US annual inflation declines to 7.1% in November vs. 7.3% expected • Hacker News Board

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#51

Post by datadata » Tue, Dec 13, 2022, 4:58 PM UTC

rhacker wrote: post #15

sgerenser wrote: post #2

"The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in November on a seasonally adjusted basis, after increasing 0.4 percent in October, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 7.1 percent before seasonal adjustment." I feel like the rise of only 0.1% October->November is more significant than the 7.1% YOY headline number, which…

The YoY that they report is definitely not useful during slight inflation like we're having. I wish the headlines were more about the month to month because I think people see the number and freak out that prices just went up 7.1 percent.

I think if MoM were widely reported, it would be stated as annualized to make sense for people in a headline. This would cause a lot of overreaction.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#52

Post by eberkund » Tue, Dec 13, 2022, 4:59 PM UTC

sprash wrote: post #28

oneoff786 wrote: post #23

Earlier quoted context omitted.

You’re incentivized to avoid spending money.

Why would that be bad?

It may not be bad, economics involves a lot of unfounded speculation IMO. It's true that deflation would encourage delaying certain types of spending but that is already the case with electronics and some other types of goods. But that has not led to the downfall of society.

A deflationary economy would be a drastic change from the system we operate under now but I don't think it would be all bad. Maybe in a deflationary economy people would feel like they could actually save money. Or it could put an end to the 40 hour work week. I doubt demand of necessities would change much in a deflationary environment: food, medicine, shelter, etc.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#53

Post by jonnycomputer » Tue, Dec 13, 2022, 4:59 PM UTC

Mo3 wrote: post #10

cheaprentalyeti wrote: post #3

I suspect some of this is because the level of economic activity is dropping.

This is it, the economy is grinding to a halt. Not good either.

You can't slow inflation by raising interest rates without slowing the economy. There are no rainbow unicorns here. The best outcome here is a so-called "soft-landing" in which growth slows but we don't have a recession or spike in unemployment. Taking the recent jobs report and this CPI report, we might just get that soft landing we need.

Also, fyi, while wages overall did not keep up with inflation, they did in the service sector and largely for lower paying jobs. I see that as correcting an imbalance in the economy, and as a stabilizer for American society as a whole.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#54

Post by TremendousJudge » Tue, Dec 13, 2022, 5:00 PM UTC

geye1234 wrote: post #37

runako wrote: post #24

Earlier quoted context omitted.

If the expectation is that everything will be cheaper next month than this month, that creates an incentive for everyone (and every business) to delay purchases as long as possible (because they will save money buying in the future). When everyone slows spending at once, it can lead to severe a recession or depression.

Perhaps for businesses this may be true. It's hard to imagine for a consumer. I'm not going to delay the purchase of groceries, a fridge, a new roof or (if I'm feeling rich) a new car just because they may be 3% cheaper next year. I'm not saying this conventional wisdom is wrong, but it's not obviously right.

Yes, that's exactly why deflation is bad for the average person. You can't afford to save your money (which is increasing in value just sitting there) because you HAVE to spend it on food, rent, etc. People who can afford to, don't spend their money and they get nominally richer. Anything you buy will decrease in value, so people tend to avoid it. This isn't hypothetical, it has happened every time there's deflation in an economy. It widens the gap between the rich and poor.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#55

Post by bryanlarsen » Tue, Dec 13, 2022, 5:00 PM UTC

ChuckNorris89 wrote: post #17

Wowfunhappy wrote: post #7

Earlier quoted context omitted.

Yes, if things were actually getting cheaper that would be "deflation" and it would probably be bad.

Can someone please school me on why that would be bad?

It's not so much that deflation is bad, it's that inflation and employment are very correlated. Given the choice between 0% inflation and high unemployment or 2% inflation and low unemployment, we choose to have low unemployment along with a little bit of inflation.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#56

Post by mdemare » Tue, Dec 13, 2022, 5:01 PM UTC

mikewarot wrote: post #35

Reminder: Inflation is a vector, not a scalar. Ignore the abstraction at your own risk. Inflation is the rise in price of every single item for sale across a market, not just the "basket" of goods selected to be a good example, and subject to adjustment and correction over time. It is entirely possible that inflation that averages out to 10% for a year may double the cost of living for some people, and actually make…

Please explain.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#57

Post by jonnycomputer » Tue, Dec 13, 2022, 5:01 PM UTC

medo-bear wrote: post #26

i guess the thing in ukraine is paying off for the us. eu gives its energy shackles to an ally at a much greater cost

US has benefited, no doubt, at least in the short term. But Europeans complain that we are price gouging... and in any case the whole situation encouraging an acceleration of Europe's transition to renewables.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#58

Post by electrondood » Tue, Dec 13, 2022, 5:02 PM UTC

mikewarot wrote: post #35

Reminder: Inflation is a vector, not a scalar. Ignore the abstraction at your own risk. Inflation is the rise in price of every single item for sale across a market, not just the "basket" of goods selected to be a good example, and subject to adjustment and correction over time. It is entirely possible that inflation that averages out to 10% for a year may double the cost of living for some people, and actually make…

Elaborate?

The difference is direction. Are you just warning about deflation?

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#59

Post by nostrademons » Tue, Dec 13, 2022, 5:03 PM UTC

sgerenser wrote: post #2

"The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in November on a seasonally adjusted basis, after increasing 0.4 percent in October, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 7.1 percent before seasonal adjustment." I feel like the rise of only 0.1% October->November is more significant than the 7.1% YOY headline number, which…

The MoM numbers are important, but the breakdown is also important. The breakdown is worrisome - MoM declines were almost entirely driven by gas and other oil-related commodities, and we're still seeing very significant inflation in food (0.5% MoM) and shelter (0.6% MoM). Food and energy are transient (prices can go down as easily as they go up), but shelter and wages are sticky (they very rarely go down, and usually only in severe recessions.

The anatomy of the 1970s recession was similar - inflation in oil had stopped by 1975, but the worst of the inflation was carried through 1977-1981 by mortgage rates, rents, and wages.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#60

Post by christophilus » Tue, Dec 13, 2022, 5:03 PM UTC

geye1234 wrote: post #37

runako wrote: post #24

Earlier quoted context omitted.

If the expectation is that everything will be cheaper next month than this month, that creates an incentive for everyone (and every business) to delay purchases as long as possible (because they will save money buying in the future). When everyone slows spending at once, it can lead to severe a recession or depression.

Perhaps for businesses this may be true. It's hard to imagine for a consumer. I'm not going to delay the purchase of groceries, a fridge, a new roof or (if I'm feeling rich) a new car just because they may be 3% cheaper next year. I'm not saying this conventional wisdom is wrong, but it's not obviously right.

Generally speaking, periods of deflation are a symptom of an existing economic malaise. Prices might drop because of solid gains in efficiency, but they generally drop because of a loss of demand. That loss of demand is generally caused by economic hardship. Therefore, deflation is correlated with economic hardship, but I think it's a correlation, not a causation.

So, I'm with you. I've had it explained to me many times, and it still doesn't make much sense to me. I'm going to buy cars / houses / investments / goods / services when I need them and can afford them-- not based on speculation about their future prices (well, except for investments, if I have some magic insight).

From a business perspective, I've been involved in many purchasing decisions and never once was "it might be cheaper or more expensive in the future" a part of the decision making process.

It really feels like "deflation is bad" is an economic theory that should be tested. Yes. We've had deflationary shocks, and those were bad, but that was because a) it was a shock rather than a gradual slope and b) it usually followed a period of marked excess. I'm not convinced that deflation itself was the enemy as much as the other ancillary issues. It's hard to disentangle that, though.