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Original article: https://www.cnbc.com/2021/11/10/consumer-price-index-october.html Burgess COMMENTARY The inflation being experienced not (in late 2021) is very different from the inflation of the 1970s ... but the difference is not talked about very much by younger economists and journalists. In the 1970s the virulent inflation of the time was drived by 'cost push' while the inflation of the present time is much more 'demand pull'. For the past 40 years since around 1980 costs of production have dropped because of productivity improvement, mainly driven by conversion of production processes from analog control to digital control. In practical terms this enabled the wholesale relocation of production from high wage USA (and more broadly North America and Europe) to China (and other lower wage Asian nations) with massive economic consequences. The owners (stockholders) in big business did very well during this time period, while workers did not. In the early 1980s 50% of US workers earned less than the average wage, and 50% earned more than the average wage. By 2020 some 80% of US workers earned less than the average wage and only 20% earned more than the average wage. During this 40 year period household wealth for the majority of the American population declined, while a few ... around 20% of the population ... experienced substantial increases in their household wealth. Widely communication US economic statistics like GDP per capita increased substantially over the past 40 years, but much of the increase was a result of massive wealth increase for relatively few and struggle for more and more of the population. The current post pandemic inflation is not driven very much by cost push but by demand pull. Most of the price increases are a function of demand increase within the supply/demand marketplace and very little has to do with fundamental production cost increases. In other words, the supply chain is simply getting more profitable as prices for the final consumer increase. While people who need to consume and are struggling financially will have to struggle even more, this inflation protects profits which in turn helps to keep stock market wealth at record levels. Peter Burgess | ||
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Consumer price index surges 6.2% in October, worse than expected and the highest since December 1990
Jeff Cox PUBLISHED WED, NOV 10 20218:31 AM ESTUPDATED 2 MIN AGO Inflation across a broad swath of products that consumers buy every day was even worse than expected in October, hitting its highest point in more than 30 years, the Labor Department reported Wednesday. The consumer price index, which is a basket of products ranging from gasoline and health care to groceries and rents, rose 6.2% from a year ago. That compared to the 5.9% Dow Jones estimate. On a monthly basis, the CPI increased 0.9% against the 0.6% estimate. Stripping out volatile food and energy prices, so-called core CPI was up 0.6% against the estimate of 0.4%. Annual core inflation ran at a 6.2% pace, compared to the 4% expectation and the highest since November 1990. Fuel oil prices soared 12.3% for the month, part of a 59.1% increase over the past year. Energy prices overall rose 4.8% in October and are up 30% for the 12-month period. Used vehicle prices again were a big contributor, rising 2.5% on the month and 26.4% for the year. New vehicle prices were up 1.4% and 9.8% respectively. Food prices also showed a sizeable bounce, up 0.9% and 5.4% respectively. Within the food category, meat, poultry, fish and eggs collectively rose 1.7% for the month and 11.9% year over year. The price increases meant that workers fell further behind. In a separate report, the Labor Department said real wages after inflation fell 0.5% from September to October, the product of a 0.4% increase in average hourly earnings that was more than offset by the CPI surge. Shelter costs, which make up one-third of the CPI computation, increased 0.5% for the month and are now up 3.5% on a year-over-year basis, pointing to more reasons for concern that inflation could be more persistent than policymakers anticipate. The annual pace is the highest since September 2019. The data comes as policymakers such as Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen maintain that the current price pressures are temporary and related to pandemic-specific issues. While they have conceded that inflation has been more persistent than they expected, they see conditions returning to normal over the next year or so. Stock market futures fell following the report and bond yields rose. Escalating inflation could cause the Fed to tighten policy more quickly than it has indicated. The central bank has indicated that it will within the next few weeks start reducing the amount of bonds it buys each month, though officials have indicated that interest rate hikes are still off in the future. Traders on Wednesday morning were pricing in two rate hikes in 2022 and about a 44% probability of a third increase, according to the CME’s FedWatch tool. The Fed has indicated a narrow likelihood of just one hike ahead, though St. Louis Fed President James Bullard told CNBC overnight that he sees two. This is breaking news. Please check back here for updates. Squawk Box WATCH LIVElogo UP NEXT | Squ
Jeff Cox
| PUBLISHED WED, NOV 10 2021 8:31 AM EST The text being discussed is available at | https://www.cnbc.com/2021/11/10/consumer-price-index-october.html and |