2021 - Is inflation finally back in the conversation?

[GRHorn 105]

So is it not going to be transitory?

 

[XYZ 2154]

1 hour ago, GRHorn said:

So is it not going to be transitory?

 

Hahaha

[GRHorn 105]

5 minutes ago, XYZ said:

Hahaha

I mean, seriously. 
We started with there won’t be any inflation.

Then we got, there will be inflation but it will transitory. 
Now we’re getting, the inflation will be good for you. 
 

These aren’t the droids you’re looking for. 

[Parliament 13979]

[workswithseed 2012]

 

lol

[unoriginal 55]

7 hours ago, GRHorn said:

So is it not going to be transitory?

 

Inflation's silver lining: silver

[Storm the Field 5239]

 

[Neonmoon 38126]

But that fact doesn’t fit my inflation panic hypothesis 

[Blotto 23226]

June Consumer Price Index: +0.9% vs. +0.5% consensus and +0.6% prior; represents the largest M/M jump since June 2008 when the index rose 1.0%.
Over the last 12 months, the index increased 5.4% before seasonal adjustment; that's the biggest increase since August 2008. The all-items index has been trending up every month since January.
Prices for used cars and trucks continue to advance, rising 10.5% in June; this accounts for more than  third of the seasonally adjusted all-items increase.
The food index rose 0.8% in June vs. a 0.4% increase in May.
Energy index rose 1.5% in June with the gasoline index up 2.5% over the month.
Core CPI: +0.9% vs. +0.5% consensus and +0.7% prior.
The core index, which excludes food and energy, rose 4.5% Y/Y, the biggest increase since November 1991.
Also on the rise last month were new vehicles, airline fares, and apparel.
The index for medical care and the index for household furnishings and operations were among the few major component indexes that fell in June.

[Bozo_Casanova 25499]

9 minutes ago, Blotto said:

Prices for used cars and trucks continue to advance, rising 10.5% in June; this accounts for more than  third of the seasonally adjusted all-items increase.
The food index rose 0.8% in June vs. a 0.4% increase in May.
Energy index rose 1.5% in June with the gasoline index up 2.5% over the month.
Core CPI: +0.9% vs. +0.5% consensus and +0.7% prior.
The core index, which excludes food and energy, rose 4.5% Y/Y, the biggest increase since November 1991.
Also on the rise last month were new vehicles, airline fares, and apparel.
The index for medical care and the index for household furnishings and operations were among the few major component indexes that fell in June

So prices were up a lot for things that had supply chains seriously impacted by COVID and also had constrained demand during COVID that has been released- eg vehicles, fuel, clothes. Meanwhile, prices stayed basically the same for things with neutral or lower demand. Everyone freak out!

Edited July 13, 2021 by Bozo_Casanova

[Neonmoon 38126]

8 minutes ago, Blotto said:

June Consumer Price Index: +0.9% vs. +0.5% consensus and +0.6% prior; represents the largest M/M jump since June 2008 when the index rose 1.0%.
Over the last 12 months, the index increased 5.4% before seasonal adjustment; that's the biggest increase since August 2008. The all-items index has been trending up every month since January.
Prices for used cars and trucks continue to advance, rising 10.5% in June; this accounts for more than  third of the seasonally adjusted all-items increase.
The food index rose 0.8% in June vs. a 0.4% increase in May.
Energy index rose 1.5% in June with the gasoline index up 2.5% over the month.
Core CPI: +0.9% vs. +0.5% consensus and +0.7% prior.
The core index, which excludes food and energy, rose 4.5% Y/Y, the biggest increase since November 1991.
Also on the rise last month were new vehicles, airline fares, and apparel.
The index for medical care and the index for household furnishings and operations were among the few major component indexes that fell in June.

Over pas 12 months. Trimmed mean CPI is 2.6%

[Trey3216 15298]

On 7/8/2021 at 1:45 PM, GRHorn said:

I mean, seriously. 
We started with there won’t be any inflation.

Then we got, there will be inflation but it will transitory. 
Now we’re getting, the inflation will be good for you. 
 

These aren’t the droids you’re looking for. 

You for got: the inflation will be good for you, but not good enough to make up for itself.  

[GRHorn 105]

5 minutes ago, Bozo_Casanova said:

So prices were up a lot for things that had supply chains seriously impacted by COVID and also had constrained demand during COVID that has been released- eg vehicles, fuel, clothes. Meanwhile, prices stayed basically the same for things with neutral or lower demand. Everyone freak out!

