One more manifestation of the inflation pressures working through various levels of the economy despite suboptimal demand.
By Wolf Richter for WOLF STREET.
January, in terms of freight volume, is usually a slow month of the year, after the shipping season before the holidays, and freight rates tend to back off. But not this January.
The amount that shippers, such as retailers and manufacturers, spent in January on shipping goods to their customers soared by 19.5% compared to January last year, the steepest year-over-year increase since 2011, and surpassing the surge in September 2018, according to the Cass Freight Index of Expenditures. This was driven by a mix of increasing freight volume and soaring freight rates:
The higher freight rates in January include trucking spot rates and contract rates. According to DAT Freight & Analysis, the average national contract rate for van-type trailers in January jumped by 26% from a year ago to $2.40 a mile.
Spot rates declined over the course of January from high levels in December before picking up again in February. But the average rate in January, at $2.36 was still up 11% from a year earlier.
The freight rates embedded in the Cass Freight Index jumped by 10.1% year-over-year in January, up from an increase of 6.0% in December.
The Cass Freight Index covers all modes of transportation, but truckload represents over half of the dollar amounts, followed by rail, less-than-truckload (LTL), parcel services, etc. It does not cover bulk commodities.
With this 19.5% year-over-year surge in January, the Expenditures index hit the highest January ever by a wide margin, blowing by the prior record of January 2019 by 10%. It was roughly flat with the all-time overall record set last December, when normally there is a seasonal drop from December to January, including -5.7% in January 2020 and -3.8% in January 2019.
January 2021 is the red square all by itself at the top left. The green line represents 2020, the gray line 2019, and the black line 2018.
Shipment volume in January jumped 8.6% year-over-year, but January 2020 had been weak and was still part of the two-year freight recession.
So shipment volume in January (red square on the left) remained below the volume levels of 2018 (black) and 2019 (gray). Late 2020 too, shipment volume (green line) strongly recovered from April, but remained below the levels of prior years:
Now there’s another factor goosing freight costs. Diesel retail prices started to rise late last year. In the week through February 15, the national average retail price for No. 2 diesel rose to $2.88 per gallon, according to the EIA, up 20% from November 2020.
The diesel price has been sticky, as they say. Crude oil, in terms of WTI, has jumped 64% over the same period – despite a terrible demand scenario – and is back where it had been in January 2020. For diesel to return to the January 2020 price, it would have to rise to $3.06 per gallon. Higher fuel prices will put further upward pressure on freight expenditures.
There were already some truck capacity constraints in January due to weather conditions, which is obviously not unusual for January. But in mid-February, a massive winter storm started wreaking havoc across a large part of the US, triggering further capacity constraints in trucking. The effects on transportation and freight rates will become clearer over the next few weeks.
So demand for transportation, while relatively strong, given the Pandemic-related shift from spending on services to spending on goods, has remained below 2019 and 2018 levels. Yet freight rates are surging at a blistering pace. This is one more manifestation of the inflation pressures now working through various levels of the economy despite suboptimal demand.
If folks say they see no inflation, they should look at industry reports now bragging about steep price increases. And consumers are willing to pay those prices – the sign of a sea change. Read… AutoNation Brags About Huge Jump in Per-Vehicle Gross Profit on Soaring Prices Despite Declining New-Vehicle Unit Sales
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But Powell sees no inflation anywhere. Or if confronted with irrefutable evidence of such, he will tell us it’s just “a passing phenomenon.”
This.
“Inflation has reached what looks like a permanently low plateau”.
Yeah, that Bernanke comment said it all. These guys are a joke. It’s hard to imagine they can look at themselves in the mirror after their BS. I was watching a financial stream yesterday online, and the guy was pointing out that literally everything the FED said and the results of their actions were the exact opposite of what was supposed to occur.
When you get paid that kinda of money, you would be doing it too. And if you wouldnt do it, then you would never get far enough in career to be put there.
We got stop praising wealth on one hand while whining the economic system is unfair on the other.
