Here's a headline from today's Wall Street Journal:
Higher Prices Leave Consumers Feeling the Pinch
Rising costs for everything from fresh fruit to freezers are shaping purchase decisions
The text of the article is the usual nonsense, so I won't bother describing it. Instead, here are actual inflation rates of nine broad categories of goods:
We already know that these inflation rates are artificially high because they're being compared to March 2020, which was artificially low. But even at that, they're in the range of -4% to 4% with the sole exception of transportation (primarily cars). Food at home is up 3.3%, which isn't enough to "feel the pinch" even if it were real.
But there's also another way of looking at things. Here's a list of 30 randomly chosen detailed items:
So here's what happens: Everyone notices that bacon, apples, ground beef, and whole chickens are noticeably more expensive than they used to be. But they don't notice that bananas and butter and tomatoes are less expensive. Homo sapiens being what we are—i.e., bad at on-the-run arithmetic—we conclude that prices are skyrocketing. Did you see what I had to pay for a pound of bacon!
(And even that's a mirage. Remember that these prices are artificially high because the base year for comparison is 2020. A closer look using 2019 as the base year reveals that bacon is actually up only 3.5% annually over the past two years. The entire category of food at home is up 2.2% annually over the past two years, about the same as overall inflation.)
So what explains the media's endless focus on allegedly skyrocketing prices? I don't really know. I have an old-fashioned belief that the media should be informative and truthful, knocking down popular beliefs if they turn out to be wrong. In this case, the popular belief that prices are skyrocketing is wrong. And yet instead of explaining why, the media produces story after story pandering to the misguided beliefs of its readers. Why?
POSTSCRIPT: It's possible, of course, that prices really are skyrocketing and the Bureau of Labor Statistics is miscalculating it. But if that's the case, there's a great story to be written about the BLS and I haven't seen it yet.
POSTSCRIPT 2: Plus there's this:
Personal income has soared! It's up by $13,000 over last year. So who cares if bacon is up a few cents? I wonder why no one reports this?
(Answer: Because it's as fake as the supposedly skyrocketing food prices. The apparent increase is due to benefits from the January rescue bill that have been annualized, not permanent income from salaries. This is what happens when you can cherry pick starting and ending points.)
Why?
Um ... to increase audience share and thereby advertising revenue?
Which ... um ... everybody knows?
Or is this just very subtle humor?
I too am genuinely mystified ...
'Prices at the supermarket are going through the roof' is a very old urban myth that everyone loves to whine about, just like they love to complain that weather forecasters never get it right even though they usually do. The popular media generally prefers to confirm perennial prejudices and avoid telling its audience they don't know what they're talking about.
At the moment, of course, Trump Republicans are pushing the line that Crazy CommieCrats are spending money so recklessly that a surge in inflation is inevitable. Since everyone knows Republicans are expert economic managers, all the media dunces are competing to see who can be first to confirm this horrible threat is happening.
Simpson-Bowles Now!
And the rise of bacon prices is clearly about the anti-red-meat rules Biden has enacted, lots of people are saying. The best people.
Pork is the other other red meat.
Squirrel.
"Squirrel."
First thing I thought of.
Also, referencing the WSJ. I remember the 80's and 90's when darn near every paper had a cartoon section, except, of course, for the Wall Street Journal. That is what I thought, until I talked with pretty smart people who pointed out, almost universally, that the editorial section of the WSJ served that purpose.
Thanks for that lulz!
😉
(I really do miss the upvote/like/.... button)
⁽⁽ଘ( ˊᵕˋ )ଓ⁾⁾
And then theres lunber- 1000 bd ft long term avg fluctuates between %200 and $400. Right now it's at $1635.
Copper, which is generally considered a proxy for global economic activity because of its use in construction is currently at a historical all-time high.
There is a shortage of world-wide shipping capacity.
Supermarket items may be holding the line so far, but if you look at the investing and financial.press, there are widespread shortages and increased prices in a lot of building and industrial input markets.
CPI is backward looking - wholesale price levels and commodity futures markets are forward looking.
To the Moon, Alice!
Supermarket items will probably be in deflation by summer. Other prices will crowd out investment until the gouging goes down. Lumber prices are a con job, they have it stored in warehouses up to the ying.
Limes were 25 cents at Aldi a couple of months ago, now they are 39 cents. And this with G & T season coming up!
Then limes fall to 34 cents, meaning what??
Meaning they are still 33% higher than two months ago. I honestly don't know if these is seasonal...I don't think Mexican grown limes (the vast majority) have a season.
Lumber prices are reflective of things very specific to the lumber industry, namely the fact that we get a huge portion of our lumber from British Columbia, and the forests in BC are being destroyed by a particular species of beetle. You can't draw any further conclusions from those prices.
Riiiiiggghhhtttt. That isn't what some business contacts told me.
Used to know a guy from BC. Complained all the time about our tariffs and Southern Yellow Pine from Georgia.
The backlog is due to lack of lumber mills.
The beetle infestation is real, thank you global warming, but not the main cause of shortages. The lumber industry downsized a lot over the past decade or so, and can't just ramp up immediately to meet surge in demand.
