Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

bls.gov

Post reply on HN
Print view View original

81–90 of 163 posts

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

#81

Post by runako »

christophilus wrote: post #60
geye1234 wrote: post #37

Earlier quoted context omitted.

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 ti…

> 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.

Think about the prevalence of sales, and their impact on moving goods. If you need a TV, but the need is not urgent, you (okay, not you, but most people) might wait for the New Year's sales in a couple of weeks to save a few bucks. Same with cars and other appliances. Or people look for a coupon code to save some money.

If sales and coupons make sense, consumer decision making in deflationary environments should also make sense. If you don't understand why people wait for sales to purchase things, you may want to talk to some working-class people to understand what it is like to not have enough money to buy everything you need immediately when you need it.

> it was a shock

Japan has been in a gradually deflating environment for decades.

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

#82

Post by wewtyflakes »

runako wrote: post #69
geye1234 wrote: post #37

Earlier quoted context omitted.

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.

> delay the purchase of groceries This will obviously not mean skipping eating, but will manifest more as fewer "special" meals like steak or lobster or whatever. > a fridge, a new roof If you are a homeowner, you know that most equipment failures are a decision to either repair or replace. In a deflationary environment, owners will bias toward patching things as long as they can. (The opposite is true in an inflatio…

All of those things seem okay, or even good.

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

#83

Post by slg »

cjbgkagh wrote: post #75
slg wrote: post #68

Earlier quoted context omitted.

Can you explain why you think this disputes my point? The real interest rate is the nominal interest rate minus inflation. When there is inflation, the real interest rate for holding cash is negative. When there is no inflation, that real interest rate is 0%. The disincentive to holding cash disappears and therefore more people hold cash.

> The real interest rate is the nominal interest rate minus inflation. Yes. > When there is inflation, the real interest rate for holding cash is negative. No. This assumes nominal interest rate stays constant which it very much will not do.

I'm still not following your line of thinking. The nominal interest rate on holding cash is always 0%.

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

#84

Post by crazygringo »

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…

I'm racking my brain to try imagine what you could possibly mean, and I've got nothing.

Scalars are 1-dimensional. Inflation is very much a one-dimensional number, ranging from positive to negative.

Vectors have 2 or more dimensions, interpretable as a scalar with a rotational direction. So how would that describe inflation exactly...?

And if you're trying to say that inflation changes over time, that doesn't turn it into a vector. That's just a scalar time series.

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

#85

Post by cableshaft »

boringg wrote: post #61
jalopy wrote: post #44

It's more helpful to look at a graph to see trends: https://fred.stlouisfed.org/graph/?g=XCAY As one can see, the CPI was fairly steep during the period from Jan 2021 till June 2022; from there it has visibly flattened. EDIT: A rolling 6 month annualized rate makes the drop pretty obvious: https://docs.google.com/spreadsheets/d/1VCEwEDWCAaWhmbosXIcD...

Look at that hockey stick curve - up and to the right! It looks like the step in inflation from 2020 onwards was quite large but over the longer time horizon it looks back to a more reasonable rate. Funny to look at rising prices over the long term.

Zoom out to its earliest recorded data around 1945 on that chart, and the CPI inflation in the past couple of years is still clearly the fastest and steepest slope compared to all previous decades, including the 70s when overall inflation got up to 12% and the early 80s when Fed interest rates went up to over 20% to combat that inflation.

Might not look as bad as when it's super zoomed in, but that still seems pretty bad (and definitely historic).

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

#86

Post by A4ET8a8uTh0 »

runako wrote: post #24
ChuckNorris89 wrote: post #17

Earlier quoted context omitted.

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

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.

This may be the misconception that is driving this. Nothing will be cheaper ( decrease in price ). It will simply not appreciate in price as much ( price will increase less ).

Agreed, especially in US where consumer spending drives the economy.

Still, in US, for better or worse, a lot of personal wealth is stored in real estate ( which also manages to explain some US idiosyncrasies ). Deflation would 'destroy' equity for owners of that real estate so a lot is regularly being done to keep the housing prices high and even more to keep them from going lower.

It is not bad in itself. Frankly, I personally see deflation as a way of economy correction, but that is one person that has limited exposure to some of those pressures. But deflation is not what is happening here. Deflation would be a negative inflation rate ( and that is not the case ).

Now..there are few other angles to consider. Higher inflation means our debt is 'worth' less; deflation means it is worth 'more'. If you owe a million dollars in an environment, where an average house costs a million dollars, it is likely that it becomes the norm ( and it is technically good for the borrower ). Interestingly, some would argue US was actually trying to inflate their way out of its staggering debt.

There are also import/export considerations for companies that operate in that space ( as you also noted ), but I am hardly an expert ( or even that interested in that subject ).

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

#87

Post by algoatecorn »

propogandist wrote: post #18

once the SPR cannot be drained to manipulate gasoline costs, things will get interesting.

Indeed, we have seen a ~35% reduction is SPR this year and are not far from 1980s level. I'm also not sure how the US is planning to restore these values given our refinery capacity and poor relationships with other top suppliers.

Not the mention, CPI is one thing, and how the average American feels is another. If you poll random people on the street, this "slowdown" in inflation is not perceived by individuals' wallets. This means consumer behavior is not necessarily reflected in CPI prints.

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

#88

Post by FredPret »

jalopy wrote: post #44

It's more helpful to look at a graph to see trends: https://fred.stlouisfed.org/graph/?g=XCAY As one can see, the CPI was fairly steep during the period from Jan 2021 till June 2022; from there it has visibly flattened. EDIT: A rolling 6 month annualized rate makes the drop pretty obvious: https://docs.google.com/spreadsheets/d/1VCEwEDWCAaWhmbosXIcD...

Zoom way out and it looks like a nice straight line from 1980 to now

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

#89

Post by Aunche »

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?

In a healthy economy deflation isn't possible because the money supply naturally grows with the economy. This was true even when we were on the gold standard because banks will be more aggressive with lending, which effectively creates more credit money. The deflation has historically only occurred when a large quantity of credit money gets destroyed in defaults.

The purpose of money is to facilitate mutually beneficial transactions. When the money supply contracts, the "price" of money goes up. People are incentivized to hoard money for the sake of hoarding money, which adds friction to mutually beneficial transactions. This causes a feedback loop, which leads to even more deflation and even less economic activity.

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

#90

Post by thinkharderdev »

listenallyall wrote: post #62
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.

I think you have to put every scenario in context with what came before. Yes, traditionally, widespread deflation can sometimes lead to recession. But when the economy has been running overheated for years, it's more of a correction to cool things off. If you're driving at 120 mph and tap the brakes, that's different than driving the speed limit and braking, the latter is much more likely to cause a traffic jam.

We've been below the target inflation rate for 15 years. We haven't had CPI consistently above 2% in the US since the 1980s. I don't see how this can be a "correction"
Post reply on HN