How long can the Fed whistle past the "There is no inflation" graveyard before raising rates?

David Goldsmith

All Powerful Moderator
Staff member
Utilities looking for double digit rate hikes.
NEW YORK — Con Edison has asked the state for permission to raise gas and electric prices next year, citing the need to cover costs including system upgrades and renewable energy investments.

The utility company hopes to hike electric and gas bills by 11.2% and 18.2%, respectively, it said in a statement provided to NY1. That increase would amount to around $1.2 billion more in electric revenue and $500 million in gas revenue, the company said.

The price hikes would “vary by customer class,” the company said in a press release, noting in a separate document that its customer classes include residential units and commercial properties.

Con Edison said the hikes are needed so it can upgrade its gas and electric delivery systems. The company is also planning to invest more in renewable energy, including electric vehicles and clean heat.

In addition, the company would put some of the revenue toward moving “vulnerable overhead electric cables and other equipment” below ground to prevent storm-related outages, with a focus on “disadvantaged communities,” the release said.

"Con Edison is in a unique position to lead the transition to a clean energy future with better public health, a vibrant economy and more equality of opportunity for all," Con Edison President Matthew Ketschke said in a statement. "That's why we want to dramatically increase our energy efficiency incentives, make electric vehicle charging more convenient, and encourage heat pumps as an alternative to gas heating."

The proposal is “designed to fund the investments necessary for a safe and reliable clean energy future… and our operating expenses, like local property taxes,” the company’s statement added.

In January 2020, the State Public Service Commission voted to allow Con Edison to raise electric prices by 13.5% and gas prices by 25%, in yearly increments, by this year.
 

David Goldsmith

All Powerful Moderator
Staff member

WHOOSH Goes the Fed’s Lowest Lowball Inflation Measure. And Eats Up All Income Gains Plus Some​

Powell should pay attention here so he’s better prepared at the next press conference when asked about the impact of inflation on regular Americans.

The “core PCE” price index, which excludes food and energy and which understates inflation by the most of all of the government’s inflation measures and which is therefore wisely used by the Fed for its inflation target, spiked by 0.50% in December from November, and by 4.9% year-over-year, the worst inflation reading since 1983, according to the Bureau of Economic Analysis today. As measured by this lowest lowball inflation measure, inflation, is well over double the Fed’s inflation target:
US-PCE-2022-01-28-core-YOY-.png


The overall PCE inflation index, which includes food and energy, spiked by 0.45% in December from November, and by 5.8% year-over-year, the worst reading since 1982.
US-PCE-2022-0128-YOY.png

So how did this inflation – the worst in 40 years – impact wages and salaries? Powell should pay attention here so that he is better prepared for the next post-meeting press conference when some wayward reporter asks him about the impact of inflation on regular Americans.
Adjusted for inflation, per-capita disposable income (income from all sources minus income-related taxes, on a per person basis) fell by 0.3% for the month and fell by 0.5% year-over-year, continuing the relentless decline that started last summer when inflation took off at a velocity not seen in decades. Note the pre-pandemic, pre-massive-inflation trend line (green):
US-consumer-PCE-2022-01-28-disposable-personal-income-real-per-capita.png

Compensation from wages and salaries, not adjusted for inflation, and not including government transfer payments, rose by 0.7% in December, by 9.2% year-over-year. And those kinds of wage and salary gains would be something to celebrate. But they were eaten up entirely by inflation. On a per-household basis, after inflation, those wage and salary gains disappeared entirely, opening up an ever-wider gap between the money people earn with their labor, and what’s left over after inflation.
As inflation whittled down the purchasing power of labor, the rising number of households reduced the slice each household gets of the aggregate inflation-diminished income figures to where inflation-adjusted income from wages and salaries is now below where it was two years ago and below where it was three years
ago:

US-consumer-PCE-2022-01-28-personal-income-salaries-real-v-nominal-per-household.png
 

khuang

New member
yep, that is where it starts. One look at lumber, copper, rare earths, shipping costs tell very ominous signs. Fed will react to this at some point, and there is your trigger for an equity reset
What's interesting is that leading indicators (e.g., ISM, ESCRI, car sales) are all pointing to slower growth w/inflation coming down significantly, so perhaps yields spike in the near-term then Fed has an "uh oh" moment as they have had over the past 30+ years after each recession and lower yields again to prevent a recession :unsure: Interesting times.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
What's interesting is that leading indicators (e.g., ISM, ESCRI, car sales) are all pointing to slower growth w/inflation coming down significantly, so perhaps yields spike in the near-term then Fed has an "uh oh" moment as they have had over the past 30+ years after each recession and lower yields again to prevent a recession :unsure: Interesting times.
I think that is exactly what will happen. Look at EU rates, they are flying..multiple standard deviation moves. Fed is yet to even reverse course or hike. I say they hike 3-4 times and market does the last few hikes for them...gather some bullets for the next deflationary wave
 