How much is the contribution of more money chasing goods? 
 

I’m not sure if or how it could be parsed out but this month is the start of essentially a new UBI program and I wonder what the contribution from that could be.

 

4 minutes ago, Neonmoon said:

Over pas 12 months. Trimmed mean CPI is 2.6%

I don’t claim to be an expert on all the different indices of the CPI, but the fact is that these things continue to surprise to the upside. 

[GRHorn 105]

Okay I found the number. 

 

[gsoda3 3187]

inflation is always occurring at about 2% yoy.  if it goes above 2% but then falls back to 2% it's transitory.  whether or not that happens depends on several drivers but the overwhelming amount of smart money in my business is betting on b/t 2 and 3 percent past 2024.  

 

some notes relevant to today:

- every goods producer in the world has transportation costs.  the cass freight index continues to surge higher with a 23.4% yoy increase in June compared to a 10.8% increase in may.  we know the yoy #s are hard to compare so perhaps the 12.3% month on month embedded rates for june is the salient data point.  in any case, those costs are increasing and everything being produced or sold is affected with no end in sight.  container rates are at record highs and climbing daily.  the forecast for continued high rates goes out past 2023 when the first new supply of cargo container ships will come on line.  

 

-  the NFIB small business optimism index for June rose to 102.5 from 99.6 in May, which is almost right where we were at (104.5) in feb 2020 before the pandemic started affecting our economy.  a record # of businesses planned on higher selling prices-  47% (increase of 7%).  the last time the number was this high was 1981.  at the beginning of 2020 that number was 17%.   the # of owners who said inflation was their biggest problem spiked to a 13 year high.

 

- 39% of businesses reported raising compensation, also a record high, with another 26% planning on raising compensation within the next three months.  why?  46% of owners reported job openings that could not be filled.  the historical 48 month average is 22%.   

 

-  the NFIB report summed up by saying 

Quote

Small businesses optimism is rising as the economy opens up, yet a record number of employers continue to report that there are few or no qualified applicants for open positions. Owners are also having a hard time keeping their inventory stocks up with strong sales and supply chain problems." On pricing, "The incidence of price hikes on Main Street is clearly on the rise as owners pass on rising labor and operating costs to their customers...Inflation is everywhere, but particularly strong in a number of critical industries.

 

the hope is this corrects by year end.  for the labor portion, around 60% of owners feel the open jobs problem is due to the stimulus and federal unemployment checks disincentivizing workers to the market.  if true we should see a reversion of those numbers to the mean.  however once jobs are filled at higher wages they don't retrace back to lower wages.  

 

[washparkhorn 9894]

A good overview of the issues facing the Fed:

 

[Incredulity 11141]

Purely anecdotal, but every business I interact with reports they are in a fucking knife fight for workers.  Crazy shit going on to try and hire and retain workers.  Great for the workers, bad for bottom lines until the costs can be passed along.

[tbone_ 13968]

Purely anecdotal, but every business I interact with reports they are in a fucking knife fight for workers.  Crazy shit going on to try and hire and retain workers.  Great for the workers, bad for bottom lines until the costs can be passed along.

We’re absolutely fighting this every day.

[torre 1284]

On 7/13/2021 at 4:05 PM, gsoda3 said:

 

 

 

 

 

 

 

the hope is this corrects by year end.  for the labor portion, around 60% of owners feel the open jobs problem is due to the stimulus and federal unemployment checks disincentivizing workers to the market.  if true we should see a reversion of those numbers to the mean.  however once jobs are filled at higher wages they don't retrace back to lower wages.  

 

WSJ today (excerpts).   "that's my story and I'm sticking to it"

Powell's term ends in Feb.    Next 7 months critical for the economy and Powell.   Any indication of how he is perceived by the WH ?  

 

Federal Reserve Chairman Jerome Powell said inflation had increased notably and would likely remain elevated in the coming months before moderating.

Inflation “has been higher than we’ve expected and a little bit more persistent than we had expected and hoped,” Mr. Powell said in testimony Wednesday before the House Financial Services Committee.

Pandemic-related bottlenecks and other supply constraints created “just the perfect storm of high demand and low supply” that led to rapid price increases for certain goods and services, he said. Mr. Powell said he expects that these effects “should partially reverse as the effects of the bottlenecks unwind.

