Wednesday, November 16, 2011


I've tugged on Paul Krugman's teat [ewww... -ed] over his denial of, in particular, food inflation often enough, so when a report goes in his direction it's only fair to post on it.
That said, do note the year-over-year trend is still intact.
First up, the headline post from Pragmatic Capitalism:
This morning’s inflation report from the BLS showed a slight down tick in headline CPI to 3.6% YoY and a slight increase in core CPI to 2.1%.   Energy was down 2% while gasoline fell 3.1%.   Motor fuel prices have dominated the index in recent years as the US economy has remained weak.  This explains much of the discrepancy in core and headline inflation.  Unfortunately, crude oil is breaching the $102 mark as I type so the relief in prices is likely to be short lived.  The price pinch from energy is becoming a growing concern and the persistent rise in energy prices should have all of us focusing more and more on theories regarding energy’s “endless bid”.

My HA-CPI (Housing Adjusted CPI) was up slightly from 2.14% to 2.26%.  This is just about in-line with headline inflation and shows a moderate though not alarming level of inflation in the U.S. economy.  The index includes a housing adjustment component that accounts for the change in housing values – a component that I believe is severely lacking in the government’s data (their housing component barely registered a decline over the course of the greatest US housing collapse of the last 80 years).

And a deeper dive into the numbers from FT Alphaville:

The reversing core-headline CPI gap
We still remember the August US CPI release that brought whispers of stagflation as it reported inflation in July that was well above what the market anticipated. (You heard no such whispers from us, natch.)
But since then:

That chart is from the report for October released this morning, and given that we called an earlier edition “meaningless”, we probably shouldn’t read too much into this one either. Analysts from Barcap note that some of the components whose prices declined last month tend to be among the most volatile.

But the general trend is simply that as commodity price rises have moderated since the summer and a global growth slowdown has become more likely, US inflation has followed suit — exactly as the bond markets and market-based measures of inflation expectations have been signaling for months now....MORE