David Goldsmith

All Powerful Moderator
Staff member

WHOOSH, Dollar’s Purchasing Power Plunges in February as Inflation Spreads Across Services, Fed Still Pours Fuel on It

This doesn’t even include the spike in food and energy prices over the past few weeks. They’ll show up later.
It would be hilarious, if it weren’t so serious, how the Fed spent a year trying to pull a bag over everyone’s head about inflation being “transitory” even as it was spiraling higher and higher, and as everyone knew that something changed fundamentally in the inflationary mindset among businesses and consumers, after $4.7 trillion in reckless money printing in two years, all-out interest rate repression, and $5 trillion in deficit stimulus spending.
It’s a horror show, the inflation data released today. But it doesn’t yet include the bulk of the crazy price spikes we’ve seen in commodities over the past few weeks, including wheat and fuel; and it doesn’t yet include the bulk of raging housing inflation that the CPI will only gradually pick up. So this is going to get worse.
The broadest Consumer Price Index (CPI-U) jumped by 0.8% in February from January, and by 7.9% from a year ago, the worst since December 1981, according to data released by the Bureau of Labor Statistics today. But back then, inflation was on the way down; now inflation is spiking:
US-CPI-2022-03-10-CPI-U-YOY.png


Inflation = loss of Purchasing Power of the Dollar.

Inflation is not a sign of growth, and it’s not a sign of anything positive. It’s just a sign of the loss of the purchasing power of the consumer’s dollar, including the purchasing power of dollar-denominated labor. And this is a long-term cumulative and relentless process that started to accelerate last year. In February, the purchasing power of $100 in January 2000 dropped to a new record low of $59.46. And this is why Americans are in such a sour mood:
US-CPI-2022-03-10-dollar-purchasing-power-since-2000.png

Inflation is spreading across the Economy.​

The “core” CPI-U, which excludes the now spiking and always volatile commodities-dependent food and energy components in order to measure how inflation has seeped into the broader economy, spiked to 6.4%, the highest since August 1982.
But there’s a huge difference: In 1982, the Fed was trying to crack down on inflation and short-term interest rates were in the double digits.
The last time inflation spiked like this was in 1978, by which time the Fed had pushed the federal funds rate toward 10%.
Now, the Fed is still fueling inflation by repressing interest rates to near 0%, and by just now ending QE after having printed $4.7 trillion in two years. And its massive pile of assets on its balance sheet – the result of money printing – is fueling inflation. Which makes this the most reckless Fed ever, after having committed two years of policy error after policy error:
US-CPI-2022-03-10-CPI-core-YOY.png

Inflation in services has started to spike.​

How deep has inflation seeped into the economy? Last year, the spike in CPI was blamed on supply chains, chip shortages, factories in China, used cars, new cars – meaning on prices of goods that spiked.
But now inflation in services has started to spike. The CPI for services spiked by 4.8% year-over-year, the highest since June 1991:
US-CPI-2022-03-10-services.png

Inflation in durable goods and nondurable goods continues to spike.​

The durable goods CPI – which includes new and used vehicles, consumer electronics, etc. – spiked by 18.7% in February, by far the highest in the history of the monthly CPI data going back to the 1950s. The prior record was set in 1975, at 14.4% (red line).
The nondurable goods CPI – which is dominated by food, energy, and household supplies – spiked by 10.7%, just a tad above November 2021, and the highest since July 2008 (11.0%), when crude oil was spiking (purple line):
US-CPI-2022-03-10-CPI-durables-nondurables.png

Rampant housing inflation gradually enters CPI.

The single biggest component in CPI is housing costs, accounting for 32.4% of total CPI. They’re tracked by two different measures of rent – the cost of housing as a service rather than an asset.
Both measures started rising in mid-2021, after the pandemic drop, slowly picking up the actual increases in market rents. Both measures are lagging, which guarantees that even if rents were to stop rising in March, those two measures would continue to rise well into 2023. So we already know that the current spikes in market rents through February will put upward pressure on CPI well into 2023 (here is my discussion of this phenomenon).
“Rent of primary residence” jumped by 4.2% in February (red in the chart below). This is based on what tenants reported as their actual rent payments, including in rent-controlled apartments. It weighs 7.4% of overall CPI.
“Owner’s equivalent rent of residences” rose 4.3% (green line). This measure estimates the costs of homeownership as a service and is based on surveys that ask homeowners what their home would rent for. It weighs 24.2% in overall CPI.
Both measures are well below CPI and therefor are still holding down CPI, but they’re holding down CPI less than before, and they will hold down CPI even less going forward:
US-CPI-2022-03-10-CPI-rent-v-owners-equivalent-rent.png

The actual costs of purchasing a house spiked by 18.8% year-over-year, according to the Case-Shiller Home Price Index, and spiked by over 25% and even over 30% in some markets. I show crazy charts of this raging home-price inflation market by market in The Most Splendid Housing Bubbles in America.
So here are juxtaposed, the exploding house prices as measured by the Case-Shiller index (purple) and the CPI stand-in for homeownership costs, the now slowly rising “Owner’s equivalent of rent” (red). Both indices are set to 100 for January 2000:
US-CPI-2022-03-10-Case-Shiller-Housing-CPI.png

