U.S. Inflation Eased to 5% in March

https://www.wsj.com/articles/us-inflation-march-2023-consumer-price-index-fa6eba99

73 102 3 years ago

zxcvbn4038• 3 years ago

I don't believe it, $10 says somebody someplace changed how inflation is calculated in order to make the number look better.

water554• 3 years ago

Yes, the government did this a very long time ago

theropost• 3 years ago

They regularly updates the basket of goods, and make adjustments

terran57• 3 years ago

Your $10 needs to be $15 now...

jonnycomputer3• 3 years ago

5% is $10.50, not $15

roflyear5• 3 years ago

Different things mean different things for different people. Meaning, 5% inflation may hit one person harder than another. That's valid.

However, the same calcs have been used for a while here. All of this economic data needs to be taken and compared with the same data. It can't be used outside of that context and have a lot of meaning. This goes the same for unemployment numbers, GDP, etc. They lose a lot of meaning outside their context.

In context, inflation is easing. It may still seem high but it is easing up compared to previous months. How you interpret that is up to you.

kcplate2• 3 years ago

Why not, they redefined recession…

mywittyname2• 3 years ago

The article is paywalled, so I looked at the BLS CPI data myself.

The 5.0% number is being driven by falling (plummeting? -6.8%) energy prices. Food is still up, at 8.5%, and all items excluding food and energy stands at 5.6%.

https://www.bls.gov/cpi/

melenaboija• 3 years ago

That’s exactly what the article says.

mywittyname2• 3 years ago

Like I said, it was paywalled for me. So I went ahead and did the courtesy of looking up the data directly from the source for others who are also paywalled.

IMHO, that's more ethical than bypassing the paywall restriction.

krisroadruck• 3 years ago

I wonder how seasonal energy prices are. Seems intuitive that as winter abates and heating demand drops, energy prices would fall.

dragontamer5• 3 years ago

These are all seasonally adjusted numbers.

But we had a warmer than expected winter, meaning less demand on heating meaning lower energy prices.

RadixDLT• 3 years ago

since 2020 prices has risen 45+ %

roflyear5• 3 years ago

Source for this? Going by inflation rates, even just food, it looks like we're at 20-25%. That's still a lot, but it isn't 50%.

https://tradingeconomics.com/united-states/food-inflation#:~....

davidgay• 3 years ago

No, CPI since January 2020 is 17%.

ta1243• 3 years ago

Not according to the calculator on https://www.bls.gov/ where $100 in March 2020 is $116 in March 2023

Lumber alone is $380 now, about the level it was in 2019. I'm old enough to remember the gnashing of teeth on this forum when lumber prices were unsurprisingly super high in 2020 and how that meant inflation on everything was really high.

I assume the same people will be claiming the opposite now and that deflation is a major problem

dragontamer5• 3 years ago

Yeah, food and energy move a lot.

So a lot of people ignore food and energy. When you ignore them, it's called 'Core CPI' and tends to be a better indicator of long term trends.

nend• 3 years ago

Sounds reasonable to me. There are 2 outliers, and the rest are right around average.

bryanlarsen2• 3 years ago

Energy is a leading indicator -- it moves the fastest and also is a cause of inflation in the other goods. Energy is a massive component in the price of food, so food prices should follow the price of energy in time.

meragrin_• 3 years ago

And gas/oil is already headed back up.

roflyear5• 3 years ago

Makes sense, and is even positive: food prices will probably fall soon as that part of the economy stabilizes post Ukraine invasion.

Energy could fall even MORE post Ukraine invasion if there is some kind of resolution!

