• Tag Archives CPI
  • Finally, An Honest Inflation Index – Guess What It Shows

    Central bankers keep lamenting the fact that record low interest rates and record high currency creation haven’t generated enough inflation (because remember, for these guys inflation is a good thing rather than a dangerous disease).
    To which the sound money community keeps responding, ‘You’re looking in the wrong place! Include the prices of stocks, bonds and real estate in your models and you’ll see that inflation is high and rising.’
    Well it appears that someone at the Fed has finally decided to see what would happen if the CPI included those assets, and surprise! the result is inflation of 3%, or half again as high as the Fed’s target rate.
    New York Fed Inflation Gauge is Bad News for Bulls (Bloomberg) – More than 20 years ago, former Fed Chairman Alan Greenspan asked an important question ‘what prices are important for the conduct of monetary policy?’ The query was directly related to asset prices and whether their stability was essential for economic stability and good performance. No one has ever offered a coherent answer even though the recessions of 2001 and 2008-2009 were primarily due to a sharp correction in asset prices.

    This post was published at DollarCollapse on DECEMBER 6, 2017.

  • Weekend Reading: You Have Been Warned

    Investors aren’t paying attention.
    There is an important picture that is currently developing which, if it continues, will impact earnings and ultimately the stock market. Let’s take a look at some interesting economic numbers out this past week.
    On Tuesday, we saw the release of the Producer Price Index (PPI) which ROSE 0.4% for the month following a similar rise of 0.4% last month. This surge in prices was NOT surprising given the recent devastation from 3-hurricanes and massive wildfires in California which led to a temporary surge in demand for products and services.
    Then on Wednesday, the Consumer Price Index (CPI) was released which showed only a small 0.1% increase falling sharply from the 0.5% increase last month.

    This post was published at Zero Hedge on Nov 17, 2017.

  • Can’t Hide From The CPI

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    On the vital matter of missing symmetry, consumer price indices across the world keep suggesting there remains none. Recoveries were called ‘V’ shaped for a reason. Any economy knocked down would be as intense in getting back up, normal cyclical forces creating momentum for that to (only) happen.
    In the context of the past three years, symmetry is still nowhere to be found. It’s confounding even central bankers who up until all this have been especially immune to contrary evidence. The unemployment rate tells them what they want, so everything else be damned.
    The US CPI in October 2017 rose 2.04% above the index for October 2016. That’s a slight deceleration from 2.23% inflation in September, despite another energy price boost.

    This post was published at Wall Street Examiner on November 15, 2017.

  • New York Fed’s ‘Underlying Inflation’ Hits 11-Year High

    Something is moving beneath the surface. Today is inflation day. After the Bureau of Labor Statistics released its Consumer Price Index for October this morning, several other inflation gauges were released, all based on rejiggering in some way the minute disaggregated details of the BLS data pile. This includes the Atlanta Fed’s ‘Sticky-Price CPI,’ which ticked up 2.2%, and the New York Fed’s ‘Underlying Inflation Gauge,’ which hit the highest level since August 2006.
    Inflation – when defined as increase in consumer prices – is very much in the eye of the beholder, or rather of the spender. Every household has its own inflation rate, depending on whether they have kids in college, have high medical expenses, or rent an apartment in a city where rents are high and soaring at double-digit rates.
    And now that the New York Fed’s Underlying Inflation Gauge has hit an 11-year high, in a sign of things to come, we better take a look at it.
    The UIG comes, like most inflation measures, in two forms: The ‘prices-only’ UIG, which is based on 223 disaggregated price series in the CPI and is comparable to a ‘core’ inflation measure; and the ‘full data set’ UIG, which incorporates all the data of the ‘prices-only’ UIG plus 123 macroeconomic and financial variables.

    This post was published at Wolf Street on Nov 15, 2017.


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    This post was published at Harvey Organ Blog on November 15, 2017.

  • Why Core Inflation is Rising & What it Means for Fed Rate Hikes

    Yellen was right to brush off ‘transitory’ factors of ‘low’ inflation.
    Consumer prices, as measured by CPI for October, rose 2.0% year-over-year. A month ago, CPI increased 2.2%. The Fed’s inflation target is 2%, but it doesn’t use CPI, or even ‘Core CPI’ – which excludes the volatile food and energy items. It uses ‘Core PCE,’ which usually runs lower than CPI, and if there were an accepted measure that shows even less inflation, it would use that. But it does look at CPI, and there was nothing in today’s data to stop the Fed from raising its target rate in December.
    The Core CPI rose 1.8%, up a tad from September’s 1.7% increase. Core CPI has been above 2% for all of 2016 and through March 2017. In the history of the data going back to the 1960s, Core CPI had never experienced ‘deflation.’ But when Core CPI rates retreated in the spring through August, along with other inflation measures, a sort of panic broke out in the media:

    This post was published at Wolf Street on Nov 15, 2017.