“Food at home” inflation spiked by 1.4% for the month and by 8.6% year-over-year. Major categories, and year-over-year inflation rates:
  • Beef and veal: 16.2%
  • Pork: 14.0%
  • Poultry: 12.5%
  • Fish and seafood: 10.4%
  • Eggs: 11.4%
  • Fresh fruits: 10.6%
  • Fresh vegetables: “only” 4.3% year-over-year, but they’re now taking off, with a month-to-month spike of 1.3%.
“Food away from home” inflation jumped by 6.8% year-over-year, the most since 1982.
Energy costs exploded by 3.5% for the month and by 25.6% year-over-year. They weigh 7.4% of overall CPI. Among them:
  • Gasoline: +6.6% for the month and +38.0% year-over-year. This does not yet include the price spikes over the past three weeks. They’re still to show up.
  • Utility natural gas to the home: +1.5% for the month and +23.8% year-over-year.
  • Electricity service: -1.1% for the month, +9.0% year-over-year.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member

WHOOSH, Dollar’s Purchasing Power Plunges in February as Inflation Spreads Across Services, Fed Still Pours Fuel on It

This doesn’t even include the spike in food and energy prices over the past few weeks. They’ll show up later.
It would be hilarious, if it weren’t so serious, how the Fed spent a year trying to pull a bag over everyone’s head about inflation being “transitory” even as it was spiraling higher and higher, and as everyone knew that something changed fundamentally in the inflationary mindset among businesses and consumers, after $4.7 trillion in reckless money printing in two years, all-out interest rate repression, and $5 trillion in deficit stimulus spending.
It’s a horror show, the inflation data released today. But it doesn’t yet include the bulk of the crazy price spikes we’ve seen in commodities over the past few weeks, including wheat and fuel; and it doesn’t yet include the bulk of raging housing inflation that the CPI will only gradually pick up. So this is going to get worse.
The broadest Consumer Price Index (CPI-U) jumped by 0.8% in February from January, and by 7.9% from a year ago, the worst since December 1981, according to data released by the Bureau of Labor Statistics today. But back then, inflation was on the way down; now inflation is spiking:
US-CPI-2022-03-10-CPI-U-YOY.png


Inflation = loss of Purchasing Power of the Dollar.

Inflation is not a sign of growth, and it’s not a sign of anything positive. It’s just a sign of the loss of the purchasing power of the consumer’s dollar, including the purchasing power of dollar-denominated labor. And this is a long-term cumulative and relentless process that started to accelerate last year. In February, the purchasing power of $100 in January 2000 dropped to a new record low of $59.46. And this is why Americans are in such a sour mood:
US-CPI-2022-03-10-dollar-purchasing-power-since-2000.png

Inflation is spreading across the Economy.​

The “core” CPI-U, which excludes the now spiking and always volatile commodities-dependent food and energy components in order to measure how inflation has seeped into the broader economy, spiked to 6.4%, the highest since August 1982.
But there’s a huge difference: In 1982, the Fed was trying to crack down on inflation and short-term interest rates were in the double digits.
The last time inflation spiked like this was in 1978, by which time the Fed had pushed the federal funds rate toward 10%.
Now, the Fed is still fueling inflation by repressing interest rates to near 0%, and by just now ending QE after having printed $4.7 trillion in two years. And its massive pile of assets on its balance sheet – the result of money printing – is fueling inflation. Which makes this the most reckless Fed ever, after having committed two years of policy error after policy error:
US-CPI-2022-03-10-CPI-core-YOY.png

Inflation in services has started to spike.​

How deep has inflation seeped into the economy? Last year, the spike in CPI was blamed on supply chains, chip shortages, factories in China, used cars, new cars – meaning on prices of goods that spiked.
But now inflation in services has started to spike. The CPI for services spiked by 4.8% year-over-year, the highest since June 1991:
US-CPI-2022-03-10-services.png

Inflation in durable goods and nondurable goods continues to spike.​

The durable goods CPI – which includes new and used vehicles, consumer electronics, etc. – spiked by 18.7% in February, by far the highest in the history of the monthly CPI data going back to the 1950s. The prior record was set in 1975, at 14.4% (red line).
The nondurable goods CPI – which is dominated by food, energy, and household supplies – spiked by 10.7%, just a tad above November 2021, and the highest since July 2008 (11.0%), when crude oil was spiking (purple line):
US-CPI-2022-03-10-CPI-durables-nondurables.png

Rampant housing inflation gradually enters CPI.