While the Fed and many private sector forecasters had expected inflation to rise this year as a surge in consumer spending collided with pandemic-related shortages and bottlenecks, the strength of the last three monthly inflation readings has been greater than many anticipated. While inflation is expected to decline, questions abound over how soon and how low inflation will fall relative to the Fed’s 2% target.

“The incoming inflation data have been higher than expected and hoped for, but they’re actually still consistent with what we’ve been talking about,” said Mr. Powell, with inflation coming from a “small group of goods and services that are directly tied to the reopening of the economy.”

Mr. Powell added, “We are monitoring the situation very carefully. We are committed to price stability, and if we were to see that inflation were…remaining materially high or above our target for a period of time, and it was threatening to uproot inflation expectations and create a risk of a longer period of inflation, we would absolutely change our policy as appropriate.”

https://www.wsj.com/articles/powell-expects-inflation-to-moderate-but-will-likely-remain-elevated-this-year-11626265800

[Hefeweizen 5210]

6 hours ago, Incredulity said:

Purely anecdotal, but every business I interact with reports they are in a fucking knife fight for workers.  Crazy shit going on to try and hire and retain workers.  Great for the workers, bad for bottom lines until the costs can be passed along.

Sort of.  Definitely true generally but all of a sudden I am seeing some softening including some decent people being let go in my field.  We’re trying to scoop up any good ones quickly too.

[gsoda3 3187]

July's Univ of Michigan Consumer Confidence # came out today.  It was expected to be 86.5 but came in significantly lower at 80.8 to put in the lowest number since February.  Month prior was 85.5.  Also noteworthy (and maybe causal), one year inflation expectations increased from 4.2% last month to 4.8% which is the highest # since the summer of 2008.  Before that, the last time it hit 4.8% was 1990.  The 5-10 year inflation outlook also increased from 2.8% to 2.9%.  

Still hoping this is temporary but every data point looks worse.  We're getting to an inflection point where inflation fears are hurting consumer sentiment.  The next few months leading into the holiday season will be instructive.  From the UofM report:

 

On the decline of the CC#

Quote

This decline was caused by a misjudgment by consumers in the pace that the economy would recover as the pandemic eased. This involved both underestimating the economy’s ability to reactivate supply lines and restore jobs, and the resulting impact on inflation. Rather than job creation, halting and reversing an accelerating inflation rate has now become a top concern. Inflation has put added pressure on living standards, especially on lower and middle income households, and caused postponement of large discretionary purchases, especially among upper income households. Consumers’ complaints about rising prices on homes, vehicles, and household durables has reached an all time record.

 

 

On the diff b/t ST and LT inflation expectations

Quote

“Every instance of a comparable rise in near term inflation expectations since 1990 was eventually countered by the maintenance of a much lower expected long term inflation rate. While this suggests a well anchored inflation rate, the factors that now underlie the recent surge in inflation are quite unique. A rising inflation in the months ahead may convince consumers that they underestimated its eventual rise, causing them to revise how high it will climb and how long the inflation runup will last.

 

[GRHorn 105]

Interesting interview here from someone that has flipped from deflationary to inflationary view. 
 

 

[washparkhorn 9894]

The deflationary headwinds have picked up with the Covid and the vaccine reluctant. These winds are buffeting the world's economy. That is a hell of a lot of drag - and uncertainty. Choppy ride ahead.

 

[Reagan1k 2999]

On 7/25/2021 at 2:16 AM, washparkhorn said:

The deflationary headwinds have picked up with the Covid and the vaccine reluctant. These winds are buffeting the world's economy. That is a hell of a lot of drag - and uncertainty. Choppy ride ahead.

 

Agree it is a factor.

The other side of that coin is that the same COVID factor that are buffeting demand would also potentially do the same to supply so there is an offset.

To what degree and for what segments is yet to be seen.

Every meeting I've been a part of recently basically had the theme of "We Don't Know Shit"

For every project that is being put on hold due to price it seems like another one is trying to accelerate to lock in pricing out of fear over future inflation.

[washparkhorn 9894]

10 minutes ago, Reagan1k said:

Every meeting I've been a part of recently basically had the theme of "We Don't Know Shit"

Accurate theme. 

Pressure is building on businesses to comply with Covid best practices (to weed out the bad actors adding the supply chain difficulties). I think the goal is for businesses to take care of the Covid issues rather than relying on governmental actors to do the right things to smother the virus. 

Suppliers with a workforce vaccinated against Covid provides an indication of reliability for buyers (and command a better price). 

