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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

#481

Post by UncleOxidant »

nivenkos wrote: post #26

The US has it easy, since the inflation was largely caused by lockdown stimulus, and also benefits from being the global reserve currency so it can leverage cheap imports as the interest rate rises increase the value of USD. I wouldn't be surprised if it's better in a few months, especially with the growing protectionism in the anti-inflation act, etc. and acts against Chinese competition, etc. keeping more industry…

> I wouldn't be surprised if it's better in a few months, especially with the growing protectionism in the anti-inflation act

Wouldn't protectionism be inflationary?

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

#482

Post by Izkata »

reedjosh wrote: post #473
treis wrote: post #468

Earlier quoted context omitted.

Seasonally adjusted != multiply by 12. Prices naturally fluctuate throughout the year due to weather, consumer patterns, and business cycles. Seasonal adjustment is an attempt to account for those changes.

Beyond seasonal price fluctuations, wouldn't it be 1.04^12 = ~6% annually?

0.4% is 0.004, so 1.004^12 = 1.049... or 4.9%

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

#483

Post by fleddr »

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.

Honestly, I'm with those people.

Your explanation is fully technically correct, but the subsequent messaging that inflation is zero is a matter of not reading the room.

When an important item dramatically rises in price, this can have a massive impact on people. A dramatic drop in purchasing power or even businesses needing to close. It is impactful.

When the price continues to be high, the impact remains. The pain continues, the problem is not solved. The politically smart messaging is to say "we feel and acknowledge your continued pain, this is what we're going to do about it", not "Good news! Inflation is 0%."

Same with the opportunistic messaging of sometimes using MoM or YoY, whichever number looks better. When MoM inflation in October is 15% and 5% in November, you really shouldn't bring this as good news. The situation still got worse in the real world.

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

#484

Post by kelnos »

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…

Sure, but this is still exactly what we want to see. If the target is 2%, YoY metrics moving in that direction is a positive step.

The only thing we can hope for is that, as inflation numbers continue dropping back toward "normal", wage increases will eventually catch up and make those already-higher prices less difficult to swallow. Of course, it never works out that neatly.

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

#485

Post by mlyle »

danielmarkbruce wrote: post #438
mlyle wrote: post #423

Earlier quoted context omitted.

If there's a true step change that happens once (and nothing else), inflation looks like: 0% 0% 0% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% 0% 0% 0% If there's a .8% price increase per month, every month, it looks like: +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% The upside of reporting this way: * Seasonal effects are (mostly) removed The downside: * You have to have a lo…

And it's not even a theoretical issue. Look at the energy component of CPI. And then consider how that flows through to food and transportation. It is very possible that the vast majority of what we are seeing is the result of a big jump in energy prices over a few months, 8-10 months ago.

> Look at the energy component of CPI. And then consider how that flows through to food and transportation. It is very possible that the vast majority of what we are seeing is the result of a big jump in energy prices over a few months, 8-10 months ago.

Well, that makes it even worse, the "flow through" you're describing from prices increasing because an input price increased. That spreads the initial shock over a longer term.

But the effect I'm describing shows up even if it's just a single good that steps once. What's measured in the YoY inflation number is a convolution/FIR filter of 12 months of changes.

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

#487

Post by napoleon_thepig »

lukas099 wrote: post #109
napoleon_thepig wrote: post #87

Earlier quoted context omitted.

The main objective of the big Mac index is not to measure inflation, it's to measure purchase parity power by using the price of something that is available in almost every country and has a very standard quality.

Just consider the same country at two different points in time as two different countries and the distinction disappears.

Unless the country in question only consumes big Macs, using that index as a measure of inflation would be a terrible idea.

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

#488

Post by kelnos »

tekknik wrote: post #430
prepend wrote: post #384

Earlier quoted context omitted.

The only reason you’ve ever drank a coke is because of these ads. Do you think you’re immune to ads? Or that ads don’t work at all? I think it’s reasonable that you’ve never seen an ad and consciously bought a coke, but that’s rarely the point of coke. We’re not aware of all our subconscious motivations. I’d like to be, but it’s usually pretty hard for me to understand why I do things at a deep level.

> The only reason you’ve ever drank a coke is because of these ads. This isn’t true in all cases. When I first drank a coke I was very young and wasn’t even aware of advertising. The first coke I drank was because my parents took me to McDonalds and that’s all they sell. Then I found I preferred it over Pepsi. Advertising had very little to do with my first coke, it was more contracts with fast food companies.

> Then I found I preferred it over Pepsi.

You "found" that either because of advertising, or because you were primed to like Coke more because of your childhood experience.

And the reason McDonald's only sold Coke? Advertising, of course. McDonald's believed they were better off selling Coke over Pepsi.

Advertising is everywhere. I try to avoid advertising as much as possible (adblockers, never watching ad-supported TV or movies, etc.) because I know how pervasive ads are, and how insidiously emotionally manipulative they can be. I know I can't make myself immune to their effects, so the best I can do is just avoid them as much as I can.

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

#489

Post by Spooky23 »

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.

People who lack foundational skills in math are always vulnerable to being worried about witchcraft and conspiracy.

It’s a major reason why society spends so much on education. Stupid people make poor citizens.

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

#490

Post by fleddr »

dntrkv wrote: post #405
ionwake wrote: post #263

In many European countries inflation is at 15% If it reaches 20% that means every 3.5 years your cash reserve loses half its value Mean someone correct me if I’m wrong I think that is astounding

As the other poster pointed out, that's primarily due to the energy costs and those will most likely come down. For a more accurate look at inflation, you should look at core CPI which excludes energy and food which can be volatile. This number is closer to around 5% in most of Europe.

Ah yes, inflation is just fine if you exclude housing, energy and food, the 3 things sustaining everybody's life.
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