The single biggest component in CPI is housing costs, accounting for 32.4% of total CPI. They’re tracked by two different measures of rent – the cost of housing as a service rather than an asset.
Both measures started rising in mid-2021, after the pandemic drop, slowly picking up the actual increases in market rents. Both measures are lagging, which guarantees that even if rents were to stop rising in March, those two measures would continue to rise well into 2023. So we already know that the current spikes in market rents through February will put upward pressure on CPI well into 2023 (here is my discussion of this phenomenon).
“Rent of primary residence” jumped by 4.2% in February (red in the chart below). This is based on what tenants reported as their actual rent payments, including in rent-controlled apartments. It weighs 7.4% of overall CPI.
“Owner’s equivalent rent of residences” rose 4.3% (green line). This measure estimates the costs of homeownership as a service and is based on surveys that ask homeowners what their home would rent for. It weighs 24.2% in overall CPI.
Both measures are well below CPI and therefor are still holding down CPI, but they’re holding down CPI less than before, and they will hold down CPI even less going forward:
US-CPI-2022-03-10-CPI-rent-v-owners-equivalent-rent.png

The actual costs of purchasing a house spiked by 18.8% year-over-year, according to the Case-Shiller Home Price Index, and spiked by over 25% and even over 30% in some markets. I show crazy charts of this raging home-price inflation market by market in The Most Splendid Housing Bubbles in America.
So here are juxtaposed, the exploding house prices as measured by the Case-Shiller index (purple) and the CPI stand-in for homeownership costs, the now slowly rising “Owner’s equivalent of rent” (red). Both indices are set to 100 for January 2000:
US-CPI-2022-03-10-Case-Shiller-Housing-CPI.png

“Food at home” inflation spiked by 1.4% for the month and by 8.6% year-over-year. Major categories, and year-over-year inflation rates:
  • Beef and veal: 16.2%
  • Pork: 14.0%
  • Poultry: 12.5%
  • Fish and seafood: 10.4%
  • Eggs: 11.4%
  • Fresh fruits: 10.6%
  • Fresh vegetables: “only” 4.3% year-over-year, but they’re now taking off, with a month-to-month spike of 1.3%.
“Food away from home” inflation jumped by 6.8% year-over-year, the most since 1982.
Energy costs exploded by 3.5% for the month and by 25.6% year-over-year. They weigh 7.4% of overall CPI. Among them:
  • Gasoline: +6.6% for the month and +38.0% year-over-year. This does not yet include the price spikes over the past three weeks. They’re still to show up.
  • Utility natural gas to the home: +1.5% for the month and +23.8% year-over-year.
  • Electricity service: -1.1% for the month, +9.0% year-over-year.
I mean, they have to hike into this. They should have took gas off the pedal last fall when they had a perfect chance, they let it run too hot and here we are. I still dont think they hike more than 100-125bps this year as markets are likely to continue to see turmoil
 

inonada

Well-known member
Current mortgage pricing (~4% for 30yr) is based on 175bps in expected hikes.

Noah, I’m not so sure market turmoil necessarily leads to lower rates. The inflationary pressures are supply-based, and the current turmoil is stoking that further.
 

David Goldsmith

All Powerful Moderator
Staff member
I suspect that a 100-125 bps raise will do nothing to combat inflation. I also suspect both the Fed and government are paying lip service to inflation concerns. Look at at Yellen's recent "oh, well ¯\_(ツ)_/¯" response to at least another year of soaring prices.

I think it's a staggeringly flippant response to the suffering of the masses. I also find some people's answer to high gas prices that people should just go buy electric cars which they can't afford very "let them eat cake." Hopefully the response will be similar to the one some other woman got for saying that.
 

David Goldsmith

All Powerful Moderator
Staff member

Producer Price Inflation Gets Entrenched at 10%, Worst Level in the Data​

Businesses are confident they can pass on higher prices, plus some, to consumers.

The Producer Price Index for Final Demand tracks the input prices for consumer-facing industries whose output prices are then tracked by the Consumer Price Index which, WHOOSH, hit 7.9% in February, the worst since 1981. Today, the Bureau of Labor Statistics released the PPI Final Demand for February, which jumped by 0.8% in February from January, and by 10.0% from a year ago.
This marks the fourth month in a row that producer price inflation clocked in at around 10%, and all four months were by far the worst in the data going back to 2010 (red line). And it does not yet include the spike in fuel prices following Russia’s invasion of the Ukraine. That’s still to come.
Without food and energy input costs, the “core” producer prices rose by 0.2% for the month and by 8.4% from a year ago, now in the 8.5%-range for the third month in a row. This includes final demand for services, which rose 7.8% year-over-year (green line):
US-PPI-2022-03-15-index-overall-core-yoy.png