All I can say is finally. Shipping rates are what they should be. For the past 10 years everything but the shipping rates went up. My insurance almost doubled, tolls have doubled or tripled, equipment went up 25-40%. Driver pay have went up by 50% from .40cpm to .60 cpm. Shop rates went from $85 to $160 an hour. But the rates have stayed the same $1.7 to $2 a mile.
Consider the 100% increase in the cost of lumber in three months. That must be inflation even for Powell.
The future contracts are pushing 3xs last year’s price. Something else is happening that we don’t see.
Yes, there’s a giant ball of money that’s rolling into every segment of the economy (except wages) looking for yield. If it can be financialized and costs pushed to the end users, speculators will bite.
There will be more unflation and higher transport costs as restraints in various energy fields from fracking to oil refining drive the prices higher.Up here in n. IL.,gas prices have quickly increased since Dec.,the natural gas prices have gone to the moon amidst the winterstorm demand,electric rates climbed as well as consumers tried to switch from gas.Shipping container shortages and port issues will continue.Prepare to makedo,wait longer for shipments,and/or pay more.
I live in northeast Illinois, collat County of Chicago and gas prices have been rising since Sept., natural gas hasn’t budged and electricity is the same, both regulated by the boogy man government. The largest increase in prices is in lumber, shipped in from Canada, that started in July last year
I’m prepared to buy NOTHING this year, aside from food and the most basic of necessities. As everybody is out spending like drunken sailors on cars, houses, boats and other toys, I am saving every penny I can, and will continue to.
As am I. The best way to beat inflation is to reduce needless consumption, develop DIY skills, and delay purchases even when they seem important.
After the GFC, I reduced my housing footprint by 50% and increased savings by around that same amount. Now I’m traveling more than ever at far reduced costs. High-end food is available at discount grocery stores at a fraction of the cost of what most people pay.
I lived aboard an old sailboat in the Virgins for a year until recently and have done some other cool things but in this economy, I’m hunkered down waiting for what appears to be a massive reset. I am ready to bottom feed when asset prices tank. It takes patience and discipline.
Good thinking. You will be rewarded.
Ain’t no inflation without increasing wages. These are just price increases to increase profits.
That is a good point but does an increase in cheap credit supplement a wage increase meaning that inflation is there?
Sure. In Weimar Germany to pay off the WW1 debt the Germans raised wages to pay off the debt. Then inflation happened. :-)
…..and there is no correlation between us and them. Germany was paying repatriation to Europe, austerity by the Government.
Here you will get the inflation due to Wall Street reparations and after this 1.9 trillion comes the austerity to the rest of us.
Mr. 10 year treasury says so. They call it stagflation and its an old friend here in the US.
And what did reparations cause the government to do … continue printing money?
To add:
And how can there be increasing wages with this?
“Fifty years ago, nearly a third of U.S. workers belonged to a union. Today, it’s one in 10.”
This is the lead sentence in an article on quick union membership comparison search.
There has been a concerted effort of business and social interests to demonise and restrict union membership in the US to increase the profits of the ownership and managerial class.
I am retired now, but have worked 1/2 my life in both union and non union settings. Some of my best jobs ever were small non union companies. But one thing I did learn along the way, the union pay scale and benefits negotiated by both sides sets the baseline for wages and working conditions in specific industries. If you take that away by legislation and design, there is no way an employee can catch up to rising costs.
At least a union member can expect a little help and adjustment to the rising cost of living we call inflation and/or currency debasement.
That, and I’m seeing headlines that more immigrants are on the way to the US, of the illegal sort, and also legal sort and in-between legal/illegal sort.
It one the many bi-partisan policies both teams agree on – driving down workers wages by flooding the labor pool with cheap labor, and not cheap labor.
But they should be able to afford a good quality winterized corrugated card board box or shipping container to call a condo or a home.
Yep, and the business owners who hire and pay the wages are the first to blame. Next time you go to a restaurant check out the table cleaner or kitchen help, and landscaping business. Would it be easier to have e-verification of employment or build a tragic wall,
“Would it be easier to have e-verification of employment or build a tragic wall,”
Yep. You don’t even need a wall with sound policies. With e-verify and a complete exclusion of illegals insofar as any government bennies are concerned, you would see caravans heading south in numbers that would make your eyes pop out. Most of these people don’t want to live in the US anyway, they’re just here to send the money back south.
