- Milton Friedman

All else being equal, a rise in the price of wheat or oil would necessitate a decrease in the price of other goods as more money than previously is spent on those particular goods. If you spend more money on gas, you'll have to spend less on something else. The only way [wheat+gas+etc] and all other goods can rise is if there's more money created to chase those goods.

somewhereoutth• 4 years ago

Pestilence, War, Famine, Death.

jcadam5• 4 years ago

And even that 8.5% number is heavily manipulated. Just like the unemployment rate.

jcadam5• 4 years ago

For the downvoters: http://www.shadowstats.com/alternate_data/inflation-charts

hereforphone• 4 years ago

Those of us who have lived through several administrations, and who aren't ultra-partisan, realize that this would play out much differently in the (traditional and social) media if it were to occur under a conservative administration.

hatware• 4 years ago

Everything is Russia's fault, haven't you been watching the NEWS?

belter• 4 years ago

Want to blame somebody, blame these guys: https://www.federalreserve.gov/

hahaxdxd123• 4 years ago

Yeah, it isn't like there are similar historically high inflation rates in the UK or Germany or the rest of the world. Nope. Biden's fault...

webXL2• 4 years ago

I highly recommend YouTube Comment Search[1]. I just searched for "hike" and got three Putin Price Hike quips from Psaki (yesterday's brief).

The masses are being programmed to look away from monetary policy. The last time an invasion caused oil prices to soar, we didn't get 8.5% inflation!

1. https://chrome.google.com/webstore/detail/ycs-youtube-commen...

edit: my search was on yesterday's press briefing

RickJWagner• 4 years ago

It's worth noting that the government has 3 primary tools for dealing with the burden of debt. (Debt brings with it interest payments, reducing the effectiveness of government.)

1) Tax increases. Political poison.

2) Reductions in entitlements. Unpopular with many (depending on which entitlements are reduced.)

3) Inflation. Sometimes nearly invisible, it only becomes politically dangerous when it's a good deal above average and in the public eye. (We are there now.)

cavisne• 4 years ago

There is 30T in government debt, and interest payments last year were ~500B/~6T of total spending.

What impact would a 1% move have on these payments, is this public information? (ie. how much is fixed vs floating etc).

Can the Fed even raise rates in an environment like that?

icedistilled• 4 years ago

Biden caused global inflation? Biden can fix global inflation? It's fun to scapegoat and cathartic. But it's counter productive and inaccurate. I seem to remember money printing and pressure to keep fed rates low even before biden, not to mention the pandemic chaos that has jacked up price world wide. It's simpler to blame whoever is currently in the spotlight though and feels so good.

lifeplusplus• 4 years ago

CPI was measured differently back then and I read calculating the old way it surpasses 1981

jbay8086• 4 years ago

The biggest story here is in shelter prices.

https://www.bls.gov/charts/consumer-price-index/consumer-pri...

March saw a continuation of a year-long trend in which YoY shelter inflation accelerated by almost exactly an additional 0.3% each month. March came in at 5%, 0.3% higher than February's 4.7%, and so on.

Shelter is the largest category in the CPI basket, and it is critical for a reason. It isn't coming from Ukraine. It mostly isn't coming from supply chain bottlenecks and shipping container shortages. It isn't discretionary. And most importantly, it's a deeply lagging indicator with a long way still to go to catch up to the current activity in the housing and rental markets.

My expectation is to see this trend continue. Base year effects (in the second derivative) might slow it down a bit, but by June we could be looking at almost 6% inflation in shelter alone.

And remember -- a linearly increasing growth rate is faster than exponential price growth.

Interest rate hikes may help, but the dynamics are such that they'll need to make things worse before they make things better.

matwood4• 4 years ago

It mostly isn't coming from supply chain bottlenecks and shipping container shortages.

Inventory is still bumping along record lows. Housing starts were up in the new year, but it will take time for new units to come online after being side lined with labor and material shortages. ~5% mortgage rates are also likely to begin to slow things down.

jbay8086• 4 years ago

Inventory is still bumping along record lows.