[Fudge Nuggets 18825]

21 minutes ago, washparkhorn said:

Suppliers with a workforce vaccinated against Covid provides an indication of reliability for buyers (and command a better price). 

This is literally the only place I've ever heard of this phenomenon.

[washparkhorn 9894]

Where we are now - one snapshot:

Reuters:

"Again and again we’ve seen over the last 18 months that the No. 1 determinant of economic activity is the virus," said Karen Dynan, a Harvard University economics professor and former assistant U.S. Treasury Secretary. "I think that we will continue to make forward progress, but that progress will be slower than otherwise.”

Developments since the last meeting "strengthened the case against pulling back on accommodation prematurely," given the new uncertainty about the recovery and despite higher-than- expected June inflation, Goldman Sachs economist David Mericle wrote.

The Fed continues to buy $120 billion in government bonds each month and hold its policy interest rate near zero, measures rolled out in the spring of 2020 to buttress the economy from the pandemic. Some Fed officials already feel it is time to pivot from those policies because of the unexpected pace of recent price increases, and trading in bond markets in recent weeks showed investors betting the Fed may have to accelerate its exit from the crisis programs.

Yet it is, indeed, a long list of new problems that have arisen since June 16, when the Fed expressed confidence the pandemic was fading and that "progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy."

Spoiler

The rise of infections could, if it continues, weigh on the recovery, and would do so at a particularly tenuous moment.

The Fed is still hoping the economy can regain all of the 6.8 million jobs missing since the start of the pandemic, but that depends on other aspects of the recovery continuing apace - particularly a full reopening of public schools in the fall. That's anticipated to help free parents to return to jobs, but the process could be set back if the health crisis intensifies again.

Any slowdown in the recovery or hiring, meanwhile, would occur amid the expiry of the federal spending and benefits that sustained personal incomes last year, a "fiscal cliff" already expected to slow annual economic growth from its current high-octane pace of around 7%.

Rising inflation had been the immediate focus of Federal Reserve officials in recent weeks, cleaving the central bank between those worried prices may be increasing too fast and those arguing that the economy needed much more time to grow and regain lost jobs before any change in monetary policy.

Powell was peppered with questions about that politically sensitive subject during recent hearings on Capitol Hill. The issue is being watched carefully at the White House as well, with both the core of Fed officials and the Biden administration saying they remain convinced current price increases are mostly the result of a complicated economic reopening and will ease on their own.

There may be new reason to doubt. A collision of events, including floods in Germany and China, are again clogging the flow of parts and materials around the world, prolonging the supply bottlenecks that Fed officials and the White House have counted on getting resolved to help ease price pressures.

"Supply-side issues are clearly not going anywhere," Citi economists wrote on Friday. "Costs from inputs and supplier wait times are likely to continue appearing in consumer inflation for months to come."

From a relatively straight-forward and even somewhat old-fashioned dilemma in June - was inflation too high or not? - the Fed now "has risks in two directions," said former Fed monetary policy director and Yale School of Management professor William English, with the likelihood of more embedded inflation now running alongside risks to growth and the waning of federal fiscal support.

"Things could play out in a way they didn't expect," English said.

Reporting by Howard Schneider and Ann Saphir; Editing by Dan Burns and Andrea Ricci

https://www.reuters.com/business/finance/fed-now-facing-twin-inflation-growth-risks-virus-jumps-supply-chains-falter-2021-07-26/ - Free Registration 

[Harrison Bergeron 1798]

Definitely put my truck purchase on hold ... damn chips.

[Neonmoon 38126]

https://www.marketwatch.com/story/fed-says-economy-has-made-progress-toward-standards-for-tapering-but-not-enough-to-start-yet-11627495469

Quote

The Federal Reserve on Wednesday said the economy has made progress towards the standards it set for starting to slow down its bond-buying program, but said not enough progress has been made to start tapering yet. 

“Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals, and the Committee will continue to assess progress in coming meetings,” the Fed’s policy statement said.

Step 1: announce change is coming

[Capt. Squints 176]

I just watched his press conference, and Powell is an idiot. Transitory my ass.

[XYZ 2154]

I don’t know if I would call these central bankers “idiots”. Shills, maybe. They know. They just can’t tell the truth.

[Incredulity 11141]

Totally agree with the above regarding, “we don’t know shit” being the theme.

The last 10 months have felt like 3 or 4 cycles from paralyzed terror to unbridled enthusiasm.  It’s exhausting.

[Reagan1k 2999]

Today I had a manufacturer announce an increase of 13% at EOD tomorrow, and that's after a 12% increase in June.  

