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U.S. inflation cools again, giving Fed room to downshift on rates

bloomberg.com

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Re: U.S. inflation cools again, giving Fed room to downshift on rates

#61

Post by throw0101a »

jollyllama wrote: post #27
ceejayoz wrote: post #20

Earlier quoted context omitted.

Sure, you can cherry-pick individual items to tell pretty much any story you like. If the 60% increase in butter prices over the last year is hitting your budget, you probably would benefit from eating less butter. (And I say this as someone who eats a good amount of butter...)

I'm not cherry picking. Produce is up massively. Heads of broccoli, lettuce, are up at least 20% over the last year! And that's IF you can find them.

> Produce is up massively.

And?

Food prices make up ~13% of the BLS CPI because, according to their surveys, that is what the national average is for an average basket of goods:

* https://en.wikipedia.org/wiki/Consumer_Expenditure_Survey

If you purchase more or less food than average, then your personal CPI will be different that the average that is reported in headlines. Further, the fact that you see some the price (inflation) in your face regularly is a form of cognitive bias:

* https://en.wikipedia.org/wiki/Attentional_bias

People noticed petrol prices go up and that inflation, but they're thinking less about the deflation of petrol going down, probably because they think the lower prices are "normal".

Re: U.S. inflation cools again, giving Fed room to downshift on rates

#62

Post by UncleMeat »

jollyllama wrote: post #27
ceejayoz wrote: post #20

Earlier quoted context omitted.

Sure, you can cherry-pick individual items to tell pretty much any story you like. If the 60% increase in butter prices over the last year is hitting your budget, you probably would benefit from eating less butter. (And I say this as someone who eats a good amount of butter...)

I'm not cherry picking. Produce is up massively. Heads of broccoli, lettuce, are up at least 20% over the last year! And that's IF you can find them.

That's just more cherry picking. The appropriate thing to do is to create a collection of food items that represent some sort of average of the population expenses and measure that.

And when they do this, they compute that food-at-home rose 0.2% in December (2.4% annualized).

Re: U.S. inflation cools again, giving Fed room to downshift on rates

#63

Post by ceejayoz »

antisthenes wrote: post #60
ceejayoz wrote: post #46

Earlier quoted context omitted.

That's further cherry-picking (and I've never been unable to purchase either; we eat brocolli 3-4x a week). The comment you replied to has the non-cherry-picked number for this month's report: "Food at home +0.2%" Some things went up more than others, some recovered faster, and without deflation the prices will remain overall higher than they were a year ago.

At some point it stop being cherry picking and becomes an actual measure. The official BLS numbers are underreporting inflation. Overall, groceries are up roughly 35-50% since 2020, while the official numbers would have you believe the inflation was 18.17% over 3 years. BLS does a lot of trickery to generate favorable numbers. There are "quality" adjustments, there are "core" inflation indicators, which exclude goods…

Sigh. "My personal number is higher" isn't a good way to contest a national, fairly rigorous process run by professionals. I can pick a basket of goods from my local Wegmans that's gone up 100%; I don't doubt it's higher than the CPI number for some people. That's how averages work; there'll be some people for which it's lower, too, and their anecdotes have equally little value for national policy decisions.

Lumber, incidentally, is back to normal nationally. Down 63% in 2022. If you're still seeing 60% above normal, you're either in an area with a supply issue, or you're getting hosed by the store. https://www.wxpr.org/business-economics/2023-01-04/despite-i...

Re: U.S. inflation cools again, giving Fed room to downshift on rates

#64

Post by ceejayoz »

adunsulag wrote: post #59
ceejayoz wrote: post #46

Earlier quoted context omitted.

That's further cherry-picking (and I've never been unable to purchase either; we eat brocolli 3-4x a week). The comment you replied to has the non-cherry-picked number for this month's report: "Food at home +0.2%" Some things went up more than others, some recovered faster, and without deflation the prices will remain overall higher than they were a year ago.

Perhaps its the people who cook with a lot of home ingredients (eggs, meats, vegetables, fruits) that are feeling the most pain. My food budget has gone up 25% in the last year for the same basket of goods. I track those numbers pretty consistently.

Yes, some individuals will see higher than average inflation in their basket. Others will see lower than average. That's why we work with the averages for policy decisions rather than looking for individual anecdotes.

If I subsist entirely off the cocktail shrimp at my local Wegmans and have no other expenses, my inflation value is something like 500%. Is that a particularly useful number for the Fed? No.