  • Core Consumer Prices Come In Hot – Rise At Fastest Rate In 6 Months

    Following yesterday’s hotter than expected PPI, Core Consumer Prices printed above expectations (+1.8% YoY vs +1.7% YoY exp) – the fastest rise since April 2017.
    Headline CPI was in line with expectations at 2.0% – a slight slowing from last month…

    This post was published at Zero Hedge on Nov 15, 2017.

  • “We Have Reached A Turning Point”: Trader Explains Why Today’s CPI Could Send Equities Reeling

    From the latest Macro View by Bloomberg commentator and former Lehman trader, Mark Cudmore
    Equities Must Fear CPI Now the Fed Put Era Is Over
    A surprise in either direction from today’s U. S. consumer price index print is likely to hurt global stocks.
    For many years, in the wake of QE, we became used to markets where ‘good data is good for equities and bad data is good for equities.’ The logic was that bad data implied a greater likelihood more liquidity would be pumped into the system, whereas good data inspired confidence that the economic recovery was on track.
    Today might mark a turning point where we more frequently trade the opposite dynamic. The Fed has fought so hard to convince investors that the economy can cope with hikes and balance-sheet reduction that it may have boxed itself into a corner. It can’t retreat from its policy path without seriously undermining its credibility.

    This post was published at Zero Hedge on Nov 15, 2017.

  • Key Events In The Coming Week: Taxes, Inflation, Yellen, Draghi, Kuroda And Brexit

    This week’s economic calendar features several key data releases and Fedspeak. The main data release in US include: CPI inflation, retail sales, industrial production, housing data and monthly budget statement. We also get the latest GDP and CPI reading across the Euro Area; the employment report in the UK and AU, Japan GDP, China IP, retail sales and FAI. In Emerging markets, there are monetary policy meetings in Indonesia, Chile, Egypt and Hong Kong.
    Market participants will also want to pay close attention to tax reform progress in Washington. The House Ways and Means Committee had voted along party lines (24-16) to deliver its bill to the full House. The Senate Finance Committee’s proposal was also revealed last week and is slated for markup this week. Both versions are essentially opening gambits by the two chambers and the hard work begins when the two bills are ‘reconciled’. As a reminder, the Senate version is likely to be closer to the final version. In our view, there is a decent chance that some version of tax reform can be achieved, but this is likely to be a Q1 event and there are numerous potential stumbling blocks along the way.
    With respect to the data, October inflation and retail sales reports are the main focus. Tuesday, DB expects headline PPI (+0.1% forecast vs. +0.4% previously) to moderate following a spike in gasoline prices last month due to hurricane-related supply disruptions. However, core PPI inflation (+0.2% vs. +0.1%) should firm. Analyst will focus on the healthcare services component of the PPI, as this is an input into the corresponding series in the core PCE deflator – the Fed’s preferred inflation metric. Recall that healthcare has the largest weighting in the core PCE.

    This post was published at Zero Hedge on Nov 13, 2017.

  • An attempt to quantify the immeasurable

    To paraphrase Einstein, not everything worth measuring is measurable and not everything measurable is worth measuring. The purchasing power of money falls into the former category. It is worth measuring, in that it would be useful to have a single number that consistently reflected the economy-wide purchasing power of money. However, such a number doesn’t exist.
    Such a number doesn’t exist because a sensible result cannot be arrived at by summing or averaging the prices of disparate items. For example, it makes no sense to average the prices of a car, a haircut, electricity, a house, an apple, a dental checkup, a gallon of gasoline and an airline ticket. And yet, that is effectively what the government does – in a complicated way designed to make the end result lower than it otherwise would be – when it determines the CPI.
    The government concocts economic statistics for propaganda purposes, but even the most honest and rigorous attempt to use price data to determine a single number that consistently paints an accurate picture of money purchasing power will fail. It must fail because it is an attempt to do the impossible.
    The goal of determining real (inflation-adjusted) performance is not completely hopeless, though, because we know what causes long-term changes in money purchasing power and we can roughly estimate the long-term effects of these causes. In particular, we know that over the long term the purchasing power of money falls due to increased money supply and rises due to increased population and productivity.

    This post was published at GoldSeek on Wednesday, 1 November 2017.