DiscourseFan• 3 years ago

Yeah I noticed that gas was getting pretty cheap, but supermarket runs were still getting more and more expensive. I've been buying luxury goods recently because they're so cheap, relatively, inflation hasn't hit things like Apple products nearly as hard.

akmarinov• 3 years ago

Well that bodes well for future months, energy factors into everything, especially food, so that'll come down as well.

keeganjw• 3 years ago

https://archive.ph/M6J8Q

xwdv• 3 years ago

Nature is healing. Life finds a way.

rconti• 3 years ago

This blog had a great read that I half-understood on how inflation is already baked into a relatively long-term time horizon due to how interest rates affect housing costs.

https://jbconsulting.substack.com/p/on-shelter-futures-part-...

ajross2• 3 years ago

So... are the "it's transient" people owed an apology? (Edit: no, of course not, see replies for all the new reasons why that don't match the original analysis. Partisan orthodoxy wins again!)

This is pretty much what everyone serious was predicting. The inflation burst was driven by a savings glut (caused by the pandemic and excess assistance programs), a hiring boom and attendant wage pressure, and supply side shocks due to sanctions against Russia and a late pandemic wave in China.

Everyone one of those factors could be seen to be temporary at the time. And... now that they're all (mostly) behind us, inflation is dropping as expected.

But yet everyone had elaborate stories about how all that stuff didn't matter and how this was really due to (a somewhat partisan take on) monetary policy. Is anyone maybe revisiting their priors?

jdminhbg• 3 years ago

So... are the "it's transient" people owed an apology?

Not really, the transience predictions were for inflation to ease a year ago.

bryanlarsen2• 3 years ago

Those predictions were made before the war in Ukraine.

shmatt• 3 years ago

there is no expected deflation. So we keep paying the prices as if there is currently a hiring boom, savings glut, wage pressure, and supply side shock.

Even though all of those have stopped by now, we're still paying even more (5%) than during that time. Pretty crazy

And even when inflation eases, I don't think anyone expects to pay 2019 prices for anything in the next 2 years

0zemp1c• 3 years ago

So... are the "it's transient" people owed an apology?

no, they claimed inflation would abate without Fed intervention

important to remember that the inflation rate is still more than 2x what the Fed deems acceptable, a victory lap may be premature

pc86• 3 years ago

Monthly numbers are in the 1-2% range, so no current inflation isn't above the Fed's "acceptable" inflation rate, it just isn't measured on a small enough scale for this release to talk about it.

roflyear5• 3 years ago

Where did anyone claim that? That's a pretty big rewriting (in my view) of history, so please back it up!

Dylan16807• 3 years ago

important to remember that the inflation rate is still more than 2x what the Fed deems acceptable, a victory lap may be premature

Only because of the 3 most distant months of the 12 month moving average. Those 3 months were 3% by themselves (not annualized), and the last 9 months have been 2% (not annualized).

Unless rates spike, inflation is going to drop below 3% in June. And it would take a ridiculous swing for it to not drop below 4% in June.

ajross2• 3 years ago

no, they claimed

That's sort of meaningless without an antecedent for "they". What I'm referring to is the chorus of voices (heard very loudly here on HN) that claimed that the 2022-23 inflation burst was the inevitable results of government money printing out of control, and that that it was unresolvable absent large-but-largely-not-identified cuts in out of control deficit spending.

Now, everyone wants to pretend that the fed rate hike did it all and that no one was ever talking about financial policy? Meh. Inflation reducer go brrr... I guess.

alexb_• 3 years ago

Or, more likely, inflation is falling because interest rates are rising. Interest rates staying low because of pandemic fears is the reason we had this gigantic inflation - interest rates rising to levels that are actually reasonable are causing inflation to slow.

neffy2• 3 years ago

Interest rates are a second order impact on the money supply, high enough interest rates may stop monetary expansion - if they reign in lending. This works fairly well in the states where the fixed rate long term loans provide a huge disincentive to new lending (say moving to a bigger house), but not so much elsewhere (it is actually possible to have both high inflation/monetary expansion, and high interest rates - it depends a lot on details of the local financial system and its regulation.)

So its probably correct to say that the monetary contraction the US is currently experiencing is due to high interest rates, but that doesn't stop the inflation that has already been caused by initial money printing.

jonnycomputer3• 3 years ago

There is a significant lag between rate changes and effect, unless its a second-order expectations effect. Following folks like Noah Smith and Brad DeLong[1], I suspect that it isn't the rate hikes, and the rate hikes are actually threatening an uneccessary recession.

