Posts Tagged ‘consumer price index’

CPI Negative 3rd Consecutive Month; Selective Memory; Perverse Effect of Falling Energy Prices on Imputed Housing Costs

CPI Negative 3rd Consecutive Month; Selective Memory; Perverse Effect of Falling Energy Prices on Imputed Housing Costs

Courtesy of Mish

As expected, as least as I expected, the Consumer Price Index for June shows the seasonally adjusted CPI was Negative 3rd Consecutive Month.

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in June on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the index increased 1.1 percent before seasonal adjustment.

Similarly to April and May, a decline in the energy index caused the seasonally adjusted all items decrease in June. The index for energy decreased 2.9 percent in June, the same decline as in May, with a decline in the gasoline index accounting for most of the decrease. This more than offset an increase in the index for all items less food and energy, while the food index was unchanged for the second month in a row.

The index for all items less food and energy rose 0.2 percent in June after increasing 0.1 percent in May. A broad array of indexes posted increases, including shelter, apparel, used cars, medical care, tobacco, and recreation. These increases more than offset declines in the indexes for household furnishings and operations and for airline fares. The 12-month change in the index for all items less food and energy remained at 0.9 percent for the third month in a row.

One Month Change in CPI-U 

12-Month CPI-U Change vs. Year Ago

Oil and the CPI

For, now the CPI (less food and energy) has been hovering near +1% for about a year. However, it is not really valid to exclude food or energy but the Fed does it to justify their inflationary policies (policies that clearly are not working now).

The jump in "all items" in the second chart reflects the rebound in oil prices in Spring-Summer of 2009 when crude soared from $35 a barrel to close to $80 a barrel.

Of course hyperinflationists were screaming every step of the way, conveniently ignoring the plunge from $140 to $35.

Selective Memories

When it comes to prices, people have selective memories. They remember every penny uptick in gasoline prices, but forget the times they drop. The same applies to most everything else, but energy is very noticeable because people are constantly filling up their tanks.

On…
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Inflationistas Still Can’t ‘Produce The Body’

Joint credit to Jake at Econompic Data and Joshua, The Reformed Broker:

Inflationistas Still Can’t ‘Produce The Body’

Courtesy of Joshua M Brown

May CPI and Core CPI were out this morning.  As we all know, nothing is worth anything anymore.  Until further notice and some change in trend, the discussion simply cannot be about inflation.

Sorry, Inflationistas.  Nothing to see here just yet.  Now if only the drop in cost of living expenditures could become a favorable topic of conversation to counterbalance all the moroseness and hand-wringing…

From EconomPic Data:

Source:

What Stinkin’ Inflation?  (EconomPic Data) 


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Big Blah (CPI)

Big Blah (CPI)

Courtesy of Karl Denninger at The Market Ticker

Oil can and graph with American dollar

From the Bullcrap Lie Society (BLS) of our government this morning:

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in November, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months the index increased 1.8 percent before seasonal adjustment, the first positive 12-month change since February 2009.

Most of the change was due to energy; gasoline was up sharply (as we saw yesterday in the PPI.)

Core was a literal zero.

Food was up a bit, but I continued to be puzzled by the difference between gasoline and "fuel oil."

Why?  Because "fuel oil" (that is, heating oil) is exactly the same thing as #2 diesel – that is, road diesel fuel.  The only difference is the tax (and the presence of dye in the heating oil to denote that the tax has not been paid.)  But for the legal (tax) issues you can run "heating oil" in your diesel car or truck, and vice-versa – they are identical products.

Used vehicles were also up materially – a reflection of the distortion from "cash for clunkers" still present in the data (it hit its maximum in October at +3.4%)  Prices for new vehicles were also up (again, the maximum was in October) – again denoting the "back-door" bailout of the automakers from cash-for-clunkers.  Unlike the new vehicle deal however, which you got a tax credit for, the buyer of a used car just got plain old-fashioned screwed through price-jacking caused by constraints in supply.  (Just wait though – in the new year when people can’t make the payments on those CFC deals, you’ll see what happens to used car prices…. supply and demand you know.. )

Medical care was up as usual (gee, how come it keeps rising faster than overall inflation?) and shelter costs were down (remember, this is not "housing", as that would expose reality – it is "owners equivalent rent")

All in all a blah report – but given the PPI that’s expected – the fun and games in the CPI report resulting from yesterday’s PPI should show up in a month or two.

 


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A Reader Asks “How Did 558,000 People Lose Their Jobs When Only 190,000 Jobs Were Lost?”

A Reader Asks "How Did 558,000 People Lose Their Jobs When Only 190,000 Jobs Were Lost?"