Absolutely, but that's part of the mechanism through which price rises happen, more than a causal explanation of it. It further suggests that shelter has a lot of momentum.

Housing starts were... side lined with labor and material shortages.

That's a bigger part, but easily offset by historically low population growth in the US. Low pandemic interest rates were almost certainly a much bigger factor in driving the housing market than the cost of construction.

~5% mortgage rates are also likely to begin to slow things down.

Again, absolutely (although if inflation also levels out at 5%, that may be neutral). But, as I mentioned in my comment, there's a "right half-plane zero" in the transfer function between interest rates, housing prices, homeownership costs, and shelter. Rising mortgage rates may level off housing prices, but meanwhile drive up the cost of homeownership. Even as the housing market plateaus, those rising homeownership costs can carry shelter higher, both in the form of real rents and "owner's-equivalent" rents. (In Canada the relationship is more direct, with mortgage interest costs directly included in the shelter basket, but the relationship exists indirectly in the US CPI metric too).

That shelter CPI can trend higher as housing prices plateau is the price of reciprocity that we pay for shelter CPI appearing low after interest rate cuts, even as housing prices grew rapidly.

sixo• 4 years ago

Not seeing how that graph suggests shelter is the biggest story. Shelter looks linear since Feb 2021, but only caught up to pre-pandemic levels around Nov/Dec 2021, and while linear since then falls FAR behind energy, food, basically everything else incl the aggregate. A few months of linear shelter prices doesn't register as a meaningfully different trend than the rest of the basket that's been booming this winter, just that shelter would be more time delayed and smoothed0out due to leases coming up.

jbay8086• 4 years ago

The reason shelter is the biggest story is not because shelter inflation is leading the pack (of course it's not, so energy is grabbing all the attention!), but because shelter has so much inertia behind it, and couples so much more closely to interest rates than to supply chains and wars.

riversflow• 4 years ago

Nice observation and chart. Also really unsettling, do you think that housing prices running away like this might instigate some policy shifts?

I can't decide if the U.S. is headed towards a feudalistic society or not. If shelter cost inflation is accelerating it gives me hope, in a sort of grim accelerationist way, that housing will have to be addressed soon. I want to believe that we will see a housing campaign to "promote the American dream" or something, but everyone I talk to seems to think it's not gonna happen and democracy isn't alive enough to fix the corporate rent seeking.

jbay8086• 4 years ago

do you think that housing prices running away like this might instigate some policy shifts?

Probably, yes. It was easy to see this coming, so I think policymakers should have shifted policy earlier, but it will be hard not to do so at this point, because now you don't need to look ahead anymore to see it.

The last time shelter inflation rose in this fashion was around 2010 to 2013 -- but that was shelter bouncing back from -0.6% to 2.3% after the GFC, rather than running ahead of the inflation target. The time before that was 2005-2007, when shelter inflation ramped up to 4.3% before the GFC. And the time before that was the '80s Volcker shock.

That's not just pattern-matching; that's a causal relationship. When interest rates gradually rise or fall, housing prices fall or rise in tandem such that shelter inflation -- rent and mortage payments -- is fairly constant at around 2%. But when interest rates step-change suddenly, shelter reacts violently. When that change is a rate cut, shelter initially falls (as mortgages get cheaper) and then climbs back (as housing prices adjust for the lower rates). When that is a rate hike, shelter initially spikes (as mortgages get expensive) and then falls (after the real estate market corrects).

But real estate market corrections are more broadly devastating than stock market corrections (although they often go in pairs). Housing is a highly-leveraged asset, is most peoples' largest (or only) investment, is used as collateral for other loans, and so on.

Shelter is a good approximator for overall long-term inflation expectations, labor prices, and wage inflation. So the Fed doesn't have much choice but to either address it or allow an inflationary wage-price spiral.

diob2• 4 years ago

Unfortunately I agree with the doomsayers. Things are gonna get a lot worse before they possibly get better. Possibly.

polygotdomain• 4 years ago

I agree that shelter(housing) prices increasing at 5% is not good, but when we're seeing inflation of 8.5% there's something else that's driving things up.

