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US annual inflation declines to 7.7% in October vs. 7.9% expected

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Re: US annual inflation declines to 7.7% in October vs. 7.9% expected

#111

Post by Forgeties79 »

giantg2 wrote: post #93
germandiago wrote: post #54

Earlier quoted context omitted.

Well explained. Idk for english-speaking countries or your country of origin but the average spanish is an absolute illiterate in economy. These explanations are very necessary so that people develop an intuition of what is going on.

Many Americans are illiterate on numbers and the economy too. I still remember the classic example that a burger chain released a 1/3 pound burger to compete with another chain's 1/4 pound burger, and many people thought the 1/4 pound was bigger... Edit: there are some people saying it's a myth, or not a complete picture. Looks like we don't have the data. But my point is that we aren't very good with numbers or econ…

I’ve always thought this was somewhat apocryphal/a myth. Did it actually occur?

Re: US annual inflation declines to 7.7% in October vs. 7.9% expected

#112

Post by ajross »

lunaru wrote: post #31

It bears repeating because this is a common mistake in inflation discussions: a decrease in inflation metrics means price increases are slowing down, it doesn’t mean that prices are going down （that would require a negative CPI print). Also, this number is year over year, so the decrease just means the price increases between Oct 21 and Oct 22 are not as steep as between Sept 21 to Sept 22, which is not hard to achie…

> The right way to interpret this number is that high prices have plateaued a bit.

This part is true.

> that means your groceries are going to be x% higher than in 2020

But this part jumps right back into the much bigger fallacy that inflation represents a change in value and not price! Sure, groceries are higher in price, just like your assets are higher in value (on average) and your wages are higher (on average).

But in any case, your notion that inflation isn't instantaneously halted is a little spun. In fact month-to-month CPI change for October is 0.4%, which corresponds to about 4.9% per year. That's higher than we've seen for most of the last decade, but not a number most people would consider "high" in the sense of "disruptive to economic activity".

Re: US annual inflation declines to 7.7% in October vs. 7.9% expected

#113

Post by cko »

keewee7 wrote: post #14

It's a bit higher in Denmark and I have a little too much stored as fiat in the bank. What is a safe asset to store value while inflation is >10% in a developed country?

Depends on your time horizon.

In the very short term, inflation linked bonds as other comments mention.

In the 15+ year bracket, probably equities.

Perhaps real estate at a low mortgage rate but it's not very diversified.

Gold is commonly touted as an inflation hedge, but that's over a much longer time horizon, probably longer than most people are alive.

In the end it really depends on the cause of inflation - expected vs unexpected, supply vs demand side.

Re: US annual inflation declines to 7.7% in October vs. 7.9% expected

#114

Post by nemo44x »

nashashmi wrote: post #70
lunaru wrote: post #31

It bears repeating because this is a common mistake in inflation discussions: a decrease in inflation metrics means price increases are slowing down, it doesn’t mean that prices are going down （that would require a negative CPI print). Also, this number is year over year, so the decrease just means the price increases between Oct 21 and Oct 22 are not as steep as between Sept 21 to Sept 22, which is not hard to achie…

Also it is worth mentioning that part of the major reason accounting for inflation is car price. It’s going down now as chip makers produce more and prices go down further.

Hopefully that helps with new car pricing. Dealers are still selling well above MSRP.

Re: US annual inflation declines to 7.7% in October vs. 7.9% expected

#115

Post by sct202 »

hnburnsy wrote: post #78
jeffbee wrote: post #43

Earlier quoted context omitted.

In the last USDA retail market report, the national weight average advertised price of milk was $2.98/gal, and last year it was $2.98/gal. In 2014 it was $3.78/gal.

Yeah milk is a horrible product to base inflation on as the market is not a free marker due to Federal marketing orders. I believe its called the Eau Claire rule as Eau Claire was once the center of the dairy industry. https://en.m.wikipedia.org/wiki/Marketing_orders_and_agreeme...