[1] https://noahpinion.substack.com/p/is-the-fed-hiking-too-fast

dragonwriter4• 3 years ago

Or, more likely, inflation is falling because interest rates are rising.

Yes, the existence of the Fed and the fact that it does monetary policy is part of the given for most of the people who predicted the inflation surge would turn out to be transitory, rather than durable.

Interest rates staying low because of pandemic fears is the reason we had this gigantic inflation

They are a factor, more precisely, the combination of monetary and fiscal stimulus enacted in response an economic slowdown that, in retrospect, turns out to have been both one of the most rapid on record, but also extremely short and with a rapid rebound, overshot in monetary effect terms, leaving the US largely all in on stimulus during one of the most powerful economic rebounds in history.

neffy2• 3 years ago

The inflation burst was driven by money printing by the Federal Reserve/Government repeated by other governments world wide during the Covid pandemic, in order to prevent the financial system imploding as everybody defaulted on their debt. Attributing it to a "savings glut" - which I know is the mainstream interpretation is darkly hilarious.

Once that has happened, the hard part is predicting how long it will take the impact to bleed out of the system - i.e. the lags - and knowing that inflation is measured over a year, the answer is at least a year after the money supply stabilises.

Said money supply:

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

btw. the way its currently contracting... that's bad. Really, really bad. They need to stop that quickly, before it does any more damage.

superkuh2• 3 years ago

Most people who are experiencing and talking about "inflation" are experiencing and talking about the increases in food and energy which, for the most part, haven't gone down. It just goes to show you that the food price increases were never inflation, just them realizing they could price gouge under the cover of inflation.

This may not matter for capitalists and finance industry jargon heads who don't have to personally worry about food and energy, but for most of us it's a substantial part (if not >1/3) of our monthly bills.

nradov• 3 years ago

What is price gouging exactly? How can we determine whether a particular price level is due to gouging or other factors?

dragonwriter4• 3 years ago

the increases in food and energy which, for the most part, haven’t gone down

Energy inflation is -6.4% year over year in the last CPI report, as well as being down month over month (both “raw” and with seasonal adjustments).

What on Earth are you talking about? (Yes, Food inflation is still fairly high, energy though…if anything, one of the drivers of continued inflation fears despite the low trend of the last several months is that the current low inflation is substantially dependent on energy inflation, which is generally historically highly-volatile, being negative.)

arberx• 3 years ago

Central banks embarked on the largest and fastest hiking cycle in a long time.

Nothing at all transitory about it.

trynumber9• 3 years ago

No I don't think so. Look at the current interest rates. Monetary policy is the hammer as theory implies.

_Parfait_• 3 years ago

no, they were completely wrong on this full stop. The fed had to do an aggressive rate hike. By your logic the great depression and great recession was also transitory*

amanaplanacanal• 3 years ago

everything is transitory. Unless people define their words differently.

dragonwriter4• 3 years ago

no, they were completely wrong on this full stop. The fed had to do an aggressive rate hike.

Yeah, I think one big difference between the “transitory” and “not transitory” camps is that the former camp tended to take “the Fed will continue to exist and engage in monetary policy in response to economic indicators” as a given, while the latter either a assumed no monetary response or vastly underestimated the effectiveness of monetary policy response.

By your logic the great depression and great recession was also transitory

Even with policy intervention, neither of those resolved quickly, so, no, by the definition by which the post-COVID-recession inflation surge appears to have been transitory, those would still not be transitory.

bnralt• 3 years ago

Fed policymakers had predicted there wouldn't be any rate hike before 2024, then they predicted there would be two by late 2023[1]. We've had nine rate hikes since then.

I think the correct reading of the situation is that inflation wasn't transitory, which lead to the Fed raising rates much soon, much higher, and much more frequently than they anticipated (which is why SVB ran into so much trouble), and the heavy rate hikes eventually got inflation under control (which was the entire reason for the aggressive rate hikes).

