Monday, February 14, 2011

WSJ Forecasting Survey: 2.1% Inflation in 2011

The WSJ Economic Forecasting Survey was released today, and based on the consensus average of more than 50 economists and forecasters, CPI inflation in December 2011 will be 2.1%, real GDP growth will be 3.5% in 2011, and the unemployment rate in December will be 8.6%.   


At 2/14/2011 11:11 AM, Blogger Che is dead said...

Are these all one handed economists?

At 2/14/2011 11:51 AM, Blogger morganovich said...

two things:

one, note that they are forecasting CPI, not "inflation" which are not the same thing.

second, a little vignette about clothing prices and input costs:

Cotton has more than doubled in price over the past year, hitting all-time highs. The price of other synthetic fabrics has jumped roughly 50 percent as demand for alternatives and blends has risen.

Clothing prices are expected to rise about 10 percent in coming months, with the biggest increases coming in the second half of the year, said Burt Flickinger III president of Strategic Resource Group.

Brooks Brothers' wrinkle-free men's dress shirts now cost $88, up from $79.50. Levi Strauss & Co., Wrangler jeans maker VF Corp., J.C. Penney Co., Nike and designer shoe seller Steve Madden also plan increases.

More specifics on price increases are expected when clothing retailers such as J.C. Penney and Abercrombie & Fitch report financial results this month.

New York Fashion Week Fall 2011 - CNBC Special Report

Current DateTime: 05:21:25 14 Feb 2011
LinksList Documentid: 41576269

* Slideshow: Irina Shabayeva: Taking Off After Project Runway
* 'Project Runway' Winner Burns Bright in Latest Test
* Luxury Fashion Customers Looking for Inspiration
* Stores Turn to Magazines to Stoke Fashion Credibility

"All of our brands, every single brand, will take some price increases," said Eric Wiseman, chairman and CEO of VF Corp., whose brands include The North Face, Nautica, Wrangler and Lee.

Cotton accounts for half the production cost of jeans, which make up about one-third of VF's sales, he told investors in November. Higher costs also will affect how clothes are made.

Cotton prices have jumped to a 150-year-high, rising to $1.90 per pound on Friday, more than double what it was a year ago and just ahead of the $1.89 record hit during the Civil War, according to the International Cotton Advisory Committee.

Cotton prices began soaring in August of 2010 after bad weather cut harvests in major producing countries including China, the U.S., Pakistan and Australia

aw materials account for 25 percent to 50 percent of the cost of producing a garment. Labor ranges from 20 percent to 40 percent, depending on how complicated it is to make, Bassuk said.

At 2/14/2011 11:54 AM, Blogger McKibbinUSA said...

I have a dissenting view of inflation for 2011 -- my own view is that inflation will begin to rise sharply by the end of 2011, and especially as commodity prices continue upwards in the coming months, as well as developments still to occur in California, which will likely fall into economic default by the Fall of 2011, requiring a Federal bailout -- inflation is imminent at this point based on these economic fundamentals.

At 2/14/2011 1:51 PM, Blogger Eric H said...

72% of those experts said states shouldn't be able to declare bankruptcy (see Q&A tab).

"Nothing should be done to make that possibility seem credible"

Propaganda duly noted. Dr. McKibbin is right on the money. The state bailouts ARE coming.

Where will that "money" come from?

At 2/14/2011 2:15 PM, Blogger Junkyard_hawg1985 said...

According to the Billion Prices Project from MIT (HT: Mark Perry at Carpe Diem), the trailing annual inflation rate is 2.42% and the trailing 1 month inflation was 0.72%. For the economists to be right, inflation will need to slow down.

At 2/14/2011 2:17 PM, Blogger Junkyard_hawg1985 said...

"Where will that "money" come from?" - Eric

First, there is basically a 0% chance Congress will approve the money. Having said that, I suspect the Fed will bail out the states by printing the money out of thin air like they have in QE and QE2.

At 2/14/2011 2:57 PM, Blogger Eric H said...

Should these economists make a wager with Ben Bernanke? He is "100% certain" he can keep inflation below 2%...

At 2/14/2011 4:04 PM, Blogger juandos said...

Well I don't know what the Wall Street Journal had to say regarding inflation (flash based article?) but did it take into account the strong possibility of increased taxes?

