Greetings everybody, and welcome to the first All Facts Matter podcast, where we push back against corporate media propaganda with facts, evidence, and data. I am Peter, author behind All Facts Matter, so let's begin.
This presentation is something of an experiment, to find out if this is a better way for people to absorb the data contained in the many charts and graphs that adorn my Substack articles. My goal is to provide a bit of explanation into how these charts and graphs drive my analyses of various economic issues. With luck, the data will be a little more accessible to everyone.
Longtime readers are no doubt aware of my recent predictions that consumer price inflation is in the process of heating up once more. Longtime readers are also aware that I bolster such predictions with a series of observations drawn from various publicly available data sets.Yet that should not be taken to imply that all the indictors are pointing to inflation. They aren’t.
There are more than a few economic indicators which suggest that the US could be headed into a period of protracted consumer price deflation rather than inflation. It would be folly to ignore the presence of these contrarian indicators, as they may prove to be the most accurate. Excluding the contrarian view is how corporate media destroyed its own credibility.
As I choose to be honestly wrong rather than deceptively right, let’s explore the possible indicators of coming deflation in the US economy:
Core consumer price inflation has demonstrably heated up already
Service Price inflation has been a primary driver of this.
Commodity prices bottomed out then rose in September.
Oil peaked in early October then reversed
September floor price for oil was around long-term floor price established since 2022.
Long term trend for both oil and commodities has been outright deflation since late 2022.
PPI For Intemediate Demand printed inflation two months running.
PPI For intermediate Demand has been broadly in deflation since around May of 2022.
Even PPI for Final Demand is printing deflation.
Defense is only industrial production area showing consistent gains–thanks war in Ukraine!
Worker weekly hours have been declining throughout (Biden-)Harris Administration.
Total Manufacturing employment peaked in 2023, with most of the job gains under the (Biden-)Harris Administration’s stewardship being a recovery of pre-Pandemic Panic jobs.
Are these indicators which are flashing “deflation” more influential and more dispositive than the indicators flashing “inflation”?
That is possible.
It is also possible that we may end up with an intensifying of a trend we are seeing already: inflation within some goods and across most services, and deflation in much industrial output and production of consumer goods.
I have argued in the past that a combination of inflation and deflation, of strong downward price pressures and strong upward price pressures, is both what we have experienced and what we are likely to experience in the future.
Given that we are seeing both inflationary indicators and deflationary indicators, a “stagflation” scenario may be the way to resolve all the indicators into a single economic forecast.
Whether stagflation is a less dire outlook than deflation would largely be a matter of conjecture and one’s particular economic perspective. Stagflation would from all perspectives be a net negative in terms of economic evolution, as it translates into increasing distortions in prices among various consumer goods and decreasing output of several goods, some industrial and some consumer.
Both a stagflation scenario and an outright deflation scenario translate into the US economy experiencing a “lost decade”. It would be the first such acknowledged event since the Great Depression of the 1930s (while some economic models would make the decade after the 2008 Great Financial Crisis into another lost decade, that assessment is still fairly problematic.
Additionally, we must always remember that what goes up must come down. We could very well see rising consumer price inflation for October, and even for the rest of 2024, only to see that give way towards increasing deflation and/or stagnation beginning in early 2025. Such scenarios are in no way outside the realm of possibility.
In the short term I still expect inflation to rise somewhat for October. Oil prices are coming down but they have not yet shown the magnitude of even the September price drops. A diminishing magnitude of oil price decline equates to diminishing influence of energy prices in the overall CPI.
However, over the longer term, and even in the medium term (i.e., from early 2025 onward), I would not be a bit surprised to see deflation make its appearance, and then stick with us for a while.
Whether the forecast is inflation, stagflation, or deflation, however, none of the three broad predictions constitutes any sort of confidence in the future of the US economy. That part should come as no surprise. I have been arguing for months that the state of the US economy is not good, and that it has been getting worse. No matter which scenario we get—inflation, stagflation, or deflation—that remains the trajectory of the US economy.
Will we have inflation, deflation, or both? The answer may very well be first we will have the one, then the other, and in the end we will wind up with both.
That’s not a good thing.
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