That the PPI for Final Demand has now been stuck at about 10% for four months in a row shows that producer price inflation is becoming entrenched at historically high levels.
Some components will rise while others will fall in a game of inflation Whac-A-Mole, particularly in the volatile commodities-based components for food and energy. But the persistence of this double-digit PPI inflation is quite something, compared to prior periods.
The companies that are having to pay those higher prices are going to pass them on to consumers and other businesses. Passing on higher prices, plus some, is now all the rage, and everyone knows it, and everyone does it, because consumers are still willing to pay whatever, and businesses are also willing to pay because they know they can pass on those higher costs.
And these double-digit producer price increases will provide further upward pressure on consumer prices going forward.
Over the past two years, the Fed has pissed away every good opportunity to end its money-printing spree, reduce its balance sheet, and start hiking short-term rates, before it ever got this far. Instead, it did everything it could to fuel inflation and created ridiculous excesses in asset prices, that have now started to come apart.
The Fed is meeting today and tomorrow and will decide to do way too little, way too late, to engineer some kind of soft landing that it actually could have engineered starting 20 months ago. Now inflation has become a raging fire at all levels, including with producer prices, and the Fed is just now trying to figure out how to pump less gasoline on the fire.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
If they hike 100-125bps, where do mortgage rates end up?
Dunno, 10yr may reverse course at some point during the cycle and price in a future end to hikes OR force the fed hand the other way. I would guess they march higher to 5% ish, before topping out if they hike 100-125, and then reverse course.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
Current mortgage pricing (~4% for 30yr) is based on 175bps in expected hikes.

Noah, I’m not so sure market turmoil necessarily leads to lower rates. The inflationary pressures are supply-based, and the current turmoil is stoking that further.
Very good point. The curve is so flat, I cant help but think about the this table - what do you think 10yr, 20yr and 30yr yields are telling us with this curve? Something is coming

1648042281756.png
 

inonada

Well-known member
On the face of it, the curve is saying that we’ll be (slightly) inverted next year — FFR at ~3% and long-term rates at ~2.5%.

I do wonder whether long-term rates will face additional pressure, beyond what the forward curve implies, from the Fed’s balance sheet reduction (they hold a sizable fraction with the stated intention of pressuring long-term rates down) and the general market (people pulling money from bond and 60/40 funds after seeing losses from “safe” investments).
 

David Goldsmith

All Powerful Moderator
Staff member
We Asked 2,200 People Where They Feel Inflation. Their Answers: A Used Minivana One-Bedroom Apartmenta Single SteakBaconChicken Wingsa Simple Loaf of Breada HaircutMilkRamen NoodlesToilet PaperDiapersInsulinButterRaw LumberFrozen VegetablesWaterCat LitterShampooDeodorantCanned HamTunaCereala Gallon of GasInternet ServiceHome Heating Oil

Americans Say High Prices Are Hitting the Things They Need to Get By​

Americans have felt inflation at the hair salon and in the frozen food aisle. They have seen it while buying pet food, pantry staples and diapers. Yes, gas is pinching them. But so is the price of bacon.
Nearly nine in 10 Americans say they have noticed prices rising around them, according to a survey conducted mid-February for The Upshot by Morning Consult. And, when asked which of the price increases have caught their attention, many mentioned necessities like gas, milk, ground beef and bread — a notably different universe of products than the narrower set of items, like used cars and raw lumber, that were soaring in price last spring.
The survey results make clear why consumers remain glum, even at a time of rapid job and economic growth. Inflation is now inescapable. And what it’s touching is deeply personal: a specific brand of baby formula, “the sausages my husband buys,” “my usual Alaskan salmon dinner at Captain D’s.”
“A car battery costs almost two times as much.”
Bacon is as expensive as filet mignon used to be.”
Cold cereal has gone up, and the box has shrunk.”
Gas. It’s painful at the pump.”
Horse feed keeps going up every week.”
“I never thought I would ever see eggs at $5 a dozen.”
“The cheap brand of hamburger meat is not cheap anymore.”
“The price of pet food is hard to even fathom.”
Responses are lightly edited.
“This is not just a used car phenomenon,” said John Leer, the chief economist at Morning Consult. “When it was used cars, you could have the option essentially of opting out of inflation,” he added. “You could say ‘I don’t want to buy a used car, so this doesn’t affect me, life goes on.’”
As opting out has become less and less possible, Americans now rate inflation among their top concerns for the first time in nearly four decades. In Washington, the topic looms over President Biden’s legislative agenda and Democrats’ prospects in midterm elections. The monthly release of government inflation figures — which on Thursday showed inflation reaching a 40-year high, driven by the steep prices of gas and food — has become an anxious political event. And the sanctions on Russia that are rattling the global economy now threaten to push energy and food prices higher still.

