According to the Bureau of Labor Statistics CPI report released on December 12th, Annual Inflation was down to 3.1% in November. (but since we calculate it to two digits, it was actually down to 3.14%.) Monthly inflation was 0.44% in August, 0.25% in September, -0.04% in October, and -0.20% in November, so it certainly looks like inflation is falling. But inflation is almost always low to negative in the fourth quarter of the year, so it could simply be an illusion. The stock market was expecting another significant drop like last month, so they were mildly disappointed, but the market was able to eke out a point or two of gains. We had been projecting a flat to slight rise for … [Read more...]
Inflation Adjusted Mortgage Rates
The interesting thing about borrowing money long-term is that inflation actually helps you repay the loan with cheaper money... At 7% inflation, prices double roughly every 10 years, which is only 1/3rd of the way through your 30-year mortgage. So, if your budget was stretched initially to make your mortgage payment, after 10 years (assuming your salary kept up with inflation) that same mortgage would only have half the impact on your budget. Thus, to get the true impact of mortgage rates, we need to adjust them for inflation. It has been a while since we addressed the issue of “Inflation Adjusted Mortgage Rates,” primarily because inflation and mortgage rates have been at historically … [Read more...]
October 2023 Inflation Shrinks
According to the Bureau of Labor Statistics CPI report released on November 14th, Annual Inflation was down to 3.2% in October. (but since we calculate it to two digits, it was actually down to 3.24%.) Monthly inflation was 0.44% in August, 0.25% in September, and -0.04% in October. So it certainly looks like inflation is falling. The stock market took this as a "positive surprise" and went on to rally. We had been projecting this decrease due to numerical anomalies for several months. Typically the 4th quarter has low or negative monthly numbers but October 2022 was very high thus the "surprise" as the new numbers were normal (i.e. much lower). Unfortunately, December holds the … [Read more...]
September Inflation Virtually Unchanged
According to the Bureau of Labor Statistics CPI report released on October 12th, Annual Inflation was unchanged at 3.7% in September. (but since we calculate it to two digits, it was actually up from 3.67% to 3.70%.) Monthly inflation went from 0.44% in August to 0.25% in September. But, even though monthly inflation was lower than last month, Annual inflation increased. This is because monthly inflation in September 2023 was slightly higher than monthly inflation in 2022. Thus, as the 2022 number fell out of the calculation, it was replaced by a slightly higher monthly number, thus increasing the Annual Inflation number. September 2023 Inflation Summary: Annual Inflation rose … [Read more...]
August 2023 Inflation Up Sharply
According to the Bureau of Labor Statistics CPI report released on September 13th, Annual Inflation increased from 3.2% in July to 3.7% in August. (but more precisely, it was from 3.18% to 3.67%.) Monthly inflation went from 0.19% in July to 0.44% in August. August 2023 Inflation Summary: Annual Inflation rose from 3.18% to 3.67% CPI Index rose from 305.691 to 307.026 Monthly Inflation for August was 0.44%, July was 0.19% and June was 0.32%. Next release October … [Read more...]
July Annual Inflation- Up Slightly
According to the Bureau of Labor Statistics CPI report released on August 10th, Annual Inflation increased from 3% in June to 3.2% in July. (but more precisely, it was from 2.97% to 3.18%.) Monthly inflation was 0.25% for May 2023, 0.32% in June, and 0.19% in July. July 2023 Inflation Summary: Annual Inflation rose from 2.97% to 3.18% CPI Index rose from 305.109 to 305.691 Monthly Inflation for July was 0.19%, down from 0.32% in June Next release is September … [Read more...]
No Surprise… FED Raised Rate by 1/4%
The market was predicting a 1/4% raise in the FED Funds rate with 99% certainty and that is exactly what they got. We were wondering if because of last month's drop in annual inflation (due primarily to a mathematical anomaly) the FED would not raise rates this month. But apparently their previous pause was sufficient under the circumstances. By applying the slight rate increase at this point, it should present the impression to the general public that they are on top of things, when the 1/3% rebound in inflation that we expect for July shows up. FED Chairman, Jerome Powell has left the door open for further increases (or not) with his comment, “Looking ahead, we will continue to take … [Read more...]
How Inflation Impacts Merchants
Just like the old joke, "How do you eat an elephant? ...one bite at a time", inflation is constantly "eating" away at your purchasing power. Some years your purchasing power might decline by 1%, and other years, it might decline by 5% or even 10%. As we can see from the chart above, back in 1980, purchasing power declined by an average of 13.55% over the whole year. But from April 1979 to April 1980, prices increased (and thus purchasing power declined) by a whopping 14.76%. And that was on top of 10.09% from April 1978 to April 1979. So, in just two years, from April 1978 to April 1980, prices increased significantly. How much? Well, due to compounding, you can't simply add 14.76% and … [Read more...]
What is the Difference between the CPI-U and the CPI-W
The Consumer Price Index (CPI) is a widely used economic indicator that measures changes in the prices of goods and services over time. It measures the average change overtime in the prices paid by urban consumers for a market basket of consumer goods and services. Being an index, a date was chosen to be equivalent to 100, and as the price of the goods in the "basket" increased the index increases as well. The percentage difference between the index a year prior and the current index is the inflation rate. Having a reliable index is an essential tool for policymakers, economists, and individuals alike to assess inflation and make informed decisions. However, there are different variations … [Read more...]
June 2023- Inflation Falls to 3%
According to the Bureau of Labor Statistics CPI report released on June 13th, Annual Inflation declined from 4.0% in May to 3% in June. (but more precisely, it was from 4.05% to 2.97%.) Monthly inflation was 0.25% for May 2023, and 0.32% in June. June 2023 Inflation Summary: Annual Inflation fell from 4.05% to 2.97% CPI Index rose from 304.127 to 305.109 Monthly Inflation for June was 0.32% Next release August 10th 2023 Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec 2022 7.48% 7.87% 8.54% 8.26% 8.58% 9.06% 8.52% 8.26% 8.20% 7.75% 7.11% 6.45% 2023 6.41% 6.04% 4.98% 4.93% 4.05% 2.97% What … [Read more...]