[1] https://apnews.com/article/inflation-health-coronavirus-pand...

fauxpause_• 3 years ago

Reminder that this number is an average of the last 12 months’ numbers. The monthly numbers are around 2% last I checked.

fizx• 3 years ago

1.26% yearly inflation based on the march number alone.

seydor2• 3 years ago

Why don't they just measure it month-to-month. Are they trying to make the whole thing more dramatic by reading the yearly change? They make it seem like the Fed can only do division by 12 months to make up its mind.

MattGaiser• 3 years ago

Probably to reduce volatility in the measurement and because their main policy tool of interest rate hikes takes a while to take effect.

seydor2• 3 years ago

i would expect them to have a model better than moving average

somenameforme• 3 years ago

You can answer this with reductio ad absurdum. Imagine they could do it by the second. Should they? That actually may not be self evident to many. The reason you would not want to is that as you start minimizing time frames, you start measuring more noise (variance) than signal.

Inflation is measured by looking at how the price of a standardized "basket of goods" changes. And this can go up and down quite quickly over short periods of time, for reasons that have nothing to do with generalized inflation. A yearly rate is long enough to make sure you're getting mostly signal, not so long that it loses meaning, and you also get to automatically normalize for various seasonal trends without relying on magic numbers.

saurik• 3 years ago

The speed of my car can also go up and down quite quickly and yet it would be crazy to try to drive it using a moving average of how fast I was going over the prior 60 seconds. "I dunno. I realize I slammed on the brakes ten seconds ago, and my speed over the past minute has certainly gone down a bit? But I'm still going really fast... I should keep holding this brake down." Meanwhile, of course, you are stopped on the exit ramp of the highway. I'm sure you'll figure it out, though, in another 50 seconds.

hartator• 3 years ago

Month-to-month might have some noise that makes it hard to read. We are still at 5.0% year-to-year inflation and 0.1% month-to-month inflation. This is still bad.

wcoenen• 3 years ago

Why don't they just measure it month-to-month

Because there are seasonal variations, e.g. gasoline tends to be a bit more expensive in summer in the USA

https://www.eia.gov/energyexplained/gasoline/price-fluctuati...

onlyrealcuzzo• 3 years ago

5% backward looking.

If you use the last 3 months and extrapolate forward - we're back down to ~2.5%.

If you use only the last month and extrapolate forward - we're at ~1.25%.

Housing costs are ~39% of the economy alone. If those aren't inflating - it's pretty hard for overall inflation to be super hot.

Unless rents & owner's equivalent rents start shooting up again, inflation isn't going back to 10%.

notch898b• 3 years ago

I guess the big question is whether landlords will hand down to tenants the massive increase in mortgage costs as interest rates rose while real estate barely budged.

KerrAvon• 3 years ago

If we're to believe the media, one of the myriad issues with housing at the moment is that landlords held onto their low-rate pre-pandemic mortgages, so there might broadly not be an increase to pass on.

sneed_chucker2• 3 years ago

massive increase in mortgage costs

Sorry, but why do you think landlords have experienced an increase in mortgage costs?

Maybe if they have adjustable rate mortgages or if their loan originated after March 2022. But I don't think that's the case for the vast majority of established landlords.

What's way more likely is that everyone marking rent money off of leveraged property went ahead and refinanced everything to 2-3% fixed rate mortgages as soon as that became an option.

bequanna3• 3 years ago

Good, but asset values are still near historical high valuations.

The Fed plan isn't to just tame inflation but reduce employment to slow wage increases, reverse asset gains with "higher for longer", and restore credibility.

Get comfortable. Still a long way to go before that pivot.

makestuff• 3 years ago

Typically the asset crash happens after the fed pivots. Obviously correlation != causation, but just because inflation is coming down doesn't mean assets won't follow soon.