In this moment of growing alarm over inflation, the survey asked 2,200 people to name specific products and services whose higher prices have stood out to them over the past year. The open-ended responses show how closely people are paying attention.
They can quote what a three-pound bag of ground coffee cost at Costco last year. They have noticed that some costlier products have shrunk in size, too. Even before fuel prices hit a record high this week, nearly one in four people cited the rising cost of gas. Eight people pointed to the fact that the Dollar Tree chain of stores now charges $1.25 per item. Sixty-three people have apparently been tracking the cost of toilet paper. One-hundred-twenty-seven mentioned a haircut.
Collectively, their answers touch on nearly every corner of consumption as the federal government tracks it. Dozens of people responded directly, often angrily, to that effect — that they have seen inflation everywhere.
“As everything goes up in price, my savings diminish.”
Everything is going up, but our wages are not.”
“Hard to not call it price gouging. Everything has gone up with no end in sight.”
Everything is on the rise except for my pay. Makes living hard.”
“When gas costs more, everything costs more.”
Responses are lightly edited.
People volunteered that the prices of bacon, beef, chicken, fruit, furniture, gas and an overnight camping spot were “outrageous.” The price of a dozen roses, a Mountain Dew soda and a rib-eye steak had become “ridiculous.” Many respondents blamed either the Biden administration or corporate greed.
Higher- and lower-income respondents generally cited the same products — gas most often, followed by grocery items like milk, beef and chicken. But that doesn’t mean that Americans who notice inflation in the same places are experiencing it in the same ways.

“Sitting here as a high-income suburban mom, if you asked me when did I first see it, I would also answer in a pound of ground beef,” said Diane Whitmore Schanzenbach, a Northwestern University economist who studies poverty. The price of ground beef has risen more than 13 percent in the past year.
“But the price increase is just annoying to us,” she continued. “It has not meant that I’ve stopped feeding the kids their favorite food.”
To poorer families, the difference can mean hunger. When we asked respondents if they wished to share anything else, many volunteered that rising prices even on small purchases have left them making difficult choices.
“I don’t see how a young family makes it.”
“It’s bad when you have to ask yourself do I get food or pay a bill.”
“I go several days in a month skipping meals or just not eating.”
Prescriptions are so high I have told the drug store to just keep them.”
“I am eating expired groceries.”
“It’s killing my family’s ability to save and participate in fun things.”
“I can barely afford to drive to work and pay my bills.”
“Many of us will have to choose unhealthy items that are cheaper.”
Responses are lightly edited.
Some described lowering the heat this winter to save money, cutting expenses like family vacations and restaurant meals, and delaying home repair projects. People detailed coping strategies, including comparison shopping, buying in bulk — or, sometimes painfully, simply doing without.
In some ways, the responses show consumers observing inflation differently than government policymakers and statistics do.
Even as their responses spanned the economy, people overwhelmingly focused on two categories — fuel and food — that are stripped out of the Core Consumer Price Index measure Washington policymakers rely on most when considering whether inflation is rising too quickly.
Food makes up about 13 percent of what a typical household buys. But food in some form was mentioned by more than 90 percent of respondents here.

Food and gas dominate the price increases Americans have noticed.​

Nearly 1,900 survey respondents listed specific items for which they’ve noticed rising prices in the past year. The numbers show how many people mentioned each item. Food items are highlighted.​

gas 904 milk 455 meat 402 beef 298 chicken 265 eggs 205 cars 150 hamburger 138 ground beef 134 bread 131 haircut 127 groceries 123 food 116 vegetables 107 steak 94 produce 93 bacon 88 chicken wings 82 fruit 82 clothing 75 soda 73 cheese 66 beer 64 lumber 64 toilet paper 63 pork 62 restaurants 61 electricity 60 cereal 59 fast food 56 chicken breast 53 coffee 51 dairy 45 takeout 40 houses 39 used cars 36 utilities 36 rent 35 water 35 fish 33 chips 29 ice cream 29 dog food 27 pizza 27 cigarettes 26 fresh vegetables 26 homes 24 alcohol 23 paper products 23 everything 22

Responses are lightly edited.
The outsize importance of food is in keeping with research on how people form their views of inflation.
“It matters what households actually purchase frequently, rather than what has a bigger expenditure share,” said Michael Weber, a professor of finance at the University of Chicago. That’s probably because people have more exposure to items they buy often, and it’s easier to recall their price changes, he said.
That means that the price of a carton of eggs can shape consumers’ impressions of inflation more than the cost of a new refrigerator to put them in. Federal policymakers, however, don’t include the eggs in their core metric because they assume that eggs that jump in price will come back down — while refrigerators, and other items that are less volatile, tell us more about lasting trends in the economy.