And also milk is often used as a loss leader for grocery stores to get people in the door. So 1 chain adjusting their promotion strategy can cause what OP is seeing in certain regions.

Re: US annual inflation declines to 7.7% in October vs. 7.9% expected

#116

Post by anyonecancode »

lunaru wrote: post #31

It bears repeating because this is a common mistake in inflation discussions: a decrease in inflation metrics means price increases are slowing down, it doesn’t mean that prices are going down （that would require a negative CPI print). Also, this number is year over year, so the decrease just means the price increases between Oct 21 and Oct 22 are not as steep as between Sept 21 to Sept 22, which is not hard to achie…

I think of it like the accelerator pedal on a car. A decline in inflation means the foot has eased up on the accelerator some, but the car is definitely still moving forward.

Re: US annual inflation declines to 7.7% in October vs. 7.9% expected

#117

Post by zmaurelius »

keewee7 wrote: post #14

It's a bit higher in Denmark and I have a little too much stored as fiat in the bank. What is a safe asset to store value while inflation is >10% in a developed country?

High dividend stocks have been a good bet and hedge in previous downturns. Individual stocks will have high variance, but a basket of high dividend stocks would be worth looking into.

Re: US annual inflation declines to 7.7% in October vs. 7.9% expected

#118

Post by throw0101a »

matwood wrote: post #80
lunaru wrote: post #31

It bears repeating because this is a common mistake in inflation discussions: a decrease in inflation metrics means price increases are slowing down, it doesn’t mean that prices are going down （that would require a negative CPI print). Also, this number is year over year, so the decrease just means the price increases between Oct 21 and Oct 22 are not as steep as between Sept 21 to Sept 22, which is not hard to achie…

And to add to your explanation, because inflation jumped so quickly and then slowed we'll eventually hit a YoY number that plummets. If milk is $4/gallon today and still $4/gallon 12 mos. from now, that's 0% YoY inflation. This will inevitably lead to people saying the numbers are fake because milk used to be $2/gallon.

> If milk is $4/gallon today and still $4/gallon 12 mos. from now, that's 0% YoY inflation.

Conversely, if there was a one-time jump in a particular item, it will take a year before it gets 'removed' from the inflation numbers.

Extremely contrived example: if gas/petrol was $1/L in December 2021 (and generally in all of 2021), but $1.20/L in January 2022, then there will be a 20% YoY jump in inflation for the January number comparing Jan 2021 to Jan 2022.

Now if gas stays at $1.20/L in February 2022, it will still register as 20% YoY even though the price has not changed month-to-month. That 20% (YoY) is "stuck" in the system until January 2023 when we're comparing $1.20/L to $1.20/L.

A one-time jump can 'skew' the numbers if all you look at is YoY metrics.

Re: US annual inflation declines to 7.7% in October vs. 7.9% expected

#119

Post by giantg2 »

jeffbee wrote: post #53
isusmelj wrote: post #40

The way I read it the price of things like eggs increased by 43% (on table 6 which is seasonally adjusted it's still 10%)? Does anyone know why?

Lack of low-wage immigrant labor to fill farm jobs. https://www.economist.com/united-states/2022/07/28/a-shortfa...

I'd imagine it's more likely due to energy prices associated with the chicken houses, and the virus (bird flu I think) they've been dealing with.

Re: US annual inflation declines to 7.7% in October vs. 7.9% expected

#120

Post by Zigurd »

Several commenters have provided various reasons year-over-year numbers are, to put it mildly, difficult to interpret.

Another reason is that a major war in Europe started within this year, adding to the difficulty of Y0Y comparisons. The principal weapon deployed against the aggressor is economic warfare to collapse Russia's economy. That has only recently made an impact that can't be denied in Russia.

Meanwhile, the war has directly cut food exports from Ukraine and both directly and indirectly disrupted food and fossil fuel markets in many regions, mostly toward higher costs and trade substitutions that also mostly lead to higher costs.

Interest rate rises are probably needed but the causes of inflation are mostly outside central bankers' control.

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