“You don’t even need a wall with sound policies. With e-verify and a complete exclusion of illegals…”
Funny that no one bothered to tell our former Leader that. Also funny too no one seemed to tell him that tax credits are given to companies that move workers to foreign nations, or the parts of “Free” Trade Agreements that encourage moving jobs other nations.
Funny all that. I guess it’s a mystery that we will never have the answer to…that no one seems to have ever mentioned any ot these things to someone who might have changed them. It will forever remain a mystery. A deep…dark…mystery.
Paulo – Businesses hold all of the cards. They will seek the lowest cost/highest profit available. All the unions did was drive jobs overseas more quickly.
At our site, the philosophy is to treat the workers fairly and they won’t need a union. I have worked at both types of shop also and the pay is just as good without unions and the cooperation between US/THEM is much better.
Russell-that used to be called ‘The HP Way”. We all know how that turned out…
may we all find a better day.
BTW Paulo – I’m in Texas digging out from the freeze. I’m working on Saturday side-by-side with the hourly folks in a concerted effort. That pays more dividends in the long run than any speech I could give on unity. Lunch coming in one hour!
Completely untrue. We have had massive inflation without wage increases. Just look at house prices for starters. Inflated for decades.
And the Emperor (Yellen The Felon) has new clothes ……
not enough truckers to handle the overwhelming supply of stuff we import. raised demand for truckers ALLOWS for increased rates. we have lived for far too long in a non inventory driven JIT economy. shortages(temporary) of items make for desperation/competition which allows truckers to charge more. same goes for houses in markets where there are not enough houses for sale to meet demand(Vegas area being one). 3 weeks ago, a house in the Henderson area was appraised at $464k. last week that same house was listed for $475k. there were 15 offers in 2 days with the LOWEST being $525 and landing at a sale contract at $605k. there are MANY distortions in many markets caused by the strange times we live in. in the same area(Vegas), hotel rooms can be had for anywhere from 50% to 90% off!!! Capitalism allows for supply/demand to determine pricing, unless the public safety is involved.
there will be o inflation when things “normalize” since we still will have TOO MUCH STUFF. too many businesses and too many JOB SEEKERS with not enough jobs for them. DELATION should be the main concern going forward.
“given the Pandemic-related shift from spending on services to spending on goods,”
Dear Wolf,
do you think, this will reverse once the economy is opening up? And what will happen to goods prices then? I suppose prices for services will rise strongly, because much of the capacity has been permanently impaired but maybe even that is counterbalanced by a drop in rents and office leases (and to some extent by fire sale prices for services in areas, where capacity has been maintined or is easy to restore). So would you say, that the pickup in prices (aka inflation) could be very temporary followed by a period of sizable deflation?
pigeon,
In the CPI inflation measure, about 70% is services (healthcare, rent, hotels, haircuts, etc.). About 20% is food and energy. And about 10% is durable goods (cars, laptops, hot tubs). Until recently, CPI for durable goods has been negative (deflation) for much of the time (thanks to “hedonic quality adjustments” etc.), though obviously, goods such as cars and many other things have gotten more expensive.
Now, despite these hedonic quality adjustments, CPI for durable goods is jumping. But it accounts for only about 10% of overall CPI, so it doesn’t matter that much.
And the non-durable goods CPI is dominated by food and energy, which are very volatile, and they are now heading higher, after the slump (collapse of crude oil price) last year.
In this chart: services CPI (red), durable goods CPI (blue), and nondurable goods CPI (green). Note that the services CPI is the one category that has been heading lower during the Pandemic, the other two are rising:
So it could be that once consumers spend more money on services, they will spend less on durable goods. This is a real possibility, as you pointed out.
Will this shift reduce durable goods prices? We’ll see. But given their relatively small share of total CPI, it won’t have much impact on CPI.