  • US Futures Rebound After Disappointing Chinese, European Data

    Yesterday’s sharp Chinese selloff is now a distant memory after the BTFDers emerged, and this morning U. S. equity futures are once again levitating as the FOMC begins its two-day policy meeting, following an uneventful BOJ announcement on Tuesday morning which left all QE parameters unchanged. Asian stocks traded mixed steady while European shares climb.
    The key event overnight was the BOJ meeting, in which the central bank maintained QQE with Yield Curve Control and kept NIRP unchanged at -0.1% as expected. The decision to keep QQE with YCC was made by 8-1 vote, with Kataoka the sole dissenter again who suggested the BoJ needs to buy JGBs so that 15yr yield stays below 0.2%, while Kataoka also commented that the BoJ should ease if domestic factors lead to delays in reaching the inflation target. In terms of changes to its outlook forecasts, the BoJ raised FY 17/18 Real GDP growth forecast to 1.9% from 1.8%, while it cut Core CPI forecasts to 0.8% from 1.1% for FY 17/18 and to 1.4% from 1.5% for FY 18/19
    Asian shares rose in afternoon trading, with the MSCI Asia Pacific Index gaining 0.1 percent to 168.29 and ignoring the overnight miss across the board in Chinese PMIs…

    This post was published at Zero Hedge on Oct 31, 2017.

  • Renting In The US Has Never Been More Unaffordable

    Over the weekend, when looking at the record high ratio in median new home sale prices to household incomes in the US, we concluded that US homes have never been more unaffordable for the average American.
    What about renting? Isn’t it intuitive that if buying a house has never been more expensive, then at least renting should be cheap(er).
    Unfortunately no, because not only is renting not cheap(er) in either absolute or relative terms, but when observed through the prism of the only thing that matters, namely disposable income, renting – just like buying a house – has never been more unaffordable.
    While it is no secret that rent inflation has been one of the few outliers that the Fed has gotten “right” in its ongoing reflationary attempt, with record rents and rising shelter costs accounting for most of rising CPI during the current centrally-planned business cycle…

    This post was published at Zero Hedge on Oct 30, 2017.

  • This is What it Looks Like When Credit Markets Go Nuts

    Pricing of risk kicks bucket in record central-bank absurdity.
    As the days pass, the perverse effects of central bank policies on the financial markets are getting more and more amazing. This includes the record-setting nuttiness now reigning in the European bond market, compared to the mere semi-nuttiness in the US bond market.
    The 10-year yield of US Treasury Securities closed at 2.34% yesterday and at 2.33% today. This is low by historical standards. It’s barely above the rate of consumer price inflation as measured by CPI, which was 2.2% in September. This means that coupon payments barely make up for the loss of purchasing power. If inflation ticks up just a little, bondholders will be left in the hole. And a yield this low doesn’t compensate bondholders for any other risks, including duration risk, which can be significant. In other words, this is a bad deal.
    But in this strange world, it looks practically sane, compared to the Draghi-engineered negative-yield absurdity that has overtaken the Eurozone, where the average yield of euro junk bonds – the riskiest bonds out there – dropped to 2.16%.
    This chart, based on the BofA Merrill Lynch Euro High Yield Index via the St. Louis Fed, shows how the average euro junk-bond yield (red line) has plunged so far this year, on the way to what? Zero? The 10-year US Treasury yield (black line) has started rising in past weeks and, in late September rose above the euro junk bond yield for the first time ever:

    This post was published at Wolf Street on Oct 19, 2017.

  • Investors Are Ignoring The Evidence At Their Peril

    I was recently watching a movie about the FBI trying to bring down a terrorist cell in the U. S. During their investigation, their evidence board became more and more cluttered with people, evidence, and locations as they attempted to track down the ‘cell.’ At first, the clues were disparate, and they didn’t provide a clear path to the end goal. But as more clues were obtained, the bigger picture emerged eventually leading to the successful ending of the terrorist threat.
    It got me to thinking about what is currently happening in the markets. As stocks rang new highs last week, there were several disparate stories that caught my attention. Individually, each story is nothing to be overly concerned about, and are regularly dismissed by investors. However, when you begin linking these stories, a picture is beginning to emerge that suggests investors may be ignoring the evidence at their own peril.
    Story 1: CPI Remains Weak
    Despite three hurricanes and wildfires over the last couple of months, core CPI (ex-aircraft) failed to register much inflationary pressure. One would have expected given the surge in demand for goods and services needed to rebuild destroyed communities.
    However, despite the Fed’s hopes for a surge in inflationary pressures to justify further hikes in interest rates, inflationary pressures have been on the decline for the last several months.