Courtesy of Jesse’s Café Américain

Obama Here is an excerpt from today’s Bureau of Labor Statistics Non-farm Payrolls report.

"The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm payroll employment continued to decline (-190,000), the U.S. Bureau of Labor Statistics reported today. The largest job losses over the month were in construction, manufacturing, and retail trade.

Household Survey Data

In October, the number of unemployed persons increased by 558,000 to 15.7 million. The unemployment rate rose by 0.4 percentage point to 10.2 percent, the highest rate since April 1983. Since the start of the recession in December 2007, the number of unemployed persons has risen by 8.2 million, and the unemployment rate has grown by 5.3 percentage points…

The civilian labor force participation rate was little changed over the month at 65.1 percent. The employment-population ratio continued to decline in October, falling to 58.5 percent."

An astute reader noticed that the BLS press release says that 190,000 jobs were lost from payroll employment, but the number of unemployed persons increased by 558,000. What’s up with that?

The BLS report consists of two independent data samples. BLS has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey.

There is the "Establishment Survey" which is based on responses from a sample of about 400,000 business establishments, about one-third of total nonfarm payroll employment. The headline payroll number, the job loss of 190,000, is based on this data.

Then there is the "Household Survey" which is a statistical survey of more than 50,000 households with regard to the employment circumstances of their members, which is then applied to the estimates of the US population to obtain the unemployment number. This survey was started in the 1950′s and is conducted by the Census Bureau with the data being provided to BLS. It is from the household survey that more detailed information is obtained about employment statistics within population groups like gender and age, wages, and hours worked. It is this study that is responsible for the unemployment rate of 10.2%.

So which survey is correct? Neither. The truth is somewhere


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Why the Austrian, Keynesian, Marxist, Monetarist, and Neo-Liberal Economists Are All Wrong

Fantastic dish served up at Jesse’s Cafe.  Highly recommended – especially if you’re a normally intelligent person who can’t understand economics. It has nothing to do with you! Imagine being an inquisitive medical student at the time when blood-letting was used to treat all ills… I loved this: 

"The ugly truth is that economics is a science in the way that medicine was a profession while it still used leeches to balance a person’s vapours. Yes, some are always better than others, and certainly more entertaining, but they all tended to kill their patients."

- Ilene

Why the Austrian, Keynesian, Marxist, Monetarist, and Neo-Liberal Economists Are All Wrong

jesse's cafe, consumersServed by Jesse of Le Café Américain

US Personal Income has taken its worst annual decline since 1950.

This is why it is an improbable fantasy to think that the consumer will be able to pull this economy out of recession using the normal ‘print and trickle down’ approach. In the 1950′s the solution was huge public works projects like the Interstate Highway System and of course the Korean War.

Until the median wage improves relative to the cost of living, there will be no recovery. And by cost of living we do not mean the chimerical US Consumer Price Index.

The classic Austrian prescription is to allow prices to decline until the median wage becomes adequate. Given the risk of a deflationary wage-price spiral, which is desired by no one except for the cash rich, the political risks of such an approach are enormous.

On paper it is obvious that a market can ‘clear’ at a variety of levels, if wages and prices are allowed to move freely. After all, if profits are diminished, income can obviously be diminished by a proportional amount, and nothing has really changed in terms of viable consumption.

The Supply side idealists (cash rich bosses, Austrians, Marxist, monetarist, and deflationist theorists) would like to see this happen at a lower level through a deflationary spiral. The Keynesians and neo-liberals wish to see it driven through the Demand side, with higher wages rising to meet the demands of profit in an inflationary expansion. Both believe that market forces alone can achieve this equilibrium. Across both groups runs a sub-category of statism vs. individualism.

all wrongUnfortunately both groups are wrong.

Both approaches require an ideal, almost frictionless, objectively rational, and honest economy in…
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THOUGHTS ON THIS MORNINGS DATA

THOUGHTS ON THIS MORNINGS DATA

Courtesy of The Pragmatic Capitalist

Another mixed bag of data this morning.  Most alarming is the continuing trend in negative consumer data.  As we all know by now, yesterday’s retail sales data was weak at best – something we’ve been reporting on here at TPC weekly thru our ICSC and Redbook data reports.

Consumer sentiment readings continue to trend in-line with broader spending habits.   This morning’s reading came in at 63.2 – almost 5 points below consensus.  This continues to represent the broader economic themes we are seeing; deflation in the things we own and inflation in the things we need.

conssent

CPI came in flat which is reflective of the sluggish economy.  This morning’s data was in-line with estimates at 0%.  The lack of pricing power across the broad economy is in-line with the lack of expansion in corporate revenues.  There is little demand for goods and even less pricing power.  I’d love to spin this into a positive, but it simply displays the death grip that deflation continues to maintain on the broad economy.