The more ordinary items cited here may convey something else anyway, about what makes consumers anxious as they try to connect their own lives to the wider economy.
“Inflation is insidious,” one respondent offered. “It snips away little bits at a time until you notice you’re in worse financial shape.”
Especially striking, that person noted: the cost of cereal.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
We Asked 2,200 People Where They Feel Inflation. Their Answers: A Used Minivana One-Bedroom Apartmenta Single SteakBaconChicken Wingsa Simple Loaf of Breada HaircutMilkRamen NoodlesToilet PaperDiapersInsulinButterRaw LumberFrozen VegetablesWaterCat LitterShampooDeodorantCanned HamTunaCereala Gallon of GasInternet ServiceHome Heating Oil

Americans Say High Prices Are Hitting the Things They Need to Get By​

Americans have felt inflation at the hair salon and in the frozen food aisle. They have seen it while buying pet food, pantry staples and diapers. Yes, gas is pinching them. But so is the price of bacon.
Nearly nine in 10 Americans say they have noticed prices rising around them, according to a survey conducted mid-February for The Upshot by Morning Consult. And, when asked which of the price increases have caught their attention, many mentioned necessities like gas, milk, ground beef and bread — a notably different universe of products than the narrower set of items, like used cars and raw lumber, that were soaring in price last spring.
The survey results make clear why consumers remain glum, even at a time of rapid job and economic growth. Inflation is now inescapable. And what it’s touching is deeply personal: a specific brand of baby formula, “the sausages my husband buys,” “my usual Alaskan salmon dinner at Captain D’s.”
“A car battery costs almost two times as much.”
Bacon is as expensive as filet mignon used to be.”
Cold cereal has gone up, and the box has shrunk.”
Gas. It’s painful at the pump.”
Horse feed keeps going up every week.”
“I never thought I would ever see eggs at $5 a dozen.”
“The cheap brand of hamburger meat is not cheap anymore.”
“The price of pet food is hard to even fathom.”
Responses are lightly edited.
“This is not just a used car phenomenon,” said John Leer, the chief economist at Morning Consult. “When it was used cars, you could have the option essentially of opting out of inflation,” he added. “You could say ‘I don’t want to buy a used car, so this doesn’t affect me, life goes on.’”
As opting out has become less and less possible, Americans now rate inflation among their top concerns for the first time in nearly four decades. In Washington, the topic looms over President Biden’s legislative agenda and Democrats’ prospects in midterm elections. The monthly release of government inflation figures — which on Thursday showed inflation reaching a 40-year high, driven by the steep prices of gas and food — has become an anxious political event. And the sanctions on Russia that are rattling the global economy now threaten to push energy and food prices higher still.

In this moment of growing alarm over inflation, the survey asked 2,200 people to name specific products and services whose higher prices have stood out to them over the past year. The open-ended responses show how closely people are paying attention.
They can quote what a three-pound bag of ground coffee cost at Costco last year. They have noticed that some costlier products have shrunk in size, too. Even before fuel prices hit a record high this week, nearly one in four people cited the rising cost of gas. Eight people pointed to the fact that the Dollar Tree chain of stores now charges $1.25 per item. Sixty-three people have apparently been tracking the cost of toilet paper. One-hundred-twenty-seven mentioned a haircut.
Collectively, their answers touch on nearly every corner of consumption as the federal government tracks it. Dozens of people responded directly, often angrily, to that effect — that they have seen inflation everywhere.
“As everything goes up in price, my savings diminish.”
Everything is going up, but our wages are not.”
“Hard to not call it price gouging. Everything has gone up with no end in sight.”
Everything is on the rise except for my pay. Makes living hard.”
“When gas costs more, everything costs more.”
Responses are lightly edited.
People volunteered that the prices of bacon, beef, chicken, fruit, furniture, gas and an overnight camping spot were “outrageous.” The price of a dozen roses, a Mountain Dew soda and a rib-eye steak had become “ridiculous.” Many respondents blamed either the Biden administration or corporate greed.
Higher- and lower-income respondents generally cited the same products — gas most often, followed by grocery items like milk, beef and chicken. But that doesn’t mean that Americans who notice inflation in the same places are experiencing it in the same ways.

“Sitting here as a high-income suburban mom, if you asked me when did I first see it, I would also answer in a pound of ground beef,” said Diane Whitmore Schanzenbach, a Northwestern University economist who studies poverty. The price of ground beef has risen more than 13 percent in the past year.
“But the price increase is just annoying to us,” she continued. “It has not meant that I’ve stopped feeding the kids their favorite food.”
To poorer families, the difference can mean hunger. When we asked respondents if they wished to share anything else, many volunteered that rising prices even on small purchases have left them making difficult choices.
“I don’t see how a young family makes it.”
“It’s bad when you have to ask yourself do I get food or pay a bill.”
“I go several days in a month skipping meals or just not eating.”
Prescriptions are so high I have told the drug store to just keep them.”
“I am eating expired groceries.”
“It’s killing my family’s ability to save and participate in fun things.”
“I can barely afford to drive to work and pay my bills.”
“Many of us will have to choose unhealthy items that are cheaper.”
Responses are lightly edited.
Some described lowering the heat this winter to save money, cutting expenses like family vacations and restaurant meals, and delaying home repair projects. People detailed coping strategies, including comparison shopping, buying in bulk — or, sometimes painfully, simply doing without.
In some ways, the responses show consumers observing inflation differently than government policymakers and statistics do.
Even as their responses spanned the economy, people overwhelmingly focused on two categories — fuel and food — that are stripped out of the Core Consumer Price Index measure Washington policymakers rely on most when considering whether inflation is rising too quickly.
Food makes up about 13 percent of what a typical household buys. But food in some form was mentioned by more than 90 percent of respondents here.

