Tuesday, April 29, 2008

Are Inflationary Concerns Inflated?

Inflation: Food
Inflation: Energy
Inflation: All Items Less Energy and Food
The charts above are from the St. Louis Federal Reserve, using CPI data from the BLS, and show the percent change from a year ago, from 2000 - 2008. Is it possible that inflationary fears are inflated? Consider that:

1. Food inflation fell in both February and March 2008.

2. Energy inflation fell in both February and March, and is lower in 2008 than in 11 months in 2005 and 2006.

3. Inflation for all items less food and energy is lower in 2008 than in 10 months in 2006 and 2007.

8 Comments:

At 4/29/2008 8:47 AM, Blogger David Damore said...

Certainly it is possible.

When people see prices for things they must buy [gasoline and food] increase in price rapidly they become unsettled.

A few comments on each of your points.

1. Food inflation may have fallen. Consumers see more $$$ going out each time they go on a shopping trip. Prices are already way higher [rate of change may be zero or negative, but people feel they are paying $3 [$2.69?] for a loaf of bread but they remember paying $2 [$2.19?] within the past 12 months].

2. Energy inflation may have fallen but the fuel station sign indicating $3.699 tells people a story about higher prices. Oil prices nearing $120 a barrel reinforces the idea of inflation.

3. People care less about prices going up for things they do not buy frequently [cars, houses, washers and dryers etc]. They even want to see some prices increase [homes].

As you probably already know, 2008 is an election year. The media is still following the 'if it bleeds, it leads' strategy to news. Consumers are bleeding.

People are seeing and feeling higher prices [total cost] every time they fill up. Lots of people bought trucks and SUVs and $70 fill ups are painful.

All three major candidates are... I'll let you fill in the blanks for what they are doing right and wrong.

What are your thoughts?

 
At 4/29/2008 9:25 AM, Blogger OBloodyHell said...

> As you probably already know, 2008 is an election year. The media is still following the 'if it bleeds, it leads' strategy to news. Consumers are bleeding.

Someone is always bleeding. That's how markets work. The best buys are always at fire sales. There's just no fire in the market right now.

 
At 4/29/2008 9:44 AM, Blogger David Damore said...

Kalamazoo Gazette on fuel prices.

"Kalamazoo area fuel prices don't go up overnight"
Posted by Gazette Staff Reports April 29, 2008 05:26AM
Categories: Breaking News

Breaking News?

Is this over the top reporting?

What is your best media story/headline on inflation?

 
At 4/29/2008 10:18 AM, Anonymous Anonymous said...

How ridiculous to state the inflationary concerns are inflated...perhaps Fed isnt expanding the money supply but the devaluation of the dollar through lower interest rates is creating the inflation as the only ones that dont have their heads in their behinds are the Govts/people that loan us money.

 
At 4/29/2008 12:16 PM, Anonymous Anonymous said...

As a consumer, one is faced with choices. One can choose to combine errands and take 1 trip instead of 2 or 3...one can buy fresh ingredients and make a meal from scratch rather than buying a pre-prepared meal or going out to eat...one can choose a Honda Fit rather than an SUV...one can shop at the bulk food store rather than the more expensive grocery chain.

The vast majority of people look for the best price and start to rationalize what they do and do not need during inflationary times. These choices are aside from discretionary spending where one can usually save a great deal of money.

We have not even seen negative GDP and already the glums are predicting the most severe downturn since the Great Depression and stagflation on a par with the 1970s. While these things may happen (almost anything MAY happen), economics should be based upon actual economic data rather than surveys & sentiments.

 
At 4/29/2008 12:51 PM, Anonymous The Masked Millionaire said...

Anonymous post at 12:16pm is right.

Everything comes down to choice.

If you want to make the choice to buy a big SUV instead of a car that gets better gas milage..good for you. Just don't complain about how much you are spending to fill up. You made your choice.

Eating out everyday is another example of a poor choice a lot of people make. I'm not sure of the dollar amount, but if you were to compare how much it cost to eat out everyday with the cost to cook your own meal, over a year I would suspect it is quite a substantial difference.

One last thing. When times are good you have a choice to save for a rainy day or you can choose to buy a $100,000 RV, a boat, jet ski, motorcycle, European vacation, $500 bicycle, on and on.

Live From Las Vegas
(Where I choose not to gamble)
The Masked Millionaire

 
At 4/29/2008 10:12 PM, Blogger tc said...

Mark,

Good post. Look at the ten year bond. The inflation stuff seems almost as overblown as the recession fear.

 
At 4/30/2008 3:53 AM, Blogger juandos said...

Well thankfully the federal government is still making money...LOL!

DAILY TREASURY STATEMENT
Cash and debt operations of the United States Treasury
Monday April 28, 2008
...

Again it looks like the supply siders might know something...

 

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