On the bright side, capacity utilization and industrial production posted slight improvements.  This is a clear sign that the recession is likely to end in the upcoming quarter.  Unfortunately, the rebound in both indicators show clear signs of the sluggish and below trend recovery we are likely to see.  It won’t be a technical recession, but it will probably continue to feel like one.

capu

All in all, this morning’s data nicely summarizes the themes we continue to focus on here at TPC.  The consumer is weak, deflation remains the bigger concern and the recovery (if we can call it that) is likely to be far from v-shaped.   As for the markets, complacency remains the name of the game.  Own equities at your own risk – which I believe are highly elevated currently….


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Predicting CPI…

Here’s a couple from Jake at Econompic Data - on CPI expectations and net worth per capita.

Predicting CPI…

So, I got lucky and somehow predicted Q2 GDP the night before the release (as a friend of mine told me, "even the blind chicken gets the kernel of corn"), BUT I’ll try again. Economists (smarter than me) are predicting a month over month CPI print of 0.0%. I’ll go on record here that it will come in lower. To understand my reasoning, lets take a look at details from today’s July import price levels release. Marketwatch reported:

Prices of imported goods fell 0.7% in July, the first decrease since January as petroleum prices declined, the Labor Department estimated Thursday.

Analysts polled by MarketWatch had expected the import price index to fall 0.1%.

Import prices were down 19.3% in the past year, the largest annual decline since the data were first published in 1982. In June, the import price index rose a revised 2.6%, compared with a prior estimate of a 3.2% gain.

In July, imported petroleum prices fell 2.8%, the first decrease since January. The petroleum imports price index is down 49.9% over 12 months. Non-petroleum import prices fell 0.2% in July, and are down 7.3% for the year, the largest 12-month decline since the data began publication in 1985.

We can see below that the change in the import price level was largely driven by the change in fuel (i.e. petroleum) prices.

Now the significance. There has been a very strong relationship between the price level of imports and broad CPI, as changes in the price of petroleum has been the main driver of CPI. Thus, the fact that July’s import prices declined makes me think we may be in for a surprise regarding July’s CPI print. The below chart shows the longer term relationship.

Regardless of the month over month figure, expect a sizable drop in the year over year number. As we can see below, prices spiked last July as the bubble in oil was in full gear. Thus, if prices are flat month over month (as expected), the year over year CPI will move down to -1.9%.

CPI Index

The important question… how do you position for this? I personally own TLT (a long positon in the long bond). My view is if CPI comes in lower than…
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What’s the Real CPI?

What’s the Real CPI?

Courtesy of Mish

Inquiring minds are asking "What is the Real CPI?" It’s a good question, too. However, you can find many widely differing opinions. For example, you will get one answer from the government, a different answer from sites like Shadowstats, and a third opinion from me.

First let’s look at John Williams’ Shadowstats .

alternative CPI measures

That’s an interesting chart, especially given the hyperinflationary bent of John Williams. He pegs the CPI at 2% as of May 2009 and had it at 9% mid-2008 and right around 5% in 2007. In contrast, the official CPI was 5.5% in mid-2008 and 2+% in 2007.

The problem with all of those numbers is they fail to properly take housing into consideration. And housing has been falling like a rock.

what is the real cpi?Should housing be in the CPI? How?

Bear in mind the government considers housing a capital good not a consumption item. Based on the idea that one would be renting a house if one did not own it, the government uses Owners Equivalent Rent (OER) and not housing prices in the CPI. OER is the largest component in the CPI.

By the same measure one might argue that lawn mowers and automobiles are capital goods. Lawn mowers are durable, not immediately consumed, and if one owns buildings and uses lawn mowers to maintain their properties (or if one hired someone to cut their lawns for them), the mowers would indeed be depreciated over time as a capital expense. The same logic also applies to auto leases.

Let’s explore this from a practical standpoint starting with theory.

Consumer Price Theory and Practice

Here are a few excerpts of note from the Consumer Price Index Manual, Theory and Practice By Ralph Turvey.

Page 47: The treatment of owner occupied housing is difficult and somewhat controversial. There may be no consensus on what is the best practice. The distinctive feature is that it requires the use of an extremely large fixed asset in the form of the dwelling itself.

Page 147: The treatment of owner-occupied housing is arguably the most difficult issue faced by CPI-compilers. Equally important it may be difficult to identify a single principal purpose for the CPI.

In particular, the dual use of CPIs as both macroeconomic indicators and also for indexation purposes can lead to


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Zero Hedge

Hong Kong Protests Go Global: China Demands Investigation After Lam's Justice Minister Wounded In London

Courtesy of ZeroHedge View original post here.

