Friday, June 17, 2011

CPI Sticker Shock



In the short term, I think there's a fair chance that the year over year CPI inflation rate may be peaking again.

1. As seen in the chart above, last June was actually deflationary so any inflation at all this June will boost the headline CPI. The year over year rate will be 3.66% plus the seasonally adjusted inflation from May to June.

2. The curve appears to be flattening (and/or rolling over).

3. Housing prices are falling again.

4. Oil is struggling to hold the $100 level.

Source Data:
St. Louis Fed: CPI

14 comments:

getyourselfconnected said...

For no inflation that seems like a pretty step graph!

getyourselfconnected said...

Steep, I cant type.

Who Struck John said...

I do wish we'd quit playing economic whack-a-mole. Every time the economy starts to stand up, half-a-dozen things (oil price, central bank policy, government policy, etc. etc. etc.) whack the economy in the head.

Stagflationary Mark said...

GYSC,

It is just a scaling issue.

Let's reserve steep for this. The year over year inflation was roughly 14% in 1979. Ouch.

Stagflationary Mark said...

Who Struck John,

Every time the economy starts to stand up, half-a-dozen things (oil price, central bank policy, government policy, etc. etc. etc.) whack the economy in the head.

It is only because our economy is so rocky.

Stagflationary Mark said...

Unfortunately, Rocky is a fictional movie. In real life, using your head to block incoming punches is far less effective. Sigh.

Stagflationary Mark said...

Dictionary.com: Rocky

difficult or uncertain; full of hazards or obstacles: a business with a rocky future.

Rocky!

Who Struck John said...

Mark,

Real inflation is when the meal that cost 5,000 marks upon ordering is 8,000 marks when the check is delivered.

There's a very good reason that the Germans are so inflation-averse; they've had their savings wiped out by currency inflation twice in the last century, though most in the West know only of the Weimar inflation and do not recall the Second Great Haircut of 1946-8.

getyourselfconnected said...

14% in 1979, that must have been a bad time (I was 3). One of my favorite commercials is when Dwayne Wade asks Charles Barkley why there is no statue of him in Philadelphia, and notes "They have a statue of Ricky, and he's not even real!"

Jazzbumpa said...

It's all about the oil. Core inflation is a fraction of a percent, and real wages are below that. We are in serious danger of a long slide into deflation and depression.

http://quotes.post1.org/historical-crude-oil-price-chart/

Crude pricing was relatively stable from late '09 to late '10, and actually took a step down in early summer. I think what we're seeing is the peak of a long, slow secondary bounce after the bubble. From the '09 bottom, the recent top is slightly above a 67% retracement.

Look at historic bubble charts. This post has the aftermath of the '29 stock bubble, with a 50% retracement.

http://jazzbumpa.blogspot.com/2009/02/more-on-smoot-hawley.html

It always plays out in some version of this kind of bounce. After oil prices fall and stabilize at their real supply and demand determined price - which may be as low as $35 - it will stay down for decades.

In 50 years the oil industry will be what railroads are today - a necessary fragment of industry, but no kind of leader.

Cheers!
JzB

Stagflationary Mark said...

All,

We had 1970s inflation in the 1940s as well. WWII was not a deflationary period. When people see value in hard assets inflation tends to happen. It can also be argued that when inflation is happening, people see value in hard assets. Slippery spiral slope that can be!

That said, oil prices certainly have room to fall if any of that process unwinds. Housing prices certainly have.

In other news, I spent all day Saturday playing Pinochle. It had been years. Very fun!

Jazzbumpa said...

I spent Saturday at granddaughter's dance recitals. Also very fun.

Cheers!
JzB

MaxedOutMama said...

Mark - inflation in other stuff like services, food and drugs is going to take off over the summer and cause further pain.

This will end when the economy takes another hard landing.

This morning crude is up on the dollar, but product is selling down.

Stagflationary Mark said...

MOM,

This will end when the economy takes another hard landing.

Here's a photo.