Inflation jumped 7.5 percent from last year, according to the Bureau of Labor Statistics’ Consumer Price Index. Moody’s Analytics compared that rate to inflation in 2018 and 2019, which was around 2.1 percent. They concluded that the excessive inflation costs the average U.S. household $276 per month, or $3,312 per year. And here (among other things) is the problem with that – it pushes the U.S. toward a recession. Now, if you’re a sane person, you should think that comment is crazy. I’m not yet calling for a recession. It is my job to look for these sort of things. In late…
Insights & Advice
Tag: Consumer Price Index
Markets are trading like a penny stock
Two major events this week had investors rushing from one side of the boat to the other. The bond auctions, followed by the Consumer Price Index report, were both surprises in the opposite directions. Neither could keep the markets up. On Wednesday, February 9, 2022, the government held its usual U.S. Ten-Year Treasury Bond auction. Bond traders were fearful that investors, especially overseas bidders, would shun the auction, due to inflation fears. Instead, bidders gobbled up the offerings with foreign purchasers accounting for more than 70% of the buyers. The next day, the 30-year bond auction was so-so at…
The biggest problem for small businesses is no longer the labor shortage
The biggest problem facing small business owners is no longer the labor shortage — it’s inflation. That is according to a December 2021 survey release by the NFIB Research Foundation. Shortly after the release of this survey, inflation clocked in at 7 percent over the past year, the highest measure of the Consumer Price Index (CPI) since 1982. In reaction to this problem, I suspect that the Federal Reserve will combat higher prices of goods and services. Up until now, the Fed has been comfortable letting inflation run above its target of two percent. A month ago, I predicted “at least…
Beware the hikes of March
There is a more than an even chance that the Federal Reserve Bank hikes interest rates at least 25 basis points by the end of March 2022. Several analysts expect another three hikes by the end of the year. As an equity investor, this should concern you. This week, both the Consumer Price Index (CPI), and the Producer Price Index (PPI) came in as expected. But “expected” does not mean anything like good on the inflation front. On a year-over-year basis, CPI was up 7%, while PPI hit 9.7% for all of 2021. And while economists debate whether inflation and…
Annual inflation hits 30-year highs
The stock and bond markets knew inflation was coming. This week’s 6.2% jump in the Consumer Price Index drove home the fact that inflation has become a fact of economic life, at least for the near future. The jury is still out on whether inflation will prove to be “transitory” as the Federal Reserve Bank argues and as some economists believe. Others fear that we could be on the verge of something a little more serious. The fear is that the Fed might be forced to raise interest rates if that were the case. The Producer Price Index (PPI) and…
High risk, high reward?
Inflation has been high, based on the Consumer Price Index, or CPI. The Bureau of Labor Statistics reported that the CPI was up 0.6 percent in May 2021 and rose 5 percent over the previous 12 months. Both are big numbers and well above historical trends. The Federal Reserve has repeatedly said that the high inflation is “transitory.” Others expect high inflation to continue unabated. I don’t understand why people argue either/or. I suspect some forces will push inflation consistently higher but not to a ruinous level. (I do believe that continuing at a 5 percent rate would be ruinous.) Let’s…