Re: U.S. inflation cools again, giving Fed room to downshift on rates

#65

Post by qorrect »

rsynnott wrote: post #30
jollyllama wrote: post #16

Earlier quoted context omitted.

Get real. Have you bought eggs or butter lately? Random shoppers are literally exclaiming about the price of butter in the store.

If the only thing you eat is eggs, then you're a weird edge-case not accounted for in the standard inflation figures, of course.

Egge case

Re: U.S. inflation cools again, giving Fed room to downshift on rates

#66

Post by dragonwriter »

Note this is CPI, which is not the measure the Fed uses for gauging inflation.

The Fed uses PCE. It is likely to behave similarly to CPI, though part of the reason the Fed has been as aggressive as long as it has is that PCE diverged more than is historically common from CPI during the inflation spike, spiking higher and coming down more slowly..

Re: U.S. inflation cools again, giving Fed room to downshift on rates

#67

Post by lettergram »

NikolaNovak wrote: post #49
roywiggins wrote: post #23

Earlier quoted context omitted.

> much of the increase occurred in 2021 - it just never came down. That's not actually in disagreement with the notion that inflation has come down a lot. (for prices to come down you'd need deflation)

This is a key point and massive misunderstanding in everybody I know : there's this expectation that when "inflation slows down", then "prices will return to normal". But that's empathically not what it means. If prices rose whatever percent last 18 months, and inflation drops to zero tomorrow... Prices will stay exactly the same. They just won't increase further day to day any more (at zero inflation). "Inflation is…

The real struggle is the government - fed, treasury, etc all claimed the inflation was “transitory”. A lot of people have been caught off guard. Aka people expected a deflation.

I was pointing out most of the increase the last 3 years occurred in 2021. I actually believe 2022 has far higher inflation than they claim in government figures. At least locally, it’s higher based on my tracking.

2023 will be worse for food due to fertilizer issues, I suspect fuel prices will also increase. Effectively, expect more expensive commodities. That said I’d suspect housing and other goods being kept up with loans to decrease.

For fertilizers - it takes ~10 years to get potassium online, for instance. The other chemicals take 3-5 years, so we shall see how this goes.

Re: U.S. inflation cools again, giving Fed room to downshift on rates

#68

Post by lettergram »

sf_rob wrote: post #28
lettergram wrote: post #15

Earlier quoted context omitted.

1. There are things like “shrink-flation” not captured. I’ve noticed most packaged goods have reduced in size 10-20%. Eggs have more than doubled, milk is up 25%, etc I don’t care what the government publishes. My friends around the country all confirm this. My own bills (I track itemized) show it as well. Though, to your point, much of the increase occurred in 2021 - it just never came down. 2. Fuel is only down bec…

RE 2: As far as I can tell the last strategic reserve sale occurred in mid-November with no sales in December / bids for repurchases being solicited. It's possible that the supply effects continued through December, but it seems a bit tenuous without economic modeling.

It takes time for a sale to hit the market. I believe the last sale (or second to last) had a several month delivery window.

That said, fair enough - it’s really hard to predict commodity prices at a global scale. China locked itself down which cut its usage, for instance.

Re: U.S. inflation cools again, giving Fed room to downshift on rates

#69

Post by UncleMeat »

markus_zhang wrote: post #31

To me the data is more or less meaningless. I keep a notebook of my own inflation record for food and fuel.

Sure, CPI data won't be accurate for a single person. But we also probably shouldn't base monetary policy off of your personal spending.

Re: U.S. inflation cools again, giving Fed room to downshift on rates

#70

Post by jollyllama »

ceejayoz wrote: post #64
adunsulag wrote: post #59

Earlier quoted context omitted.

Perhaps its the people who cook with a lot of home ingredients (eggs, meats, vegetables, fruits) that are feeling the most pain. My food budget has gone up 25% in the last year for the same basket of goods. I track those numbers pretty consistently.

Yes, some individuals will see higher than average inflation in their basket. Others will see lower than average. That's why we work with the averages for policy decisions rather than looking for individual anecdotes. If I subsist entirely off the cocktail shrimp at my local Wegmans and have no other expenses, my inflation value is something like 500%. Is that a particularly useful number for the Fed? No.

Cocktail shrimp sounds extravagant; that's not what we're talking about. GP is on point. We're talking about basic staples, the real food you find on the edges of the grocery store, not the highly processed items in the middle.
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