When you look at just the energy component of the CPI you'll notice that it began to outpace inflation in March of 2021 at 13.2% and has fluctuated between 25% and 32% since them. The previous chart on that page that breaks down the most recent month's inflation between food, energy, and all other items you see that food is in-line with inflation, energy is crazy, and other items are at 6.5%.

https://www.bls.gov/charts/consumer-price-index/consumer-pri...

We have a lot of problems going on right now, but why the energy sector has been experiencing crazy inflation for the last year might be more of a factor that the other things grabbing the headlines right now.

jbay8086• 4 years ago

Shelter isn't housing, it's rent. Housing is up much more -- 21.7% YoY (as of January 2022, on top of 9% the previous year [1]) -- but that isn't directly captured in the CPI. Shelter CPI goes approximately as a massive low-pass filter on the product of (housing prices x mortgage rates), and so rising interest rates can carry shelter up higher, even after housing prices plateau.

[1] https://fred.stlouisfed.org/series/csushpinsa

erdos4d3• 4 years ago

Does anyone here know how high interest rates need to be to finally see a military spending cut?

elischleifer• 4 years ago

This is what happens when global shipping supply routes break down.

annoyingnoob• 4 years ago

No matter which party you choose, or if you choose to be independent, we are very likely to end up with a Democrat or a Republican in the White House. History tells us that a lot of inflation under a Democrat president will help flip the next election to a Republican. If Democrats want the next term they will have to get inflation under control, otherwise the WH is going to flip. The way things are going Biden is going to look like Carter.

Barrera2• 4 years ago

Real worker earnings fell by another 0.8% during the month as the cost of living outpaced otherwise strong pay gains.

Most post-WWII recessions were preceded by or coincident with a spike in CPI (and not coincidentally by record-low unemployment numbers). This point is widely overlooked and plain forgotten. A substantial CPI-spike preceded the GFC, for example.

Here's a handy chart to look into this further:

https://fred.stlouisfed.org/series/CPIAUCSL#0

Way too much attention is being focused on the Fed at this point. The Fed is pretty much a bystander engaged in a psychological operation on the American Public. It talked up the current stock market bubble with its pointless QE and now it's in the process of talking down the bubble as gently as it knows how.

Meanwhile markets are telling you what's about to happen. The inversion of the Eurodollar curve in late 2021 and Treasury yield curve more recently are telling you that a recession is on the way. The speed with which interest rates have been fluctuating tells you that something big could be in the works. The sudden appearance of large amounts of housing inventory, partially resulting from spikes in long-term rates tells you that market is peaking. Overvaluation of the stock market by just about any metric (e.g., "the Buffett Indicator") tells you that the bull market is transitory.

And of course, there's falling real wages, which the article notes. 0.8% MoM decreases in purchasing power are not sustainable. Consumer spending makes up the majority of the US economy. Give people less to spend and they start going into debt to keep up appearances. Take away their job during a recession, and they default on those debts.

Every time these kinds of warnings flash, spinmeisters write them off as peculiarities of the current situation. Every time, there's a reason this time is different. It never is.

dont__panic• 4 years ago

As someone who's currently feeling left out of the housing market and who thinks the stock market has been pants-on-fire insane for the last 2 years of covid... I pray for a recession so I can actually own a home.

Barrera2• 4 years ago

When the opportunity presents itself few who think that now will want to or even be able to act.

It turns out that buying a house when house prices are going down isn't much fun. In fact, it's downright terrifying.

Worse, most of the charm of "owning" a house evaporates with even flat prices.

bruce343434• 4 years ago

What's GFC, QE?

bittercynic• 4 years ago

global financial crisis (2008), quantitative easing.

sequoia• 4 years ago

Stepping back from the numbers and into the realm of personal anecdotes:

1. I was listening the radio a couple weeks ago and the DJ invited people to call in and talk about the mask mandate being lifted (in Toronto). Woman calls in, says she went to the grocery store, got three bags of groceries, $146. The dj asks "and... were people wearing masks?" "oh yeah, some were" says the woman before going on to explain how she paid $14.50 for a roll of aluminum foil. The topic was masks and the caller didn't even want to talk about that, the cost of goods was her top and only issue.