Food and gas dominate the price increases Americans have noticed.​

Nearly 1,900 survey respondents listed specific items for which they’ve noticed rising prices in the past year. The numbers show how many people mentioned each item. Food items are highlighted.​

gas 904 milk 455 meat 402 beef 298 chicken 265 eggs 205 cars 150 hamburger 138 ground beef 134 bread 131 haircut 127 groceries 123 food 116 vegetables 107 steak 94 produce 93 bacon 88 chicken wings 82 fruit 82 clothing 75 soda 73 cheese 66 beer 64 lumber 64 toilet paper 63 pork 62 restaurants 61 electricity 60 cereal 59 fast food 56 chicken breast 53 coffee 51 dairy 45 takeout 40 houses 39 used cars 36 utilities 36 rent 35 water 35 fish 33 chips 29 ice cream 29 dog food 27 pizza 27 cigarettes 26 fresh vegetables 26 homes 24 alcohol 23 paper products 23 everything 22

Responses are lightly edited.
The outsize importance of food is in keeping with research on how people form their views of inflation.
“It matters what households actually purchase frequently, rather than what has a bigger expenditure share,” said Michael Weber, a professor of finance at the University of Chicago. That’s probably because people have more exposure to items they buy often, and it’s easier to recall their price changes, he said.
That means that the price of a carton of eggs can shape consumers’ impressions of inflation more than the cost of a new refrigerator to put them in. Federal policymakers, however, don’t include the eggs in their core metric because they assume that eggs that jump in price will come back down — while refrigerators, and other items that are less volatile, tell us more about lasting trends in the economy.

The more ordinary items cited here may convey something else anyway, about what makes consumers anxious as they try to connect their own lives to the wider economy.
“Inflation is insidious,” one respondent offered. “It snips away little bits at a time until you notice you’re in worse financial shape.”
Especially striking, that person noted: the cost of cereal.
One look at fertilizer prices makes me worry about upcoming food inflation and shortages. For many, this is the first real sticky inflation we are dealing with. Not good. Hope this resolves itself in short order
 

David Goldsmith

All Powerful Moderator
Staff member


I Keep Hoping Larry Summers Is Wrong. What if He’s Not?​

The former Treasury secretary discusses inflation, a possible recession and how the Russia-Ukraine war might exacerbate both.​

For the last year or so, Larry Summers, the economist and former Treasury Secretary, has been this relentless, loud, frustrating economic Cassandra. He’s been saying often and to everyone that the risk of inflation was way higher than most economists believed. He flayed President Biden’s American Rescue Plan for being way too much stimulus too fast.
Month after month, he said that the inflation— it wasn’t just transitory. It wasn’t just going to go away. These weren’t just supply chain problems that would unkink. That this wasn’t just going to be a problem of autos and energy. That the markets were wrong, and the forecasters were wrong, and the pundits were wrong, and the Fed was wrong, and we were headed for a serious bout of inflation.
And damn it, he was more right than he was wrong. You can debate, and people do, if he was right for the right reasons or right for some of the wrong reasons, or its contingency, or luck, or what will happen next. But things he was saying six months ago are conventional wisdom now. Inflation is still here. It seems in many ways to be getting worse, even as the economy is weakening a bit. The idea of transitory inflation— that is gone. That has been retired. The data now shows that the inflation is pretty broad-based. It’s not just in a few goods.
The Fed is raising rates much, much faster than it had intended, or projected, or said it would be. Though, to be fair, still not nearly fast enough for Summers. Fear of inflation is now a central risk to Democrats in the midterms and a really big challenge for the rest of Biden’s agenda. We are, unfortunately, living much more in the world Larry Summers predicted than in the world I’d hoped to be inhabiting right now. [more...]
 

inonada

Well-known member
I listened to this and thought it was very insightful, both in expressing Summers’ views but also explaining the economics clearly.

Pretty interesting view on where the Fed needs to head in expectation (couched by uncertainty that he acknowledges):

I don’t think we’re going to avoid and bring down the rate of inflation until we get to positive real interest rates. And I don’t think we’re going to get to positive real interest rates without, over the next couple of years, getting interest rates north of 4 percent. What happens to real interest rates depends both on what the Fed does and on what happens to inflation.

My sense of this is that given the likely paths of inflation, we’re likely to have a need for nominal interest rates, basic Fed interest rates, to rise to the 4 percent to 5 percent range over the next couple of years. If they don’t do that, I think we’ll get higher inflation. And then over time, it will be necessary for them to get to still higher levels and cause even greater dislocations.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
If he is right (and it's hard for me to argue against it since I've been feeding this thread for a year and a half) where does that push mortgage rates to and what is the impact on Real Estate?
5.5-6%? I think we got a few intra meeting fed hikes coming. 4% 10yr on way? Equities in this environment?
 
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