Peter, You can see the rise in the gas pumps weekly and sometimes sooner than that. And not to put a damper on your article, but the FRED chart shows 9 months of increases to 6 months of decreases and the increases make substantially higher percentage moves than the decreases. Sometimes 3X as much. It will take several months of continued decreases to even get close to what we were paying on food. I'll wait and see what the next couple of months bring, Thanks for keeping us informed.
One thing we need to keep in mind is that, as a rule, prices generally move up. The only routine exceptions to that rule are energy prices, which have a history of significant volatility, moving up and down.
When we look at consumer price inflation, including food price inflation, the most realistic assessment of where inflation stands is to consider how much prices have risen.
For example, during the first fifteen months of the Biden Reign of Error, food prices rose an aggregate of ~9%. Starting from the beginning of Biden's term, food prices have risen to date an aggregate of ~27% on the CPI and ~24% on the PCEPI.
Food prices have not gone back to where they were before the 2022 hyperinflation cycle and they are not going to go back to where they were. That option was never on the table.
What has made that a problem is something I have discussed in the past when analyzing the jobs data: wages particularly in service industries have not kept pace with inflation, so that even now, going on four years after the 2022 hyperinflation cycle, for many people their real earnings still have not recovered.
Next Friday we get the April Employment Situation Summary and that will give us fresh data on wages (April CPI comes out the following Tuesday, which will complete the April picture on prices and wages). That will give the most recent indicator of where wages stand relative to inflation.
That being said, it is still significant that there was not inflation in food prices for March. As with so many goods, just getting food to market requires energy at the very least for transportation. Canning and other storage processing methods also require energy. In a month of extreme energy price inflation, it is remarkable that very little if any of that factored into food pricing. In the US, the price shock is confined almost exclusively to energy goods and services.
As the data shows with China, that is not universally the case. Nor do I expect that to be the case the longer that energy prices overall remain elevated. That's when the energy price shock becomes a true stagflation crisis, when energy prices begin pushing up other prices even as demand destruction sets in.
As I said in my article, "yet" is going to be the watchword here. A number of negative inflation and stagflation outcomes are likely headed our way, but they are not here "yet".
Food prices are in deflation - excellent! My guess is that Wall Street has been dealing fairly well with the war situation because, aside from energy prices, things aren’t as bad as some feared. Once the war ends, energy prices will drop. The effects of several of Trump’s policies - such as domestic job growth resulting from tariffs - will start to manifest.
Peter, you’ve shown us that stagflation is a worrisome possibility. If gas prices drop by, say, a dollar per gallon, do you still see enough job-market softness, etc. for stagflation to occur?
Stagflation is a worrisome possiblity, and increasingly a worrisome probability.
Stagflation, being the collision of price shock and weak economic growth (the simplest formulation is the collision between inflation and deflation) is invariably more painful than simple inflation or deflation.
This is because stagflation--which in today's argot is facetiously termed "cost-push inflation"--is a forced supply reduction across the supply curve. For market equilibrium to be restored, demand has to be reduced as well. The "cure" for stagflation is demand destruction.
If oil prices continue to remain elevated, stagflation and demand destruction is inevitable.
If oil and/or gasoline prices come down, the extent to which they decline is the extent to which the stagflation risk and the consequent demand destruction risk is reduced.
Peter, You can see the rise in the gas pumps weekly and sometimes sooner than that. And not to put a damper on your article, but the FRED chart shows 9 months of increases to 6 months of decreases and the increases make substantially higher percentage moves than the decreases. Sometimes 3X as much. It will take several months of continued decreases to even get close to what we were paying on food. I'll wait and see what the next couple of months bring, Thanks for keeping us informed.
One thing we need to keep in mind is that, as a rule, prices generally move up. The only routine exceptions to that rule are energy prices, which have a history of significant volatility, moving up and down.
When we look at consumer price inflation, including food price inflation, the most realistic assessment of where inflation stands is to consider how much prices have risen.
For example, during the first fifteen months of the Biden Reign of Error, food prices rose an aggregate of ~9%. Starting from the beginning of Biden's term, food prices have risen to date an aggregate of ~27% on the CPI and ~24% on the PCEPI.
https://fred.stlouisfed.org/graph/?g=1VESn
For Donald Trump's first fifteen months of his second term of office, food prices have risen an aggregate of ~3% on the CPI and ~2% on the PCEPI.
https://fred.stlouisfed.org/graph/?g=1VESf
Food prices have not gone back to where they were before the 2022 hyperinflation cycle and they are not going to go back to where they were. That option was never on the table.
What has made that a problem is something I have discussed in the past when analyzing the jobs data: wages particularly in service industries have not kept pace with inflation, so that even now, going on four years after the 2022 hyperinflation cycle, for many people their real earnings still have not recovered.
Next Friday we get the April Employment Situation Summary and that will give us fresh data on wages (April CPI comes out the following Tuesday, which will complete the April picture on prices and wages). That will give the most recent indicator of where wages stand relative to inflation.
That being said, it is still significant that there was not inflation in food prices for March. As with so many goods, just getting food to market requires energy at the very least for transportation. Canning and other storage processing methods also require energy. In a month of extreme energy price inflation, it is remarkable that very little if any of that factored into food pricing. In the US, the price shock is confined almost exclusively to energy goods and services.
As the data shows with China, that is not universally the case. Nor do I expect that to be the case the longer that energy prices overall remain elevated. That's when the energy price shock becomes a true stagflation crisis, when energy prices begin pushing up other prices even as demand destruction sets in.
As I said in my article, "yet" is going to be the watchword here. A number of negative inflation and stagflation outcomes are likely headed our way, but they are not here "yet".
Great explanation. I think you just wrote your next article, LOL!!!
Breaking news: Trump gets revenge on Europe- ha ha!
https://www.theepochtimes.com/us/trump-announces-new-25-percent-tariff-on-cars-and-trucks-from-eu-6020019?utm_source=ref_share&utm_campaign=copy
Food prices are in deflation - excellent! My guess is that Wall Street has been dealing fairly well with the war situation because, aside from energy prices, things aren’t as bad as some feared. Once the war ends, energy prices will drop. The effects of several of Trump’s policies - such as domestic job growth resulting from tariffs - will start to manifest.
Peter, you’ve shown us that stagflation is a worrisome possibility. If gas prices drop by, say, a dollar per gallon, do you still see enough job-market softness, etc. for stagflation to occur?
Stagflation is a worrisome possiblity, and increasingly a worrisome probability.
Stagflation, being the collision of price shock and weak economic growth (the simplest formulation is the collision between inflation and deflation) is invariably more painful than simple inflation or deflation.
This is because stagflation--which in today's argot is facetiously termed "cost-push inflation"--is a forced supply reduction across the supply curve. For market equilibrium to be restored, demand has to be reduced as well. The "cure" for stagflation is demand destruction.
If oil prices continue to remain elevated, stagflation and demand destruction is inevitable.
If oil and/or gasoline prices come down, the extent to which they decline is the extent to which the stagflation risk and the consequent demand destruction risk is reduced.