2. Standing in a park, an older gentleman is walking by with two small bags of groceries in his hands. I look at him to greet him as he passes, but he walks straight up to me as though he wants to address me. He stops in front of me, looks right in my eyes, lifts his groceries and says "FORTY DOLLARS! Too much money!!" (English was not his first language.) I directed him to the discount grocery, he confirmed that's where he is already shopping, and it's a green grocer with dry goods so I know his bags contained no (costly) meat, just vegetables and maybe some bread, pasta, or eggs.

I frequently hear of "inflation" etc. on the news or economic reports, but this is different. I have never been approached by strangers on the street who are so frustrated and shocked by price hikes they couldn't walk all the way home without telling someone, even a stranger. This economic situation is different from any I have experienced in my ~40 years.

jcal93• 4 years ago

Oooff.. these are hard-hitting stories for me. I can relate similar anecdotal evidence though; my parents called just today to vent about the cost of a carton of eggs at the discount grocer. We've not noticed it too much yet, save the cost of some meats locally. I expect it will catch up here when it's not our growing season.

digianarchist• 4 years ago

It's almost certain that the BoC will raise rates tomorrow. I think they're going to have to accelerate the increases.

Throwawayaerlei• 4 years ago

This economic situation is different from any I have experienced in my ~40 years.

I'm sure you realize it at some level, but as someone who's half again older than you, this is the 1970s at warp speed.

jcal93's comment below about eggs though is partly "transitory" inflation, we're having another widespread bird flu outbreak like in 2015: https://en.wikipedia.org/wiki/2015_United_States_H5N2_outbre...

parf02• 4 years ago

So what does the normal working class guy like me do to protect my savings? Currently investing in diversified ETFs doesn't seem to protect me.

reducesuffering• 4 years ago

Global stock market is 18 P/E, so returning 5.5% + inflation medium & long term, assuming no growth. That's 14% nominal right now, more if there's any growth (which there usually is medium & long term).

nofunphil• 4 years ago

So, I think it’s time to build solutions that directly address the problem (inflation). An interesting idea would be an NFT (I know…bear with me)that breeds a “child NFT” when CPI(inflation) rises past a threshold. Owner can sell child to cover inflation costs. Child becomes a parent when transferred, and similarity breeds based on CPI increases. Cycle repeats…

Would love to hear why it won’t work, how to improve it, etc.

Instead of asking governments to stop printing so much dang money, or, starting wars, both of which cause inflation, we can now say fuck it and build economic tools that protect people from the crushing lose in purchasing power. Let’s do that!!

erdos4d3• 4 years ago

Maybe ditch the NFT part and do it with actual children and you might be on to something.

fy20• 4 years ago

Isn't that just a Ponzi scheme? What happens to the person who buys one, then the CPI is flat for 10 years.

skybrian• 4 years ago

Normally the difference from a year ago is reported, but you might also want to look at the level graph:

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

stuckinhell• 4 years ago

The government is lying. The CPI index is being manipulated like crazy. Real inflation or grocery store inflation is at 20% percent min, and it's easy enough to check for most americans. Just check your bills and factor in smaller sizes. Cost increase of at least 10% plus smaller portions.

erdos4d3• 4 years ago

100% agree. Prices where I live are up at least 20% from last year on basically everything. The official numbers are just not believable.

randyrand• 4 years ago

Can they really not add YoY in the title? It's 3 characters.

contingencies• 4 years ago

In Februrary UK prices were up 6.2% YoY which is a 30 year high. https://www.bbc.com/news/business-60833361

aglavine• 4 years ago

I don't get it.

With this unemployment figures deficit could be decreased substantially without hurting much economy. Why on Earth they aren't doing this?

flerovium• 4 years ago

Note: it's 8.5% annualized.

Consumer prices rose 8.5% in March – highest since 1981

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