According to the Bureau of Labor Statistics CPI report released on June 13th, Annual Inflation declined from 4.9% in April to 4.0% in May. (but according to our calculations, it was from 4.93% to 4.05%.) Monthly inflation was 0.25% for May 2023, compared to 1.10% in May 2022. May 2023 Inflation Summary: Annual Inflation fell from 4.93% to 4.05% CPI Index rose from 303.363 to 304.127 Monthly Inflation for April was 0.25% Next release July … [Read more...]
Annual Inflation Virtually Unchanged in April
According to the Bureau of Labor Statistics CPI report released on May 10th, Annual Inflation declined by 0.1%... but according to our calculations, it was even less than that. The BLS reported a decline from 5% to 4.9%, but when carried to two decimals, it was virtually a rounding error difference. Monthly inflation was 0.51% for April 2023, compared to 0.56% in April 2022. April 2023 Inflation Summary: Annual Inflation fell from 4.98% to 4.93% CPI Index rose from 301.836 to 303.363 Monthly Inflation for April was 0.51% Next release June … [Read more...]
What are “Sticky Prices” and Why Do They Matter?
What Is Price Stickiness? Price stickiness, aka. "Sticky prices" are prices that tend not to change very quickly. So, despite costs (or demand) going up, a business with "sticky prices" may not raise its prices for an extended period of time. In other words, sticky prices tend to change slowly despite changing underlying factors. Sticky prices are a key component of Macroeconomic theory. Why wouldn't a business raise prices if its costs are going up? You would think that most products and services would respond to the laws of supply and demand, i.e., when demand goes up, prices quickly follow. Or, when underlying costs rise a business would automatically raise its own prices to maintain … [Read more...]
Inflation Less Than Experts Predict in March
Annual inflation PLUNGED in March according to the Bureau of Labor Statistics CPI report released on April 12th. Monthly inflation was 0.33% for March 2023, compared to 1.34% in March 2022. This resulted in a 1% drop in Annual inflation. But despite the significant drop in inflation, the stock market did not rally. Instead, the NYSE lost a few points, and the NASDAQ lost just over 100 points. March 2023 Inflation Summary: Annual Inflation fell from 6.04% to 4.98% CPI Index rose from 300.840 to 301.836 Monthly Inflation for March was 0.33% Next release May … [Read more...]
The 3 Major Causes of Bank Problems
There are three major categories of problems that can cause bank instability. In his article "A Tale of Two Crises" Bloomberg's John Authers tells us that they are: a liquidity crisis- When customers pull their money out. a solvency crisis- When borrowers can fail to repay their loans. a confidence crisis- When shareholders sell the bank's stock, sending their shares down making it harder to raise money. And beyond true crises, changes in economic and financial conditions can attack their profits — which is bad for shareholders and ultimately might tend to imperil everyone connected to the bank. Understanding a Liquidity Crisis One of the primary causes of a Liquidity … [Read more...]
Central Banks Respond Differently to the Banking Crisis
Central bankers don't like surprises, so they tend to communicate among themselves in order to coordinate their response to every new crisis. And this week there was a wave of responses to the combination banking crisis and still high inflation. The Cause Raising interest rates from near zero to over 4.5% in a short period of time puts stress on banks' liquidity as it causes an "inverted yield curve", i.e., short-term interest rates are higher than the locked-in long-term rates. Thus banks are paying out more (on short-term deposits) than they are receiving (on long-term mortgages). The Effect So you would think the Central Bankers would be prepared to deal with the … [Read more...]
Stock Market Ignores Lower Inflation in February
The Bureau of Labor Statistics reported that Annual Inflation fell from 6.41% in January to 6.04% in February Monthly inflation was 0.56% for February 2023, compared to 0.91% in 2022. Despite the significant drop in inflation the market was more concerned with bank failures so, there was no inflation rally. February Inflation Summary: Annual Inflation fell from 6.41% to 6.04% CPI Index rose from 299.170 to 300.840 Monthly Inflation for February was 0.56% Next release April … [Read more...]
January 2023 Inflation “Disappointing”
The Bureau of Labor Statistics reported that Annual Inflation fell from 6.45% in December 2022 to 6.41% in January 2023. Monthly inflation was much higher than expected for January, resulting in a much smaller loss than most experts predicted. With 0.84% monthly inflation for January set to fall out of the calculations, the opportunity for a significant drop in inflation was possible. Monthly inflation for both November and December was negative so it seemed possible that January inflation could be moderate, but instead, it came in at a whopping 0.80%, just 0.04% lower than January 2022, resulting in a minuscule 0.04% decline in the annual inflation rate. January Inflation … [Read more...]
Falling Inflation is Good for Stocks
Historically, Stocks tend to soar in years when inflation is falling. But typically, inflation doesn't fall until the fed-funds rate rises above the current inflation rate... The last data we have as of this writing is that inflation was 6.45% in December, and the FED funds rate was 4.1%. That is still a significant gap. But inflation is already falling. Monthly inflation began a dramatic slowdown last July. Monthly inflation has fallen by 80% over that timeframe (bringing annual inflation down by 33%). At this point, the majority of our annual inflation occurred during the first six months of 2022. January through June of 2022 had an average of 1.02% inflation per month. The second … [Read more...]
Inflation Falls Again in December
The Bureau of Labor Statistics reported that Annual Inflation fell from 7.11% in November to 6.45% in December 2022. This was down from a peak of 9.06% in June 2022. Monthly inflation was negative (Disinflation) for November at -0.10% and December at -0.31%. This is fairly typical for the fourth quarter, which is traditionally negative. Monthly inflation for 2022 was lower than in November 2021, so December Annual inflation fell. It is important to remember that although the inflation RATE is falling... prices are still going up, i.e., prices are still 6.5% higher than they were a year ago. A decline from 7.5% to 6.5% is similar to a car going from 75 mph to 65 mph... it is still … [Read more...]
