Tuesday, January 24, 2012

BPP@MIT Data Show Inflation Slowing at Year-End



The charts above shows monthly and annual inflation rates from the Billion Prices Project @ MIT over the 12-month period ending at the end of December.  According to the BPP website, the index is "designed to provide real-time information on major inflation trends, not to forecast official inflation announcements. We are constantly adding new categories of goods, but we do not cover 100% of CPI goods and services. The price of services, in particular, are not easy to find online and therefore are not included in our statistics."

Bottom Line: Monthly inflation, measured by the BPP @ MIT, has been trending downward since February, and was showing slight deflationary pressures in November and December.  Similarly, BBP annual inflation has been trending downward since July and reached an eight-month low on December 21.  According to this real-time measure of inflationary trends in the U.S. economy, inflationary pressures are gradually moderating, and there is even evidence now of short-term deflation for the months of November and December.    

11 Comments:

At 1/24/2012 3:19 PM, Blogger morganovich said...

short term deflation?

that seems like a pretty questionable way to put it.

we see such trends late in most years. it's seasonality. this is particularly pronounced online at year end due to holiday sales.

compared to a year ago, BPP (which is comparable to core cpi, not full cpi) is showing over 3% inflation.

describing that as "short term deflation" seems misleading. inflation tends to pick up again seasonally in feb-march and accelerate into summer. why do i doubt you will call that "short term high inflation"?

given what food and energy prices have done, this BPP seems consistent with a full CPI of around 6-7%. keep in mind that BPP is all internet prices and therefore will always show less inflation than the economy as a whole for the products it covers and that it overweights those products like consumer electronics that have the most aggressive price drops and and ignores food, healthcare, gasoline, education, etc that tend to have the biggest hikes.

 
At 1/24/2012 4:00 PM, Blogger VangelV said...

given what food and energy prices have done, this BPP seems consistent with a full CPI of around 6-7%. keep in mind that BPP is all internet prices and therefore will always show less inflation than the economy as a whole for the products it covers and that it overweights those products like consumer electronics that have the most aggressive price drops and and ignores food, healthcare, gasoline, education, etc that tend to have the biggest hikes.

Mark loves to talk deflation even as the real world evidence shows otherwise. I agree that if we use the pre-Boskin methodology we are likely looking at 6% of so consumer price inflation. Given the fact that politicians were in a panic in the early 1970s when the inflation rate hit 3% I wonder what the hell people like Mark are smoking.

 
At 1/24/2012 4:06 PM, Blogger AIG said...

Its all obviously a lie perpetrated by the BLS, IMF, CIA, KGB, Milton Friedman and George Soros.

I know so, because some guy on the radio told me that inflation is out of control.

Ron Paul 2012! :p

 
At 1/24/2012 5:11 PM, Blogger Benjamin said...

Inflation is dead, deader than Villi Manilli.

The Chicken Inflation Littles have started to report on what cranks, UFOlogists, astrologers and scaremongers say, not what the BLS figures say (which may actually over-report inflation).

The question is why is the Fed still fighting yesteryear's wars (inflation) in an era prone to deflation?

Another meaningful question: If inflation is at zero with energy prices up 25 percent in last year, what will happen when energy prices top out or go down? There is a ceiling on oil prices, after all. We know you get immediate demand destruction much north of $100 a barrel, and medium-term demand destruction north of $80.

Bernanke went to Japan in the 1990s on an advisory mission. What we didn't know was that it was Bernanke getting advice from the Bank of Japan, not giving it.

With global supply chains and private sector unions destroyed, inflation is no threat.

The threat is that we do a Japan.

 
At 1/24/2012 5:26 PM, Blogger kmg said...

Benjamin,

I fully agree. The inflation hawks are drifting close to becoming the new peak-oil nuts (the two groups overlap, of course).

 
At 1/24/2012 6:40 PM, Blogger Benjamin said...

KMG-

Thanks for posting, and post again. The screwballs have taken over the fort here, and we need some relief.

 
At 1/24/2012 6:40 PM, Blogger rjs said...

so, should the bernank start the presses again?

 
At 1/24/2012 7:10 PM, Blogger PeakTrader said...

kmg says: "...peak-oil nuts..."

I guess, you believe Peak Oil is over, since Brent Crude fell below $110 a barrel today (they say on a possible Greek debt default, along with the E.U. recession).

 
At 1/24/2012 7:21 PM, Blogger morganovich said...

bunny-

another meaningful question? on what planet?

inflation is zero? really? where?

as ever, you have nothing of substance to add.

i'd try explaining japan to you again, but it's obvious from the last 12 tries that you have no idea what you are talking about and even less ability to learn.

 
At 1/24/2012 7:43 PM, Blogger Benjamin said...

"API: US petroleum demand down 1.2% in 2011, domestic production up 2.5%
20 January 2012
Total petroleum deliveries (a measure of demand) fell 1.2% to an average of 18.9 million barrels a day in 2011 compared with 2010, according to the American Petroleum Institute (API). Except for 2008, this was the largest drop in annual domestic deliveries over the past decade."

Yes, oil is presently expensive, though less costly than in the late 1970s, adjusted for inflation.

In most markets, when demand wanes year afar year, they call that a mature or declining market. The demand for oil is falling in Europe, Japan and the USA.

How would you like to make a product that people use less of every year? While people get better at extracting it?

We will see Peak Demand before Peak Oil. We have already seen Peak demand in the developed world, and the rest of the globe may go to CNG, methanol, or PHEVs (China). China already went to electric bikes. What if they mandate PHEVs?

 
At 1/24/2012 11:14 PM, Blogger bix1951 said...

please don't confuse us with facts
our opinions are true for sure and the facts are not relevant

 

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