Inflation tends to arrive in 3 stages: Stage 1 The first stage is the price manufacturers pay for their raw materials. This can be tracked in a variety of ways including the Global Price of Agrigated Raw Materials published by the St. Louis Federal Reserve. Interestingly, raw materials prices peaked in February 2011 at 187.2 and then fell steadily over the next 4 years. Prices stabilized for a few years before plummeting due to COVID. Since then raw materials prices have spiked sharply. But are still nowhere near 2011 levels. One of the reasons for the sharp spike in 2011 was serious flooding causing massive crop loss driving the price of four basic crops (wheat, rice, corn, and soybeans) … [Read more...]
April Inflation More than Double FED Target
Inflation Summary: Annual Inflation up sharply from 2.62% in March to 4.16% in April. CPI Index rose massively from 264.877 in March to 267.054 in April. Monthly Inflation for March was 0.71% and for April was 0.82%. We have to go back to the Oil Peak of 2008 to see higher inflation. Next release June 10th Annual inflation for the 12 months ending in April was 4.16% We have been predicting Annual Inflation would shoot up in March and April due to negative numbers falling out of the annual calculation. Since the BLS rounds their numbers to 1 decimal place they reported March as 2.6% and April as 4.2% taking inflation well above the FED's 2% target rate. Due to … [Read more...]
Managing Business During Periods of Inflation
When a currency's purchasing power declines, the average cost of goods and services rise, and the economy in question enters a period of inflation. This affects not only individual consumers and families but businesses as well. COVID-19 has rocked the global economy like nothing we've seen or experienced for a century. And the government's response has been to create massive quantities of liquidity. This means that a period of inflation could very well be on the horizon. If a business is to effectively circumvent this difficult economic period, it should be preparing for the challenges that lay ahead. Here are four things a business can do to prepare for the next inflationary … [Read more...]
March Inflation Skyrockets
Inflation Summary: Annual Inflation up from 1.68% in February to 2.62% in March. CPI Index rose slightly from 263.014 in February to 264.877 in March. Monthly Inflation for February was 0.55% and March was 0.71%. Next release May 12th Annual inflation for the 12 months ending in March was 2.62% We have been predicting Annual Inflation would shoot up in March due to higher gas prices and negative numbers falling out of the annual calculation. Further increases to come in April and May. Since the BLS rounds their numbers to 1 decimal place they reported February as 1.7% and March as 2.6% for a monthly increase of 9/10ths of 1% taking inflation well above the FED's 2% … [Read more...]
February Inflation Increases 20% over January
Inflation Summary: Annual Inflation up from 1.40% in January to 1.68% in February. CPI Index rose from 261.582 in January to 263.014 in February. Monthly Inflation for January was 0.43% and February was 0.55%. Next release April 13th Annual inflation for the 12 months ending in February was 1.68%, a 20% increase over January's 1.40% The CPI index itself was up from 261.582 in January to 263.014 in February. Resulting in a monthly inflation rate of 0.55% which replaced February 2020's 0.27%. Annual inflation for the 12 months ending in February was 1.68%, since the BLS rounds their numbers they report it as 1.7%. Setting the Stage for Inflation Due to the Corona … [Read more...]
January Inflation Setting Stage for Big Run Up
Inflation Summary: Annual Inflation up from 1.36% in December to 1.40% in January. CPI Index rose slightly from 260.474 in December to 261.582 in January. Monthly Inflation for December was 0.09%, January was 0.43%. Next release March 10th Annual inflation for the 12 months ending in January was 1.40% The CPI index itself was up from 260.474 in December to 261.582 in January. Resulting in a monthly inflation rate of 0.43%. Annual inflation for the 12 months ending in December was 1.36%, the 12 months ending in January was 1.40%. Since the BLS rounds their numbers they report both as 1.4%. Setting the Stage for Inflation Due to the Corona Virus, March and April … [Read more...]
Price and Wage Changes since 2000
When we think about price changes we often think of them in terms of the changes in the Consumer Price Index (CPI-U for all Urban Consumers). Looking at it that way, we may get the idea that price movements are monolithic i.e. that they all move together, so "prices" were up 2% or 5% or whatever, over the last 12 months. But that is a bit misleading since prices all move independently. For this reason, the U.S. Bureau of Labor Statistics publishes a CPI database with a breakdown of all the various components. By analyzing the various components of the CPI over the last 20 years we developed the following Chart. Click Chart for larger image As we can see … [Read more...]
Why Hasn’t the U.S. Dollar Experienced Hyperinflation?
I recently answered this question on Quora and thought I'd share the answer here as well. Why hasn't the U.S. dollar experienced hyperinflation? That is an excellent question. As we can see from the chart the FED has engaged in 4 major phases of Quantitative Easing (QE) where they drastically increased their “assets” and one phase of Quantitative Tightening (QT) where they tried to decrease their assets. FED assets is sort of a euphemism for money printing. Basically, it involves creating money out of thin air and then buying something. That “something” becomes an asset on the FED’s books. Prior to 2008, the primary thing the FED bought was U.S. Treasury debt i.e. Treasury Bills, Bonds, … [Read more...]
Using Risk to Combat Inflation
Inflation is a fact of life that everyone must deal with. Even when inflation is "low", it gradually takes its toll on your assets. The result of low inflation is that your purchasing power gradually erodes even though you might have the same amount of money. In order to combat this, you have to earn more or increase the rate of return on your investments. Often a simple savings account won't even pay enough interest to cover the losses due to creeping inflation. In that case, the only way to beat inflation is to take on additional risk to increase your rate of return. Taking on additional risk, however, means that you could suffer other types of losses. So, in order to properly manage … [Read more...]
December Inflation Up Slightly
Inflation Summary: Annual Inflation up from 1.17% in November to 1.36% in December. CPI Index rose slightly from 260.229 in November to 260.474 in December. Monthly Inflation for December was 0.09%, November was -0.06%. Next release February 10th BLS Commissioner's Inflation Report: According to the BLS commissioner's report, "The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in December on a seasonally adjusted basis after rising 0.2 percent in November, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.4 percent before seasonal adjustment. The seasonally adjusted increase in the all … [Read more...]