But the shift will heat up services CPI, the biggie. This will also be driven by capacity constraints with airlines, restaurants, etc., where capacity has been cut back dramatically, which will cause prices to jump. And when services CPI moves (70% of total CPI) the overall CPI moves.
So when consumers shift spending from goods back to services, this is when we’ll see much bigger jumps in CPI.
Thanks a lot for this detailed and excellent reply!
Thanks for good analysis, Wolf.
‘when consumers shift spending from goods back to services, this is when we’ll see much bigger jumps in CPI’
Since ‘expectation’ of inflation heralds before the actual inflation sets in/reflercted, isn’t the 10y yield at 1.34% unsettling, regardless what Mr. Powell says? Thanks.
The Fed folks, from Powell on down, have unanimously welcomed the higher long-term yields as a sign of “economic growth” and “inflation.”
I think it’s their way of slowing down the markets, including the housing markets, before the taper begins, and then the rate hikes.
Wolf, it sounds then that you’re agreeing with people, myself included, who have said that if the Fed has to pick between strong credit/equity markets and a strong dollar, they’ll pick the latter. Is that correct?
Yes. I think the Fed has decided to softly tighten. The way to do this is to let long-term yields rise — despite QE. I think it sees the excesses in the credit market and housing market and wants to not let it go even crazier. And I think it has heard the grievances of central banks of other countries and is ready to stop the dollar’s drop, and it’s trying to do that by letting long-term yields rise.
Won’t a yuan devaluation partly do that anyhow?
Thanks, interesting. I don’t understand though why other central banks would want a strong dollar. Wouldn’t a weaker dollar be better for them, as it would make THEIR printed currency more valuable in relative terms?
They want a stronger dollar (a weaker local currency with regards to the dollar) because it makes THEIR exports cheaper and more competitive in the US, and more profitable at home, and it makes US exports more expensive in other countries, and everyone wants to get rich off exporting to the US.
This current administration occupying the White House has just released their latest spending spree, and it will extend the “extra $400 per week” unemployment benefits until the end of August, and we’re not even into March yet. The benefits alone amount to a full work week at $10 per hour, which is higher than the current minimum wage in most locales. When you add that to the state UE bennies, these people are getting paid over $15 per hour to sit around, get high, and buy sh!t while they are stiffing the landlord. So, look for it to continue in perpetuity.
None of the recipients will riot over it while the government hoodlums have the spigots open for $trillions to their corporate, Wall Street and Big Government benefactors.
They are destroying every facet of the country.
you only forgot to include the trillions, with a TTT that goes into their own pockets,,,
if and only discoverable if you are able to audit the grandmother of the sister of the brother in law of the brother of the daughter of the incumbent…
Clear enough for anyone with the inclination to look these days,,, in spite of the number of searches one might need..
Sorry Wolf if my cynicism is beyond your limits, , for which I would not blame you one bit…
Without broad income advances, deflation is more likely. Asset prices are being inflated, but the property tumult is telling, in my opinion. A narrowing in what is selling in the car/truck market to me seems similar to the stock market, which is very narrow. Bottom line: full employment and income gains is the best path forward. But private debt levels will be an anchor unless the Fed and Treasury start putting zeroes on their balance sheets.
The FED and Treasury have been “putting zeroes on their balance sheets” for decades, and it hasn’t done a damn thing. What makes you think more of the same will lead to a different result?
Talking with the local carpet store owner yesterday. (non lockdown area, one of the few “booming” areas in US) 8% increase in carpet prices to him Jan 1. Another 8% in February and he just got notice that another 8% is happening end of March. That doesn’t include fuel surcharges for shipping.
Here in America we party like it is 1999 spending like the life of the party I was taught to be conservative and thrifty first save only buy one thing at a time car house etc pay it off repeat now go to college on credit graduate buy car house furniture on credit people can’t figure out there digging their own graves more stuff never makes u happy it’s just stuff
This is merely the vanguard of the Green deal. Just wait till diesel becomes scarce, and the solar and wind mills can’t keep up with electric power demand…oh, that is already being seen in “rolling outages” in California and Texas.
Know how to fix bad policy? Just force the policy makers to be the first impacted by their policies, the tax payers last.