    This post was published at Zero Hedge on Oct 16, 2017.

  • Overheating China PPI Sends 10Y Yields To 30 Month Highs As Banks Inject Another Quarter Trillion Dollars In Loans

    Despite a disappointing US CPI report on Friday, which saw core inflation miss once again despite an expected spike due to the “hurricane effect”, moments ago China reported that in September, its CPI printed at 1.6% Y/Y, in line with expectations, and down from, 1.8% in August largely due to high year-over-year base effects, but it was PPI to come in smoking hot, jumping from 6.3% last month to 6.9% Y/Y, slamming expectations of a 6.4% print and just shy of the highest forecast, driven by the recent surge in commodity costs and strong PMI surveys.
    While there has been no reaction in the Yuan, either on shore or off, the stronger than expected PPI has pushed China’s 10Y yield to the highest in 30 months, or since April of 2015.

    This post was published at Zero Hedge on Oct 15, 2017.

  • Doug Noland: Arms Race

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    Bloomberg: ‘Treasuries Surge as December Hike Odds Drop After CPI Miss.’ Year-over-year CPI was up 2.2% in September, with consumer inflation above 2% y-o-y for six of the past 10 months. The Producer Price Index gained 2.6% y-o-y in September. Yet, apparently, the focus will remain on core CPI (along with core personal consumption expenditure inflation) that, up 1.7% y-o-y, missed estimates by one tenth and remained below 2% for the sixth straight month. Notably – analytically if not in the markets – the preliminary October reading of University of Michigan Consumer Confidence jumped six points to the high since January 2004. Or taking a slightly different view, Consumer Confidence has been stronger for only one month in the past 17 years. Current Conditions rose to the highest level since November 2000.
    Data notwithstanding, from Bloomberg: ‘Bond Shorts Experience the Agony of Defeat Yet Again.’ Ten-year Treasury yields declined nine bps this week to 2.27%, though I’m not sure this qualifies as a ‘defeat.’ In stark contrast to the fanatical gathering on the opposing side of the field, not a single central banker was spotted on the bond bears’ sideline.

    This post was published at Wall Street Examiner by Doug Noland ‘ October 14, 2017.

  • Core CPI Stays Below Fed Mandate For 6th Straight Month

    Core CPI has now been below the Fed’s 2% mandate for 6 straight months, printing a 1.7% YoY gain in September (weaker than the expected 1.8% rise).
    Headline CPI bounced back above 2% however, led by a 6.1% surge in Energy costs…
    The index for all items less food and energy increased 0.1 percent in September following a 0.2-percent rise in August.

    This post was published at Zero Hedge on Oct 13, 2017.

  • Yellen Was Right: ‘Transitory’ Factors of ‘Low’ Inflation Are Reversing, with Much More to Come

    What’s Boiling Beneath the Surging Inflation?
    Consumers are going to shell out more money for the same stuff, that’s for sure. Inflation as measured by the Consumer Price Index jumped 2.2% in September compared to a year ago, the Bureau of Labor Statistics reported this morning. All fingers pointed at energy costs: the index jumped 10.1% year-over-year. Within it, ‘motor fuel’ prices (gasoline and diesel) jumped 19.2%.
    Food prices rose 1.2% year-over-year, kept down by prices for ‘food at home’ – the stuff you buy at the grocery store – which inched up only 0.4% year-over-year in part due to the price war currently tearing into the supermarket sector.
    In the chart below of CPI, note the dreadful ‘Deflation Monster’ – one of those rare and brief occasions in the US when the purchasing power of wages actually rose just a tiny bit on a year-over-year basis. It was caused by the energy bust. And it was ‘transitory’:

    This post was published at Wolf Street on Oct 13, 2017.

  • Looking For A Last Minute ‘Cheap’ Trade On A CPI Miss?

    Demand has exploded for a cheap options bet which stands to benefit should the market-implied odds of a Federal Reserve rate hike in December tumble.
    As Bloomberg reports, the eurodollar call option involved expires Friday, so the biggest chance the wager has to profit lies with a weaker-than-forecast print on the September consumer price index, set for release at 8:30 a.m. New York time.
    The options position emerged Wednesday, and was added to dramatically on Thursday, CME open interest data show.
    Expectations are for a 0.6% rise in CPI MoM (Core CPI +0.2% exp) and the whisper number is for a 0.5% rise.
    The current odds for a Dec rate hike are 80.2%…

    This post was published at Zero Hedge on Oct 13, 2017.