Tag Archives: Inflation

Update on (Price) Inflation

Inflation is negative for the economy.  So far the evidence that more is coming is spotty.  Some headline prices are rising,but most aren’t.  I’f inclined to be watchful and wary.  Inflation has to be chocked off before inflation expectation become heavily embeded as they did in the 1970’s.

I know I’m supposed to hang my head in shame at how some of us have been Chicken Littles on price inflation, but I’m still not sure it’s time to throw in the towel. (For the record: Yes I have definitely been wrong in the specific timeframes I gave for when we’d see certain things happening with CPI.)

For example, looking at the latest numbers from the BLS, coming from the Producer Price Index and Consumer Price Index, we get the following 12-month changes:

Consumer goods except food and energy: +1.3%
Consumer goods: +3.2%
Finished goods: +6.8%
Intermediate goods: +9.4%
Crude goods: 23.7%

And in light of all this, I’m supposed to just roll over and say, “Yep there is clearly no sign of price inflation in the system.” ? I don’t mind people saying, “I think this is a one-time blip in commodities that will work its way through the headline numbers,” like so.

But Krugman et al. are going much farther than that, acting as if only Newt Gingrich could be so stupid as to think there is any sign of inflation. Steven Chapman (HT2 David R. Henderson) goes so far as to say, “The last epidemic of inflation, in the 1970s and early ’80s, was a searing experience, from which the Federal Reserve learned lessons it has no desire to repeat. Is inflation coming back? Sure. Right after the Ford Pinto.”

Really? That’s how confident we all are in this guy?

Update on (Price) Inflation
Fri, 13 May 2011 22:00:22 GMT

From the Big Picture: There is No Food Inflation; the BLS Made Sure of That

So is inflation an issue as Sarah Palin has in her inarticulate way suggested?

The media, as represented by the newspapers above, not only accept the Consumer Price Index as released by the Bureau of Labor Statistics, but also: (1): accept the rationale that food and energy prices should not be included in the price index because of their excessive volatility, and, (2): notify readers that such low inflation “bolsters” the Fed’s case to continue pumping up asset prices. Note that both papers link the happy inflation news to the $600 billion purchase with the word “bolster.” This has the whiff of a press release delivered by the Fed to the media.

It went unnoticed how the Bureau of Labor Statistics (BLS) relieved the volatile food and energy prices of volatility. The BLS also relieved the CPI of “extreme values and/or sharp movements [of prices] which might distort the seasonal pattern [which] are estimated and [are] removed from the data.” So out went milk, cheese, oil, and cars from the CPI, if they did not meet the BLS volatility criteria. (The excisions also include non-edibles and non-combustibles, including cards, trucks and textbooks.)


The Big Picture

via There is No Food Inflation; the BLS Made Sure of That.