Can you envision a liberal in government shivering in a cold house whose pipes are bursting? Nah, non of them have had this experience.
This is sarcasm, yes? Solar and wind are the cheapest sources of electricity. See also “Who’s to Blame for the Texas Power Crisis?” right at here at Wolf Street two days ago.
During full capacity wind and solar in Texas provide 10% of Texas electricity. Not prepping for a cold spell at natural gas, oil and coal electricity plants caused the Rolling blackouts.
CreditGB,
Good lordy. Feel better now?
If you really want to know what happened in Texas, instead of jabbering nonsense, read this:
https://wolfstreet.com/2021/02/18/whos-to-blame-for-the-texas-power-crisis/
Well many countries have freezing weather & use wind turbines for electricity without any issues, Doesn’t Texas produce the majority of the Nat Gas & Oil in the US, it’s incompetence & complacency that caused this, I’ll read the article now that Wolf posted, see if my initial thoughts are correct.
Lack of winterization of all the ‘ALT’ energy resources including Wind, natural pipelines/end points and then even coal fired and nuclear plants.
Cascend: Data Shows Wind-Power Was Chief Culprit Of Texas Grid Collapse
ZH
Can Pelotons be hooked up as a generator or into the grid? I think The Professor from Gilligan’s Isle invented this technology 55 years ago.
Shiloh1,
Yes, you can hook up a regular bike trainer to a generator. So a top-notch cyclist – the kind that tries to set a new hour record – can put out maybe 2/3 hp for the duration of an hour. That’s about 500 watts for an hour. So that would allow you to light up a few LED bulbs and maybe keep the fridge running and use a hairdryer on “low heat,” but not at the same time, and only for an hour.
An electric space heater, the kind you can put under your desk, on “high” uses, I think, up to 2,000 watts. That’s enough to heat a good-size room or two when it’s cold outside.
So using human power to turn on the electric heat is hard.
Now you could bring a spin class over to your house, with 20 people in it, charge them $10 each for the class, and then use the electricity (about 200 watts each) at your house. And run 10 spin classes back to back every day. Here we go… a new business model :-]
“Here we go… a new business model :-]”
Can I get in on the IPO for this?
I remember an ad, featuring an athlete and a car, rabbit iirc, from the early 80s. Plot line said: He (the car) can run a mile cheaper than you can (the athlete, powered by hamburgers). Humans aren’t as good and cheap as oxen.
Just to put things in perspective……
From The Great Depression, by Benjamin Roth
“January 6, 1933 – During the boom everybody piled up debts to a dizzy height (…) economists claim that either the debt will have to be cut down or money inflated.”
“September 1, 1932 – The stock market (…) tripled its value during August in one of the quickest climbs ever witnessed. I believe this also established a record. Nobody seems to know even yet why the stock market went up because business has gotten worse instead of better.”
“August 30, 1932 – It is interesting to note that during the first three years of depression a wave of bankruptcy swept out of existence most of the small independent merchants. Recently the movement has included large national chain stores.”
“June 1, 1933 – In looking back over the 3 months since Roosevelt became President it seems that the U.S. has traveled a long way toward some form of socialism or managed economy.”
“August 3, 1933 – Since Roosevelt became President a war-time hysteria of public opinion has been created which makes it unpopular to criticize what he does. Even newspaper editorials have unanimously supported him so and refrained from honest criticism.”
“August 14, 1932 – The movement back to the farm has grown stronger during the past two years until today it is almost an exodus from the city to the farm.”
The reason history repeats itself, is that human nature does not change, and humans always react in a similar manor to similar circumstances…
So true that, I said that here a few articles ago, that rise in markets then collapsed, it took 25 years to go back to the peak.
Now we are in the denial phase, back to normal, head in the sand, the worse is yet to come, people forget massive amounts of people are not paying a single payment of their huge debts & haven’t for over a year.
The socialism point is striking too, amazing how a bit of socialism is ok when it’s primary & hidden agenda is to bail out the rich, watch that all change to austerity once the rich as now have sold at the top, they did the same then, get caught by a sudden collapse, create a fake bounce to sell into, then it collapses again. Call me a cynic, same thing as 1929.
