The Bureau of Labor Statistics reported Record High Annual Inflation Rate in December.
Inflation Summary:
- Annual Inflation highest since June 1982.
- CPI Index rose from 277.948 to 278.802.
- Monthly Inflation for December was 0.31%
- The next release is on February 10th
Annual Inflation for the 12 months ending in December was 7.04%.
2021 Inflation Rates
Nov. 6.81% — Oct. 6.22% — Sept. 5.39% — Aug. 5.25% — July 5.37% — June 5.39% — January 1.40%
Inflation in December 2020 was just 1.36%, but by December 2021, Inflation had multiplied over five times in a single year to 7.04%. As you can see from the chart below, current levels have exceeded the July 2008 peak of 5.6% and the October 1990 Peak of 6.29%, putting us halfway up the slope to the March 1980 peak of 14.76%. This is virtually identical to June 1982, when Inflation hit 7.06%.
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In March of 1980, Inflation peaked at 14.76%. In January 1982 it was down to 8.39%, and by May of 1982, it had fallen to 6.68%, with a slight blip up in June to 7.06%. Of course, there’s a big difference between the peak in 1980 and current levels, but as we discuss below, there is still the possibility that Inflation will climb higher from here. The FED has been spoiled by declining inflation rates since the 1980 peak, allowing them to print money almost at will. This is partly due to innovation in the Electronics/Computer/Internet area and partly due to competition from China driving down prices. See: How Nixon’s Revolutionary Move Influenced U.S. Inflation For 50 Years for more information.
BLS Commissioner’s Inflation Report:
According to the BLS commissioner’s report, “The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in December on a seasonally adjusted basis after rising 0.8 percent in November, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 7.0 percent before seasonal adjustment. Increases in the indexes for shelter and for used cars and trucks were the largest contributors to the seasonally adjusted all items increase. The food index also contributed, although it increased less than in recent months, rising 0.5 percent in December. The energy index declined in December, ending a long series of increases; it fell 0.4 percent as the indexes for gasoline and natural gas both decreased.
The index for all items less food and energy rose 0.6 percent in December following a 0.5-percent increase in November. This was the sixth time in the last 9 months it has increased at least 0.5 percent. Along with the indexes for shelter and for used cars and trucks, the indexes for household furnishings and operations, apparel, new vehicles, and medical care all increased in December. As in November, the indexes for motor vehicle insurance and recreation were among the few to decline over the month. The all items index rose 7.0 percent for the 12 months ending December, the largest 12-month increase since the period ending June 1982. The all items less food and energy index rose 5.5 percent, the largest 12-month change since the period ending February 1991. The energy index rose 29.3 percent over the last year, and the food index increased 6.3 percent.”
Of course, the BLS rounds the inflation rate to a single decimal place. We prefer a bit finer view, so we round it to 7.04% otherwise had it been 1/100th of a percent higher, i.e., 7.05%, the BLS would have rounded it to 7.1%.
Seasonally Adjusted Inflation Components Table
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Since we calculate the inflation rate to two decimal places, this month’s Annual Inflation was 7.04%, and monthly Inflation on a NON-Adjusted basis was 0.31%.
Critical components of November’s increase were Gasoline prices which increased 49.6% over the last year but down ½% over the previous month. Used Cars and Trucks were also up 37.3% over year-ago prices. Food was up 6.3% over year-ago prices.
See: From Pandemic To 2021 Supply Chain Disruption for more information. We’ve also updated the Inflation Adjusted Corn prices chart.
December 2021 Inflation Situation
The Current Annual inflation Rate for the 12 months ending in December was 7.04%, up from 6.81% in November and significantly above September’s 5.39%. This followed the run-up from December 2020’s 1.36%. So Inflation is currently 5X last December’s rate.
Monthly Inflation:
December’s monthly Inflation was 0.31%, November’s was 0.49%, compared to 0.09% in December 2020 and -0.06% in November 2020. Typically, October – December have extremely low (or even negative) monthly Inflation, so having a massive number like this indicates a shift toward much higher annual Inflation.
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See Annual Inflation for more information.
Moore Inflation Predictor
In March, FED chairman Jerome Powell insisted that Inflation would not be a problem, i.e., that the spike was only “transitory”. We disagreed, so we added an additional line to project what was possible if the FED’s pronouncement was wrong. In May, we produced this chart based on April data, and at the time, it appeared a bit far-fetched. (We’ve updated the reality to show what actually happened). But as you can see, we were reasonably close 7-8 months in advance.
See our Moore Inflation Predictor for this month’s projection.
Not Seasonally Adjusted Monthly Inflation Rates
As we can see from the table below, the monthly numbers for the 4th quarter of 2020 are very low. If 2021 numbers come in above those numbers, the annual inflation rate will rise.
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | |
| 2016 | 0.17% | 0.08% | 0.43% | 0.47% | 0.41% | 0.33% | (0.16%) | 0.09% | 0.24% | 0.12% | (0.16%) | 0.03% |
| 2017 | 0.58% | 0.31% | 0.08% | 0.30% | 0.09% | 0.09% | (0.07%) | 0.30% | 0.53% | (0.06%) | 0.002% | (0.06%) |
| 2018 | 0.54% | 0.45% | 0.23% | 0.40% | 0.42% | 0.16% | 0.01% | 0.06% | 0.12% | 0.18% | (0.33%) | (0.32%) |
| 2019 | 0.19% | 0.42% | 0.56% | 0.53% | 0.21% | 0.02% | 0.17% | (0.01%) | 0.08% | 0.23% | (0.05%) | (0.09%) |
| 2020 | 0.39% | 0.27% | (0.22%) | (0.67%) | 0.002% | 0.55% | 0.51% | 0.32% | 0.14% | 0.04% | (0.06%) | 0.09% |
| 2021 | 0.43% | 0.55% | 0.71% | 0.82% | 0.80% | 0.93% | 0.48% | 0.21 | 0.27 | 0.83% | 0.49% | 0.31% |
See: Monthly Inflation Rate for more information and a complete table of Unadjusted Monthly Rates.
Federal Reserve Actions
Despite the rapid increase in Inflation, throughout 2021, the FED refused to admit that Inflation was going to be a problem and continued their QE money printing. See: Why Quantitative Easing is Inflationary… Sometimes. Finally, in December, the FED announced that it would begin tapering in January down to zero QE by March. This is not stepping on the brakes but simply letting off the gas. Looking at total assets, we can see the same stairstep pattern we’ve been seeing for the last year, but the steps are supposed to be smaller in January and February.
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However, just letting off the gas is enough to send the stock market into a tailspin since it is like a drug addict when it comes to QE. Cut off its supply, and it gets the shakes.
FED Funds Rate
So far, the FED has held the FED funds rate steady at a minuscule 8/100% (0.08%) from September through December.
Chart Data Source St Louis FED.
For more info, See NYSE ROC and MIP.
Misery Index
Even though unemployment was down, Inflation was up, so the Misery index was virtually flat.
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[Read More…]
NYSE Rate of Change (ROC)©
Sell Signal
The NYSE ROC index is down below its moving average.
See the NYSE ROC for more info.
NASDAQ Rate of Change (ROC)©
Sell Signal
The NASDAQ ROC, down well below its moving average.
See NASDAQ ROC for more.
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