Inflation/stagflation Thread

Interesting numbers behind the numbers.

The large increase in the employment numbers touted by the Democrats this week is due to fewer people working but more people working multiple jobs

The second factoid is the drop in gasoline prices is due to a drop in gas usage and not from the Biden administration selling oil from the US oil reserves to the Chinese

Over the past four weeks, consumers bought about 8% less gasoline compared to the same period last year, when prices were lower than $3 a gallon, according to data released last week by the U.S. Energy Information Administration.

Using less gas caused supplies to grow, and that, combined with fears of an impending recession and the European Union’s easing of its sanctions against Russia’s oil industry, have caused oil and gas prices to plummet.

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Fed watch

  • Fed’s Bowman: There Are Almost No Concrete Indications Inflation Has Peaked
  • Bowman: Need to See ‘Unambiguous Evidence’ of Inflation Decline Before Changing Outlook
  • Bowman: Commodity Prices Have Declined but Are Historically High
  • Bowman: Significant Risk Remains of High Inflation for Necessities Next Year
  • Bowman: Expect Economic Output to Pick Up in Second Half of Year
  • Bowman: 75-Basis-Point Rate Increases ‘Should Be on the Table’ Until Inflation Declines Meaningfully

July CPI will be out on Wed 8/10 this coming week.

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GREEDFLATION under threat

more about the employment numbers

The most obvious issue concerns “seasonal adjustments.”

However, in reality these seasonal adjustments are just gimmick the BLS uses to fake the numbers… particularly at a time when the BLS is under tremendous political pressure to make the economy look better than it really is.

Times like today.

As Bill King notes, the seasonable adjustments for July 2021, were NEGATIVE 65,000. And yet, for some reason, the seasonable adjustments for July 2022, were POSITIVE 287,000.

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Posting here because there isn’t a specific recession / employment / real estate market thread that is as active as this thread.

I’ve noticed an increase in cold calls from mortgage brokers that I reached out to for quotes over the past several years. What that tells me is that these brokerages who had plenty of work for all the brokers on staff now no longer have that volume and they are instructing their brokers, instead of sitting around twiddling their thumbs, to cold call everyone whose phone number they got in the past few years hoping for a nibble. Soon those folks will be laid off.

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CPI less bad than feared, flat for July, Fed futures hikes expected to be lower.

  • US Jul Consumer Prices Unchanged; Consensus 0.2%
  • US Jul CPI Ex-Food & Energy 0.3%; Consensus 0.5%
  • US Jul Consumer Prices Increase 8.5% From Year Earlier; Core CPI Up 5.9% Over Year
  • FED SEEN RAISING INTEREST RATES BY 50 BPS IN SEPT, BASED ON FED FUNDS FUTURES PRICING, VERSUS 75 BPS HIKE SEEN BEFORE CPI REPORT

More Fed comments

  • FED’S EVANS: TODAY’S INFLATION REPORT IS FIRST POSITIVE REPORT
  • EVANS: I EXPECT WILL INCREASE RATES THIS YEAR, NEXT YEAREVANS: OPTIMISTIC FORECASTING THAT NEXT YEAR CORE PCE INFLATION WILL BE CLOSER TO 2.5%
  • EVANS: I’M NOT LOOKING FOR ECONOMY TO TURN DOWN IN A SIGNIFICANT FASHION ANY TIME SOON
  • EVANS: NOT LOOKING FOR A RECESSION
  • EVANS: SECOND HALF OF THE YEAR TO BE `QUITE POSITIVE’
  • EVANS: THE ECONOMY IS ALMOST SURELY A LITTLE MORE FRAGILE, BUT WOULD TAKE SOMETHING ADVERSE TO TRIGGER RECESSION
  • EVANS: I EXPECT ECONOMIC GROWTH NEXT YEAR TO BE 1.5% -2%
  • EVANS: WILL CONTINUE TO STRUGGLE WITH SUPPLY CHAIN ISSUES FOR LONGER THAN I’D LIKE
  • FED’S EVANS: IT’S QUITE POSSIBLE WE WILL BE ABLE TO TIGHTEN MONETARY POLICY ENOUGH TO BRING INFLATION DOWN AND UNEMPLOYMENT WILL ONLY RISE TOWARD 4.25%
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I guess it’s good the CPI print came under expectations, but we are still at 8.5% YoY. I would presume the Fed would stay the course on rate hikes.

I’m happy the street likes it, but I don’t see this as a cherry picture.

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I believe this is the one you’re looking for

image

But seriously, the annual number for CPI is dumb, just look at the last month. The July was 0% vs May 1% and June 1.3%. That’s way better.

However, the recent commodity drop contributed a large part to that lower CPI for July. I doubt the same amount of energy deflation will occur next month (is oil going to fall another $20/barrel?) as well and continue like that for all future months, so my guess is core inflation returns somewhat higher for Aug.

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Inflation CPI commentary, charts

https://wellsfargo.bluematrix.com/links2/html/2cdfd25e-a670-4a76-bb47-6838a3813485

Excluding food and energy prices, “core” CPI rose just 0.3% in July, matching the slowest pace of monthly core inflation seen in 2022. Core goods inflation eased to 0.2% over the month. Modest deflation was seen in apparel and education and communication goods prices, a welcome development for back-to-school shoppers hitting the stores before the fall. Used car and truck prices also fell in July, declining 0.4%. However, not all goods categories showed clear signs of easing inflation. Prices for household furnishings rose 0.6%, a tenth higher than the 0.5% registered in June, while prices for new vehicles matched June’s 0.6% growth.

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image

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All the Democrats voted for it and no Republican voted for it

House Democrats pass $739B Manchin-Schumer spending and tax increase bill

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Our regional theme park has began selling 2023 season passes and related add-ons. The prices are rather shocking - while not the same early bird sale prices as last year, the pricing isnt materially different than what they’ve been selling the passes, etc for all this summer. And they actually expanded the timeframe the add-ons are valid for, making them more costly to fulfill.

Clearly I overestimate the typical usage of an all-season dining plan (which allows you to eat for free two times per day for as many days as you want to go to the park). Plus I neglected to consider the fact they probably know their season pass base as a whole cant afford yet another big price increase right now.

Maybe the strategy is to give everyone a good deal, with the expectation that no one will be able to afford the gas needed to get to the park to take advantage of that deal… After all, this is for 2023, the election will be over, and instead we’ll be refilling the SPR.

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Visualization for the factors that balanced out to 0% last month.

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So the two factors related to the price of oil, energy and airfare, balanced out the other two, Shelter and used cars.

Europe energy is about to SHTF. Will be interesting.

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SHTF 1

On August 16, the price of September futures at the Title Transfer Facility (TTF) of the Netherlands, which is considered the most liquid virtual sales center in Europe, was $2,631.7, 13,3 times higher than the previous calculation price.
According to the article this is the price per 1000 m³ of gas I assume at atmospheric pressure.

@shinobi How does this compare to the price of oil?

Edit. I looked it up and it seems that 1000 m³ of natural gas is equivalent to six barrels of oil. So $2632 is equivalent to about $440 for a barrel of oil??

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If we didn’t have cheap nat gas from all that fracking, we could be like the UK. It won’t last forever.

UK Jul CPI 0.6% On Month; 10.1% On Year
UK Jul Core CPI Was 0.3% On Month; 6.2% On Year

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