They are still trying to fill backorders from mid-April and their new bookings are still exceeding shipments, so they're continually losing ground.

Both increases retro active to April 1st, so all those backorders that have been on the books for months have been slapped twice since they were placed.

Discussion regarding the retroactive increase was....if you still want it, here's the new cost.   You're welcome to cancel at no cost, but otherwise, amend your PO.

 

 

[Parliament 13979]

What are these manufacturers making?

[Reagan1k 2999]

8 hours ago, Parliament said:

What are these manufacturers making?

HPDE injection molded accessories.

Anything with HPDE or fiberglass resin is FUBAR in all things related to pricing and lead times.

[XYZ 2154]

10 hours ago, Parliament said:

What are these manufacturers making?

Dildos.

[Muy Frio 182]

On 7/28/2021 at 3:15 PM, Capt. Squints said:

I just watched his press conference, and Powell is an idiot. Transitory my ass.

Transitory is a great word. No timeframe needed. Really everything in life is transitory. 

[gsoda3 3187]

fed bullard at least is giving an opinion.  says he wants to taper faster rather than slower (by end of this year) and sees inflation somewhere between 2.5 and 3 for 2022.  he's not a voting member of the fomc this year but will be next year.  

[NotActuallyALonghorn 4956]

On 7/30/2021 at 7:08 AM, Reagan1k said:

HPDE injection molded accessories.

Anything with HPDE or fiberglass resin is FUBAR in all things related to pricing and lead times.

The wee cold snap we had in February pretty well shut every kind of plant down on the coast. Many took a long while to chase down and fix all the problems it caused.

[Muy Frio 182]

21 minutes ago, NotActuallyALonghorn said:

The wee cold snap we had in February pretty well shut every kind of plant down on the coast. Many took a long while to chase down and fix all the problems it caused.

So you’re telling him it’s transitory?

[washparkhorn 9894]

20 hours ago, NotActuallyALonghorn said:

The wee cold snap we had in February pretty well shut every kind of plant down on the coast. Many took a long while to chase down and fix all the problems it caused.

100% correct. 

The resin shortage is an aftereffect of the Winter storm. Supply chain catching up (see lumber). 

https://www.plasticsmachinerymanufacturing.com/injection-molding/article/21215639/resin-supply-expected-to-take-months-to-recover

 

Edited August 1, 2021 by washparkhorn

[washparkhorn 9894]

20 hours ago, Muy Frio said:

So you’re telling him it’s transitory?

[washparkhorn 9894]

On 5/12/2021 at 12:41 AM, washparkhorn said:

On top of lumber shortages (Canada shut down pretty tight) and increased demand (Covid leaving vacation money burning a hole in their pockets), the Texas Freeze worsened the resin/plastics shortage by a significant factor. (OSB need resins, 40% comes from Texas, IIRC). Add in just in time supply chains to exacerbate it further.

As expected, transitory supply chain problems would cause price increases. 

Your buddy's supplier did your friend a favor. Kudos to his honesty.

TLDR for home renovators - find projects not dependent on lumber, plastics and resins for the short term. Decreasing demand will help bring the prices down. (think outdoors - windows, siding, aggregates, landscaping, pouring concrete . . .).

A couple of us discussed the resin shortage back in May. 

[Muy Frio 182]

Manchin no expert obviously. More interested in the political pressure starting up again against the Fed. 

Here’s the article. Also jawbones about government spending concerns. 

 

Edited August 5, 2021 by Muy Frio
Found it

[Neonmoon 38126]

Senator Manchin Koch asks Fed to ease bond buying 

[Muy Frio 182]

 

[Bozo_Casanova 25499]

That graph is good- it illustrates how PPI rises when economies rebound from massively disruptive deflationary crises as real productivity returns, which is just basic supply/demand dynamics at work.

EVERYONE FREAK OUT!111

Edited August 9, 2021 by Bozo_Casanova

[jimmyjazz 45055]

3 hours ago, Bozo_Casanova said:

That graph is good- it illustrates how PPI rises when economies rebound from massively disruptive deflationary crises as real productivity returns, which is just basic supply/demand dynamics at work.

EVERYONE FREAK OUT!111

It's almost as if the rate of change is . . . common.

[tbone_ 13968]

At some point though won’t the Chinese slave labor demand more than slave wages?

[Trey3216 15298]

On 7/30/2021 at 8:28 AM, XYZ said:

Dildos.