If only those poor people in the Hoovervilles had bought Bitcoin.
This will end very badly & when you realise this temporary move higher in inflation will be subtracted in the short term with additional deflation soon.
Note the spike in 2007 before a massive collapse, that’s what I have been saying that’s coming, we are in a financial crises.
Withe the Dollar being shorted & now 15% lower the US will be experiencing inflation in a highly deflationary environment, the truest head fake, then add as in 2007 the massive spike in all commodities & it’s a mirror of the spike & crash in 2007/08.
People do the same things, I believe these crazy prices now will totally collapse as in 2008 & because & these price spikes now will mean even more deflation, how is any of this a good thing, it is sinking the economy, people have lost their minds, it’s amazing how everything now is being run by psychology, it’s totally crazy, how on earth do people believe 2021 will be better than 2019 when hundreds of thousands of business are gone, many are not paying their bills/debt.
They drop numbers showing growth in retail sales, spending but if they up 5% Y/Y that’s still down 10% if you factor is a 15% decline in the Dollar, obviously price rises vary but the numbers are all negative, I’m happy to be corrected if anyone can, then add the US GOV is now 60% of the economy, with yields on bonds rising, Dollar down 15%, a total 35% loss in bond investments in a year these investors are fleeing, the policies have turned the US bond market to junk bonds, junk bonds are falling & the US bonds have risen 173% since March.
Big trouble coming.
Bond yield have risen 173% since march, let me just clarify, so if retail sales are up 5% Y/Y & the Dollar is down 15%, as people experience massive price surges how is that a good print, sure spending is up but people got less for it. This is why I say all the numbers are a lie, the system is corrupted ya better off just using ya own instincts, look at the silly 6.3% unemployment number.
All people have to do is look around, what do you see, I see a depression, no travel, hardly any flights, empty stores, 20 million claims, 800k plus a week of new claims, child poverty skyrocketing, people going to food banks in record numbers, empty apartments, empty streets, hundreds of thousands of bankrupt businesses gone, I could go on and on, yet people will look at the numbers the Gov releases and say different.
The worse part is, if people are convinced everything is recovering, things are not so bad, nothing will be fixed, it will all hit at once, at least if people understood the real dire situation they would prepare. What use was stimulus cheques when before they are even printed the speculators eat it all by a factor of 10 in bidding up commodities, increasing prices, these rises will be rejected & collapse.
yep, what is coming will shake the even optimistic souls..
cycles repeat in everything….including life…
throw in the 2nd amendment political gyration coming…..expect ugly….
the market is ready to roll over, it will push flows to 10 year….plus they need to sell a 1.9 trillion package that has nothing to do with CV19 false flag…
good start Jack, welcome to the club…
many of Wolfstreet commentariat been saying same or similar for a long time, including some saying same in other venues since the now clearly printing/postponing errors began many decades ago.
How will it end other than in total chaos/calamity is the real and serious challenge to all forward thinking analysts,,, even those of us who are of sufficient age and preparation not to ”have a dog in that fight” by any such words of understanding that concept,,, as well as the concepts of the challenges right now…
While I really hope you and others in the commentariat here can maintain your passion and good will,,,
I also really hope you understand totally that no matter what, you are not getting out of here alive,,, so don’t take it all too seriously as though you are in charge
Kind of like is the glass half empty or half full analogy isn’t it. I’m a glass half empty guy. Been watching this closely since 2007. All they did was mash the pedal to the metal. You can’t keep doubling total credit market debt every 8-10 years ad infinitum. At some point “debt out the wazoo” will matter.
You wonder if and when people will ever wise up to the inflation scam.
It is as if people do not understand basic mathematics.
Inflation lowers the value of your pay check by a certain percentage, and then your employer gives you a raise roughly equaling that percentage. The problem is that it does not replace your lost value because you are beginning from a lower basis.