Chinese officials slammed American lawmakers who are advancing a bill designed to protest Hong Kong's quasi-independent status guaranteed by the legal handover agreement between the British and the Chinese, but the US isn't the only major western power that's creating problems with the increasing dangerous situation in Hong Kong.

Hong Kong's Justice Minister Teresa Cheng took a nasty tumble last night during a confrontation with pro-democracy sympathizers who came out to protest her presence in London. ...



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Phil's Favorites

Fed's Powell Says Forensic Work Ongoing on Liquidity Crisis; This Chart Shows Why He's Worried

Courtesy of Pam Martens

Stock Price of Deutsche Bank, Lincoln Financial and Goldman Sachs Since                  September 17, 2019 When the Fed Began Pumping Money Into Wall Street

By Pam Martens and Russ Martens: November 15, 2019 ~

Yesterday, for the second day in a row, the Chairman of the Federal Reserve, Jerome Powell, gave testimony and took questions before a Congressional Committee. On Wednesday it was the Joint Economic Committee; yesterday i...



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Biotech

Why telling people with diabetes to use Walmart insulin can be dangerous advice

Reminder: We are available to chat with Members, comments are found below each post.

 

Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

About 7.4 million people ...



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Insider Scoop

New Jersey Back Tax Bill Creates More Uncertainty For Uber, But Industry Remains Strong

Courtesy of Benzinga

New Jersey’s order that Uber Technologies Inc (NYSE: UBER) must pay more than $600 million in back taxes, interest and penalties for drivers the state considers employees instead of contractors creates more uncertainty for the ride-hailing company.

But despite the new ruling, along with a class action suit in New Jersey that “adds to the regulatory...



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The Technical Traders

What happens To The Global Economy If Oil Collapses Below $40 - Part II

Courtesy of Technical Traders

In the first part of this research article, we shared our ADL predictive modeling research from July 10th, 2019 where we suggested that Oil prices would begin to collapse to levels near, or below, $40 throughout November and December of 2019.  Our ADL modeling system suggests that oil prices may continue lower well into early 2020 where the price is exp...



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Chart School

Dow Jones cycle update and are we there yet?

Courtesy of Read the Ticker

Today the Dow and the SP500 are making new all time highs. However all long and strong bull markets end on a new all time high. Today no one knows how many new all time highs are to go, maybe 1 or 100+ more to go, who knows! So are we there yet?

readtheticker.com combine market tools from Richard Wyckoff, Jim Hurst and William Gann to understand and forecast price action. In concept terms (in order), demand and supply, market cycles, and time to price analysis. 

Cycle are excellent to understand the wider picture, after all markets do not move in a straight line and bear markets do follow bull markets. 



CHART 1: The Dow Jones Industrial average with the 900 period cycle.

A) Red Cycle:...

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Digital Currencies

Is Bitcoin a Macro Asset?

 

Is Bitcoin a Macro Asset?

Courtesy of 

As part of Coindesk’s popup podcast series centered around today’s Invest conference, I answered a few questions for Nolan Bauerly about Bitcoin from a wealth management perspective. I decided in December of 2017 that investing directly into crypto currencies was unnecessary and not a good use of a portfolio’s allocation slots. I remain in this posture today but I am openminded about how this may change in the future.

You can listen to this short exchange below:

...



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Kimble Charting Solutions

Silver Testing This Support For The First Time In 8-Years!

Courtesy of Chris Kimble

Its been a good while since Silver bulls could say that it is testing support. Well, this week that can be said! Will this support test hold? Silver Bulls sure hope so!

This chart looks at Silver Futures over the past 10-years. Silver has spent the majority of the past 8-years inside of the pink shaded falling channel, as it has created lower highs and lower lows.

Silver broke above the top of this falling channel around 90-days ago at (1). It quickly rallied over 15%, before creating a large bearish reversal pattern, around 5-weeks after the bre...



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Lee's Free Thinking

Today's Fed POMO TOMO FOMC Alphabet Soup Unspin

Courtesy of Lee Adler

But make no mistake, if the Fed wants money rates to stay down by another quarter, it will need to imagineer even more money.

That’s on top of the $281 billion it has already imagineered into existence since addressing its “one-off” repo market emergency on September 17. This came via  “Temporary” Repo Man Operations money, and $70.6 billion in Permanent Open Market Operations (POMO) money.

By my calculations that averages out to $7.4 billion per business day. That works out to a monthly pace of $155 billion or so.

If they keep this up, it will be more than enough to absorb every penny of new Treasury supply. That supply had caused the system to run out of money in mid September.  This flood of paper had been inundati...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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About Phil:

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