Friday, February 17, 2012

Inflationary Pressures Were Falling at Year-End

The chart above (click to enlarge) shows some interesting data from Table 2 in today's CPI report on seasonally adjusted, annualized inflation rates for the three and six month periods ending July 2011 compared to comparable periods ending January 2012.  For example:

1. For the six month period ending July 2011, the annualized inflation rate for CPI: All Items was 4.1%, and that fell to only 1.8% for the six month period ending last month.

2. For the three month period ending July 2011, the annualized inflation rate for "food at home" was 5.5% and for the three month period ending January 2012, the annualized inflation rate was only 1.0%.

Bottom Line: Compared to last summer for the three and six month periods ending in July 2011, inflationary pressures fell significantly towards the end of last year and in the first month of 2012 for the three and six month periods ending in January.  Inflation for food at home has fallen to only 1% (at an annual rate) for the November-January period.  

10 Comments:

At 2/17/2012 9:23 AM, Blogger Methinks said...

over 4% and 5%? That's pretty high inflation. At a 5% rate, prices double in approximately 14 years.

I shouldn't worry about inflationary pressure declining. Bernanke is working overtime to ensure that your dollar buys less with the passage of (a very small amount of) time.

 
At 2/17/2012 10:27 AM, Blogger morganovich said...

why use such weird timeframes?

yoy CPI was 2.9%.

it seems like you are cherry picking and trying to pass off seasonality as disinflation.

year on year food at home was +5.3%.

it was 6% in december.

it was 6.3% in sept.

so, there may have been some small disinflation, but this is also WAY up from the 2.1% yoy figure last january.

this further blosters the case that you are mistaking seasonality for disinflation.

food at home was inflating over twice as rapidly vs a year ago as it was last jan.

this is also the the time of year when you tend to see the least inflation and there is a big benefit from the drop in nat gas (though energy commodities as a whole are up double digits)

jan-feb tends to be the annual low.

people were saying this same thing last year when jan CPI dropped to 1.6. then it nearly tripled by summer.

i think you are falling into that same trap.

 
At 2/17/2012 11:23 AM, Blogger Buddy R Pacifico said...

The Producer Price Index averaged 1.7% growth between 1983 and 2003.

What about 2004 -> 2011?

The PPI average was double the previous twenty year average at 3.6%.

If you are a consumer of natural gas and computers you have benifited, otherwise not so much.

I think a big question is, can natural gas production drive down the Producer Price Index starting in 2012, and begin a flatter trend? Has the trend begun with year-end flattening?

 
At 2/17/2012 11:54 AM, Blogger Benjamin said...

Excellent insights from Dr. Perry. While the Chicken inflation Littles (for some reason, the dominant fowl in right-wing circles) go hysterical on inflation, in fact we are looking at some of the lowest inflation rates in decades and decades.

When Ronald Reagan the Great Inflation Fighter left office the inflation rate was 5 percent, and the Wall Street Journal was calling on Volcker to ease up.

Now we are clawing our way out of the Great Bush jr. Recession, and the Chicken Inflation Littles are sniveling about inflation rates under 2 percent.

 
At 2/17/2012 12:14 PM, Blogger bart said...

Wowee Zowee... the official CPI-U inflation rate is down one half of one percent in the last six months to about 2.9%. The actual inflation rate per my work is at least 8.5%, and ostrich inflation crew continues in blinder mode.

Using annual rates to compare against annualized rates (and using different periods) is very unbecoming of a professional.

In the meantime, water/sewer/trash is up almost 6% annual, energy is up 6.9%, medical care is up 9.7%, etc. Even OER is up... sheesh.

 
At 2/17/2012 12:29 PM, OpenID moneyjihad said...

Urm.. I think they must be excluding peanut butter from "food at home." Am also seeing rising prices for apples and bananas.

 
At 2/17/2012 12:32 PM, Blogger morganovich said...

"I think a big question is, can natural gas production drive down the Producer Price Index starting in 2012, and begin a flatter trend? Has the trend begun with year-end flattening?"

don't count on it. nntgas fell all year. energy commodities soared.

this trend flattens at the end of every year, then in feb-mar it starts up again. it's very seasonal. that's why you want to look at yoy numbers, not the sequential ones.

 
At 2/17/2012 1:21 PM, Blogger Bill said...

As if on cue:

"Rising Fuel Prices Push CPI to Highest Gain in Four Months

Published: Friday, 17 Feb 2012

By: Reuters

U.S. consumer prices rose the most in four months in January as the price of gasoline jumped, highlighting a growing concern that higher energy costs could slow the economic recovery. "
http://www.cnbc.com/id/46426789

 
At 2/17/2012 2:50 PM, Blogger morganovich said...

benji-

first off, it was 4.5%, not 5%.

second, you cannot compare that 4.5% with current inflation.

it was calculated a different way.

using today's CPI, that would read maybe 2%. whichever you believe to be correct, comparing disparate methodologies is apples and oranges.

this is a fact of which you have been made aware about 100 times.

why the willful lying?

is your case so feeble that you need to misrepresent facts to try to support it?

 
At 2/18/2012 9:34 PM, Blogger Ron H. said...

morganovich: "is your case so feeble that you need to misrepresent facts to try to support it?"

Case? What case is that. I've apparently missed something.

 

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