If inflation goes up 5%, and a year later you get a 5% raise, you are only at 99.75% of where you were. Now add to that the fact you are dealing with fabricated numbers to begin with and the scam becomes even worse…
Temporary move higher in inflation – Fed with it’s usual policy error(s) as it is still buying (120 B) Tresuries+MBSs until the end of next year(?) will create flare up in inflation- rising yields – deflation od assets (fast & furious) and then, yes DEFLATION!
Just watch out for FURTHER (from last week!) rise yields across the bond curve, next week+
This may change, but as of Feb 18, 2021 still don’t see it in my weekly grocery basket.
Because of the crowds I avoided Trader Joe after the pandemic outbreak. In recent weeks I’ve returned as things have calmed down.
My grocery item spread sheet, with keen attention to lablelled size (ounces or grams or whatever, to be on guard for hedonic pricing games) goes back to Q4 of 2017.
As of this week, Trader Joe has held the line on pricing of 37 items in my grocery basket. One item, a pound of 80/20 ground beef, increased from $3.99 in November 2017 to $4.29 this week. That’s a 2.4% compounded inflation rate. All other 37 items the same price.
Although a sample involving the experience of one, interesting. Thank you.
Also interesting that no one has put forward evidence to the contrary.
Powell’s been busy sending money to all corners of America. Makes sense that shipping costs would be up ;)
Inflation got high as 2.24% last week, highest in 5 years!
Per Mark Hulbert (Mkt wath) Stocks, historically are inflation hedges in the ‘early’ stages ( of course, with minimal increase) but the question is, will they, when are already in over valued zone? IMHO will NOT!
No wonder, all yields across the bond curve went UP with value of bonds DOWN. But Cryptos made records!
We will witness, how the mkts react next week!
Unless one is homeless, real-inflation has been at least 10% for nearly two decades.
In 2014, I did a survey of the expenses of friends and family from 1998 to 2014. Factoring in all expenditures, including insurance, taxes*, real estate taxes**, interest***, etc., I arrived at an average economy wide price-inflation rate of 11.23% over that time–a doubling of costs every 6.41 years or so.
My survey excluded medical costs, because they are extremely difficult to compute, and most people do not like to share such information. My guess, from what I did see and hear, is that the real rate of economy wide price-inflation that includes medical and health insurance costs is over 15%. A doubling of prices every 5 years or so.
A friend quipped recently: “I can buy a larger television this year for less than last year, but can’t afford it because my health insurance went up over 12%.” That’s reality in a nutshell.
None of my survey was scientific, but was very revealing, none the less.
*ALL taxes, on everything, including fees (driver’s license, car registration, etc.), and average amount paid in fines. Fines mostly come via mulcting by way of the gun and badge thugs on the side of the road. I took an average of the number of times a family or person was victimized, computed the percentage rise in the average fine, and then applied that to my inflation average. Up over 23%.
**Imposed-costs – property taxes, association fees, maintenance fees, mortgage required insurance, etc. – of home ownership have skyrocketed. Taxes, relative to local income levels, are headed to the Moon. Up over 33%.
***Including imposed fees along with changes in rates for existing or new debt applied to average debt loads. Difficult to accurately compute, but regardless, the revelation is that the cost of debt is WAY up. Even on mortgages, except for those with pristine credit. Up over 33%.
Hmm, ok.
But isn’t a fall in overall money supply, say when banks aren’t lending for one example, potentially deflationary?
Sure, direct fiscal injections through stimulus checks may counter that for households for a time, but they can’t continue for ever.
They don’t address the liquidity drying up for small to medium businesses. That feeds into persisting high joblessness and then lack of disposable income.
At what point will the currently increasing producer purchasing costs and freight costs be met by a consumer who just can’t afford to pay.
Time to buy US bonds anyone…..?
Right, that’s the thing that “the future is bullish” people are never able to explain. In their mind, is everyone displaced by the failure of small and medium businesses going to go work at Amazon or Tesla? If not, is the government going to print and replace their income in perpetuity?
I just don’t understand the tunnel vision people have with respect to the S&P 500 (and particularly with BigTech) that those companies aren’t ultimately reliant on the general economy as a whole.