Kevin himself has cherry-picked those terms for averaging. For inflation he rejects the year/year and month/month numbers for some (arbitrary) longer period, but in his last post on GDP he took the qtr/qtr number at an annualized rate to claim that it is "soaring".
I say again that to understand these things in a time like the last two years you should look directly at the graph of CPI or GDP or whatever. If you can't figure out what's going on from that you probably shouldn't be forming an opinion. Kevin is right that the media tend to distort things trying to make something alarming or at least attention-getting out of the latest simplified number.
Three months ago I could fill my truck for $65 bucks, now its $82. Is this the normal run up to summer? Who knows. Who knows how inflation is calculated. Does the BLS account for the shrinkage of a cartoon of Thrifty ice cream from 1/2 gallon to 3 pints? I've read somewhere they actually adjust for prices, assuming if steak goes up X amount, there will be a Y decrease in its consumption and a Z increase in a cheaper substitute. Home prices are up 15% , rents of one bedrooms up 3.5% year over year. Don't know where that 1.5% for shelter comes from.
"... they actually adjust for prices, assuming if steak goes up X amount, there will be a Y decrease in its consumption and a Z increase in a cheaper substitute."
That's called chained CPI. Basically, the idea is that so long as the working class can keep cutting its standard of living to scrape by on the same wages, there is no inflation.
It's pernicious. Conservative economists love it.
So it's true then? I remember reading an article on it probably a decade ago. That's really screwed up including an endogenous variable in your final outcome.
https://www.apartmentguide.com/blog/apartment-guide-annual-rent-report/
I got an egg mcmuffin meal here in Seattle the other day - $8.39. I visited my daughter in college in Minnesota this week and got one there - $5.89. Wow, inflation, big whoop.
Back in my day, we got change back from our dollar at McDonald's. What is the world coming too!
https://www.youtube.com/watch?v=4oBpdBn5GZw
The Big Mac Index is the only reason to read the Economist.
Been tracking selected construction materials. Lumber and steel prices are through the roof.
In one year, T&G floor sheathing has gone from $26 to $115, most of that runup in the last 4 months. Most studs are about 3-4x what they were one year ago. All that plywood boarding up storefronts is worth a shocking amount of money.
Outside of wood and steel (metals), most other construction materials haven't changed much. Gypsum wallboard is still roughly the same price as one year ago. So are screws, nails, adhesives, and insulation.
It's the shock prices of certain commodities and items that grab the attention, rather than the lack of price increases for most items.
COVID induced business closures wrecked the global economy and all measures of inflation that we were USED to.
Think about it this way. Price of food.
When restaurants are operating at full capacity there is demand for food for both commercial and home use. Take away the commercial demand and prices SHOULD fall due to over supply - but this is food that can spoil so they can only drop the price on some stuff but not all.
Then there's the supply side. If demand slackens producers have to adjust. That is hard for farmers who have just planted crops for harvest in summer and fall
Animal livestocks are a little easier because the finished product, for the most part can be frozen awaiting re-opening of the commercial businesses - but there's only so much capacity for that
The only way to measure inflation correctly would be to get back to ORDINARY supply and ORDINARY demand. We are far from that
For the "comfortably well-off" such as you and I at least.
Well, from this arm-chair, I would notice the bacon, apples, and ground beef (not whole chickens, but assorted parts) because I buy those. I do also buy butter, but tomatoes and apples not so much....
(not whole chickens, but assorted parts) because I buy those.
Buy the whole chicken, watch a couple of youtube videos on how to break them down. then you'll have the carcass to make stock (or as the johnny come latelies call it, 'bone broth'.
Bacon here is still $3.99 a pound--same as it's been for the past five years. Pretty sure this is the mainstream press scrounging for simple stories to sell since they're incapable as journalists of communicating anything more complicated. Journalists, reporters, editors, op-ed writers, all of them: getting worse all the time. Of course, that's not news.
Bacon is typically 4.99, 5.99 a pound. The weekly loss leader might be 3.99 a pound, but if the urge for a BLT strikes you and you head to the store, in Southern and Central California at least you aren't getting away with $3.99 a pound.
Supply chain hick ups and windfall profits....and this will ripple through the economy for a few years.
EXACTLY
When we went into lockdown last winter we were IMPORTING most fruits and vegetables. In the summer the domestic suppliers got hit but they were aware that last seasons crop was a lost cause because they had no workers and no demand
Now we are ramping up re-opening so that restaurants will now be competing with households for fruits and veggies until the supply chains can get back to normal
I expect "food" inflation to ranp up as reopening goes forward. Meat and poultry are a little different as "growers" have cut back on breeding to keep from having too much supply
hiccups
The key item is PEANUT BUTTER
That has gotten cheaper because it was hard to find peanut butter last year.
Now you can get it at a reasonable price.
So inflation is close to negative 100%.
Peanut butter was not available at any cost. Now it is.
QED
Local bike shop is still charging the SAME prices for bikes despite a global shortage. They are turning people away regularly -- the owner tells me that he has to "psych himself up" to give the talk: We aren't taking special orders until the supply can be guaranteed.
Needless to say, they had a banner year last year, and they are not paying their employees more.