JumpCrisscross2• 3 years ago

Fed plan isn't to just tame inflation but reduce employment to slow wage increases, reverse asset gains with "higher for longer"

No, the Fed’s plan is to tame inflation. If Powell can do that while maintaining strong employment, he’ll go down in history as a legend. Nobody wants unemployment to go up or asset prices to go down.

jraby3• 3 years ago

Housing prices aren’t included in the inflation basket of goods.

dragontamer5• 3 years ago

Yes it is. See "Shelter", filed under "Services less energy services".

alephnerd2• 3 years ago

This is the 5th time I've seen this comment on HN. How did this misinformation start?!? CPI calculation includes housing. The BLS is very open about it.

Edit: misread GP as Housing COST. Not Housing PRICE

Housing Price is NOT included in CPI.

Housing Cost IS (via the OER)

dragontamer5• 3 years ago

I don't think its a good idea to extrapolate using CPI, because food/energy is so volatile. Its not like anyone can predict the next Avian flu / Swine flu / whatever... and oil prices rise / fall to the whims of OPEC+, which is also quite unpredictable. (Also, weather: mild winter caused lower energy prices this past few months... but we can't rely upon good weather constantly)

Core-CPI isn't so rosy: the last three MoM values are 0.4, 0.5, and 0.4 (1.3% core CPI inflation over 3 months), which extrapolates to 5.3% yearly core-inflation.

Which _is_ down btw compared to last year... But its not nearly down enough.

adam_arthur7• 3 years ago

And it's ~5% if you annualize last months MoM core measure.

The Fed is making judgements primarily off of core, not headline. e.g. Oil dropped to ~$65 last month, but is now at ~$85. Does it make sense to consider last month's number a durable trend down given that the low headline was primarily due to decline in energy prices? A decline that doesn't exist anymore? No, not really.

CPI in general is a poor measure for driving Fed policy since many measures are lagged, but even still, far more sensible to use core and strip outliers

dragontamer5• 3 years ago

Fed policy is based around PCE these days, not CPI. Because PCE is more-leading than CPI is. (Or less lagged?)

stainablesteel• 3 years ago

information on US inflation would go nice with information on inflation in other countries, seeing as its the relative comparisons that matter here

the fact that they don't do this means....

MrThoughtful• 3 years ago

For some definition of "Inflation".

The original defintion was an increase in the amount of money.

This amount can be seen here:

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

We are still in an experiment which started in 2008. Unprecedented amounts of money have been printed. All this new money creates waves throughout the economy. With all kinds of complex indirect consequences for prices of different types of goods and services.

It will take many more decades to see how this experiment actually plays out.

The rise of stock prices and the downfall of Silicon Valley Bank are just the first ripples we can witness.

jonnycomputer3• 3 years ago

I thought you were wrong about the original definition of "inflation", but this article agrees with you on that historical fact:

https://www.clevelandfed.org/-/media/project/clevelandfedten...

Not sure I share your worries though, tbh.

mwbajor• 3 years ago

In my experience, when it comes to inflation discussions, everyone dances around the subject because there is an R or D after a name that they don't/do like.

Hows about this: Both R's and D's have printed too much money over the last 40 years. They are equally responsible on average since 1972, some more than the other at times.

It sounds archaic, dumb, and antiquated but things got worse after we left the gold standard and no, a person is not crazy for saying shiny rock with a certain scarcity prevented politicians from printing too much money.

grogers• 3 years ago

We were printing too much money going back far longer than just 1971. That's just when other countries found out and we ran out of actual gold to exchange it back.

0xDEF• 3 years ago

So why are finance podcasts and twitter awaiting the total collapse of the petrodollar and US economy when the official numbers (and people ITT) say otherwise?

xracy• 3 years ago

It feels like, for most practical purposes comments about "inflation lowering YoY" are missing the point that the damage is already done. Like, until costs of things actually start to go down (seems unlikely), the inflation easing isn't actually a tangentially positive thing for the people most negatively impacted by inflation.

egberts1• 3 years ago

In other words, last 23 months worth of real wage loss and still losing ... badly.

https://ycharts.com/indicators/us_real_average_weekly_earnin...

U.S. Inflation Eased to 5% in March

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