At 2/14/2011 5:09 PM, Blogger VangelV said...

Great. The same group that failed to see a crisis coming in the housing market is expecting inflation to be low. How reassuring for all of us.

Meantime, in the real world we see huge price increases for energy, metals, food, utilities, health care, insurance, etc., that gets ignored by the statisticians who compile the data and the same economists who keep predicting a rise in profits even as they claim that companies will not be able to pass along the price increases to their customers.

At 2/14/2011 5:25 PM, Blogger morganovich said...


also note that the MIT BBP is a survey of online prices.

online is the single most competitive selling environment anywhere with the thinnest margins and the most intense price pressure.

from that it seems reasonable to infer that online inflation would be lower than "real world" inflation, especially as many of the things going up in price most rapidly (like healthcare) are not sold online.

thus, i think inflation would have to slow down a great deal to hit 2.1%.

At 2/14/2011 5:28 PM, Blogger morganovich said...

"Great. The same group that failed to see a crisis coming in the housing market is expecting inflation to be low. How reassuring for all of us."


worse, we get nonsense like this from greenspan:

"We run the risk, by laying out the pros and cons of a particular argument, of inducing people to join in on the debate, and in this regard it is possible to lose control of a process that only we fully understand."

that only you understand? god help us if that's true. the hubris of these guys astounds me.

At 2/14/2011 8:46 PM, Blogger morganovich said...

another anecdote:

PORTLAND -- Get ready to pay double or even triple the price for fresh produce in the coming weeks after the worst freeze in 60 years damaged and wiped out entire crops in northern Mexico and the southwestern U.S.

The problem started less than a week ago, when our nation was focusing on the Superbowl and sheets of ice falling from Texas Stadium.

Farmers throughout northern Mexico and the Southwest experienced unprecedented crop losses. Now devastation that seemed so far away, is hitting us in the pocketbooks.

"We've had to double and triple some prices and consumers come in and it's quite a shock to them," said Rusty Peake, GM of Food4Less in Southeast Portland.

"Increase, increase, increase," said produce manager Troy Winterhalter as he watched urgent messages coming across his laptop computer. "Peppers, zucchini, cucumbers, asparagus, the entire asparagus crop was wiped out," said Winterhalter.

Roma tomatoes have more than doubled in price since Thursday and very soon they may not be available at all.

At 2/14/2011 10:18 PM, Blogger Ron H. said...


"that only you understand? god help us if that's true. the hubris of these guys astounds me."

Maybe he means that there are things the Fed is involved in that we are unaware of, not that we couldn't understand them.

I'm all in favor of Ron Paul's efforts to audit the Fed, and even end it.

At 2/14/2011 10:21 PM, Blogger Ron H. said...


"Should these economists make a wager with Ben Bernanke? He is "100% certain" he can keep inflation below 2%..."

Well, of course he's confident. With a supportive BLS calculating CPI, inflation can be anything he wishes it to be.

At 2/15/2011 3:27 AM, Anonymous Anonymous said...

Its all depends on monetary policy.
May be we can see hyperinflation in 2012...

At 2/15/2011 9:27 AM, Blogger morganovich said...

more fun data: (as we continue to "diverge" from the rest of the developed world)

British consumer price inflation surged to double the Bank of England's target in January, official data showed on Tuesday, raising pressure on the central bank to look seriously at increasing interest rates.

The Office for National Statistics said that the rate of consumer price inflation rose to 4.0 percent in January, in line with economists' forecasts, from 3.7 percent in December.

On the month, CPI rose by 0.1 percent, the first time it has risen between December and January on record.

CPI typically falls in January due to post-Christmas discounting.

The retail price inflation gauge, which includes more housing costs and is the benchmark for many wage deals rose to 5.1 percent, its highest since May 2010.

At 2/15/2011 10:14 AM, Blogger morganovich said...

mport prices rose 1.5 percent, or nearly double the consensus forecast of 0.8 percent in a Reuters poll of economists.

Petroleum prices rose 3.4 percent in January and have risen 18.5 percent over the past four months. Non-petroleum costs rose 1.1 percent in January, the largest advance in that category since April 2008.

Export prices rose 1.2 percent in January, exceeding the consensus forecast of 0.7 percent. They were led by agricultural export prices, which rose 3.2 percent.

so much for the accuracy of economists expectations...


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