Month: July 2022

From Ruy Teixeira, a longtime progressive scholar, on why he's gotten tired of the relentless identity politics among the left:

I’m just a social democrat, man. Trying to make the world a better place.

I don't know if Teixeira is right about conditions at the Center for American Progress, where he worked for the past couple of decades, but he has nothing good to say about it:

Like a lot of older and whiter veterans of liberal think-tanks and foundations, he also says he’s exhausted by the internal agita. “It’s just cloud cuckoo land,” he says. “The fact that nobody is willing to call bullshit, it just freaks me out.”

Since neoliberalism is now in such bad odor, how about if we all start up a new think tank that's called The Foundation for Social Democracy, or some such? We could have different groups dedicated to the Swedish model, the French model, the Japanese model, and so forth. Just sign up for the softball team of your choice.

According to the Wall Street Journal, retail sales were up 1% in June. This is, needless to say, incorrect. When you account for inflation retail sales were down -0.3% from May.

(As John Maynard Keynes sort of said, I can whine about correcting for inflation longer than you can stay sane listening to me. You should all just give in and do the right thing.)

Right. Anyway, this month I thought I'd present retail data in a new and exciting way. Here it is:

This chart starts with March 2021, when the stimulus bill passed and retail spending spiked upward. Since then, as you can see, spending has declined overall and in every single category.

In other words, real consumer spending is declining in exactly same way as real wages. Neither spending nor wages are pushing on inflation. Despite this obvious evidence, there's frequently blithe talk about high savings rates and how people are still drawing down the money they got from the stimulus checks, but even a brief look tells you that isn't true:

Stimulus savings have long since been spent and overall personal savings is now a third less than it was before the pandemic. Calculated as a percentage of disposable income it's gone down about a quarter.

Wages are down. Savings are down. Spending is down. Total personal expenditures have been flat since reaching a peak last October. But retail inventories, which took a huge dive after the pandemic thanks to supply chain problems, have risen 10% from their low point. Warehouses are bulging:

Maybe I'm just an idiot, but for the life of me I can't figure out what's supposedly driving concerns about future inflation. Inventories are growing above the inflation rate while wages and spending are growing below the inflation rate. This ought to be a recipe for price levels to go down. What's going on?

Are you tired of inflation geekery? Me too, actually, but I got curious about something so I'm going to show it to you anyway. Voila:

Let me explain. First I charted the past year of data for four measures of core inflation:

• CPI (Consumer Price Index)
• PCE (Personal Consumption Expenditures)
• PPI Goods (Producer Price Index for goods)
• PPI Services (Producer Price Index for services)

This is not the usual year-over-year metric that I've plotted. It's month-over-month (annualized for ease of viewing) so you can see the inflationary impulse in the economy from moment to moment. Then I let Excel draw trendlines for each. I did nothing to affect it: I just clicked the buttons and let Excel choose the best fit.

Of the trendlines, three appear to have already peaked and are now declining:

• PPI Services peaked in September
• PCE Core peaked in December
• PPI Core Goods peaked around May, or maybe June

Only one measure, core CPI, is still rising.

So . . . what does this all mean? To me it suggests that the inflationary impulse in the American economy is already fading out. I don't know for sure how the Fed should respond to this, but it does seem to confirm that we don't really have any need to panic at the moment.

This morning I went in for a post-op visit for my new eyes, and everything seems fine. They're still a bit blurry, but basically OK, and I have high hopes this time around that they're going to function really nicely after a few days of settling in and letting the swelling go down.

The lens replacement was done at a small outpatient surgery center in Lakewood. To get there from the freeway, you go north on Lakewood Blvd. and then turn west on East South street.

This entire post was just an excuse to get that sentence in.

This is the Place de la Concorde in central Paris. Why not the Place de la Bastille today? Because we didn't go there and I don't have any pictures of it.

Besides, the Bastille was stormed and then destroyed by mobs of woke Frenchmen anyway, so why bother? As the favored place for guillotining kings and queens¹ I think Concorde is a pretty good substitute. Plus it was only a few minutes from our apartment.

¹In particular, King Louis XVI and Queen Marie Antoinette.

Take a look at the subhead in the Washington Post this morning:

Nothing? Really? How about this?

And there's this, released alongside the inflation report:

This is certainly not good news for workers. But if it's a wage-price spiral you're worried about, it's terrific news.

Finally, if you could wait a day, BLS released the June figures for the Producer Price Index this morning:

There's no trick here. Inflation is high and headline CPI is especially high. But if you want to understand the underlying inflationary pressures in the economy—not the effects of OPEC and bad weather and a war in Ukraine—you look at core inflation. And that's been going down since February.

With inflation in the news today, aren't you curious about how the rest of the world is doing? Sure you are:

This only goes through May, since it takes a little while for the OECD to collect everything and put it up. In another week or two we'll see if everyone else joined us in our little June surge. I'll bet they did.

Along with its inflation report, the BLS also released this today:

Real wages continue to go down, down, down. Workers are making less than they did before the pandemic—or will by next month, anyway.

This is yet another reason to be skeptical that inflation is baked into the economy unless we throw ourselves into a recession. Other reasons include: (a) a slowdown in the housing market, (b) the end of the Biden stimulus money, (c) personal savings back to normal, and (d) core inflation abating since the beginning of the year. It's also a reason to be skeptical that employers are really that desperate to fill all those jobs they say are open.

But how long will it take for all this to affect the headline CPI rate? Next month will bring some relief on the gasoline front, but food keeps going up. So who knows?

And that's it for me today. I'm about to go in to the eye surgeon and get my unloved RxSight lenses replaced with Synergy multifocal lenses, which is what I wanted in the first place. Wish me luck.

This is a little patch of school bells, everyone's favorite flower, on the side of Laguna Canyon Road near the Blue Bell Foundation for Cats.

After that dismal inflation report we could all use a little good news, couldn't we? I forgot to post gasoline prices on Monday, so here they are today:

This time I even adjusted for inflation! I wouldn't normally do that for a four-month series, but since inflation has been running high I figured it might make a small difference.

Anyway, using the inflation-adjusted price, regular gasoline has dropped 43¢ since the middle of June. That's 8.5%. Hooray!