Guest Post by Michael Ashton
Below is a summary of my post-CPI tweets. You can follow me @inflation_guy :
- 1y inflation swaps and gasoline futures imply a 1-year core inflation rate of 0.83%. Wonder how much of that we will get today.
- Very weak CPI on first blush: headline -0.3%, near expectations, but core 0.07%, pushing y/y core down to 1.71% from 1.81%.
- Ignore the “BIGGEST DROP SINCE DECEMBER 2008″ headlines. That’s only headline CPI, which doesn’t matter. Core still +1.7% and median ~2.3%
- Amazing how core simply refuses to converge with median. Whopping fall in used cars and trucks and apparel – which is dollar related.
- Core services +2.5%, unch; core goods -0.5%, lowest since 2008. But this time, we’re in a recovery.
- Medical Care Commodities, which had been what was dragging down core, back up to 3.1% y/y. So we’re taking turns keeping core below median.
- Core ex-housing declines to +0.800%, a new low.
- That’s a new post-2004 low on core ex-shelter.
- Accel major groups: Food, Med Care (22.5%) Decel: Housing, Apparel, Transp, Recreation, Educ/Comm, Other (77.5%). BUT…
- But in housing, Primary Rents 3.482% from 3.343%, big jump. Owners’ Equiv to 2.707% from 2.723%, but will follow primaries.
- Less-persistent stuff in housing responsible for decline: Lodging away from home, Household insurance, household energy, furnishings.
- Real story today is probably Apparel, which is clearly a dollar story. Y/y goes to -0.4% from +0.6%. Small weight, but outlier.
- Similarly used cars and trucks, -3.1% from -1.7% y/y (new vehicles was unch at 0.6% y/y).
- On the other hand, every part of Medical Care increased. That drag on core is over.
- Curious is that airfares dropped: -3.9% from -2.8%. SHOULD happen due to energy price declines, but in my own shopping I haven’t seen it.
- I don’t see persistence in the drags on core CPI. There’s a rotation in tail-event drags, which is why median is still well above 2%.
- We continue to focus on median as a better and more stable measure of inflation.
- Back of the envelope calc for median CPI is +0.23% m/m, increasing y/y to 2.34%. Let’s see how close I get. Number around noon. [Ed. note: figure actually came in around 0.15%, 2.25% y/y. Not sure where I am going wrong methodologically but the general point remains: Median continues to run hotter than core, and around 2.3%.]
Continue reading Post-CPI Tweets
A good report that departs from some of the nuts and bolts (so much so that I forgot to include the usual currency segment, which we have frankly had nailed since the commodity currencies broke down a year ago and the great USD rally was just a twinkle in Uncle Buck’s eye ), managing what was an expected early December drop in markets with an eye out toward Tax Loss, Santa and January Effect seasonals.
But to me the most important aspects of #321 are its clear views about why nothing about this macro environment is healthy, how the market is vulnerable and how 6 years later we are simply closing out a massively significant market event, with the majority at the opposite end of the emotional spectrum to Q4, 2008.
On that note, at the prodding of a subscriber, I’ve excerpted a segment from NFTRH 7 (Nov. 8, 2008) on Deflation and Inflation. To me it shows how little things have changed in the ensuing 6 years. Amazing, really. I’ll probably post it here later, to go with Friday’s post about a potential ‘inflation trade’ bounce, possibly in early 2015.
Some guy over here is asking that question.
Well, now that the title has hopefully gotten your attention I’d like to talk about the ‘d’ and ‘i’ words that so many financial types – myself included – throw around so often. This is due to a reader/subscriber KR’s aggravation at my use of the word deflation, which he had thought was meant sarcastically, but then came to find out I am serious when I use it.
First I want to note that I seem to have been pissing everyone off lately, gold bugs (one of which I am) and gold bears in particular. That is due to my writing style being one where if I’ve got something to say, I say it. Sometimes that’s bad for business, as I can get a little heavy handed.
I’ll try to be less heavy handed going forward but in criticizing what I view as promotion with little backing substance (whether bullish or bearish), I don’t retract any comments aimed at the type of people that I think are not being square with readers or are simply not doing the work required (i.e. promoting lazy analytical thinking).
Continue reading Deflation!
Guest Post by EWI
Why the biggest monetary stimulus effort in the world did NOT stop deflation in its tracks
When Shinzo Abe became the Prime Minister of Japan in December 2012, he was regarded with the kind of reverence that politicians dream about. He was featured in a hit pop song (“Abeno Mix”), hailed as a “samurai warrior,” and featured on the May 2013 The Economist cover as none other than Superman.
But in the two short years since, Abe as Superman has been struck down by the superpower-zapping force of economic kryptonite. On November 17, government reports confirmed that Japan’s brief respite from a 20-year long entrenched deflation was over as the nation’s 2nd & 3rd quarter GDP shrank 7.2% and 1.6% respectively.
Continue reading Abenomics: From Faith to Failure
 Let’s add a new post at NFTRH.com… Semi Equipment Book-to-Bill Ratio Moderating.
- NFTRH Dovetails some public content (Stocks vs. CPI and vs. Gold) with some of what this weeks report discussed regarding a potential plan for stocks.
Guest Post by EWI
As early as 2011, our analysis warned that Europe’s deflation was coming — here’s why
For the economies of Europe, the past few months have felt like one long ice-bucket challenge that never ends: A perpetual state of shock induced by the bone-chilling fact that deflation
“…has become a reality in many European countries.” (Oct. 24, New York Times)
At last count, eight European nations are now in outright deflation, including:
Continue reading What’s Scarier Than DE-flation?
Guest Post by Steve Hochberg and Pete Kendall, Elliott Wave International
Deflation Rearing its Ugly Head in Subtle and Not-So-Subtle Ways Around the Globe
The following article was adapted with permission from the November 2014 issue of The Elliott Wave Financial Forecast, a publication from Elliott Wave International, the world’s largest market forecasting firm. Follow this link for the complete article.
According to the latest figures, deflation is now perched on China’s doorstep.
In September, China’s consumer price index was up 1.6%, but its producer price index fell 1.8%. The CPI increase was its lowest since 2010.
Economic growth is also receding. It’s hard to pinpoint the exact figures, because Chinese economic data is notoriously sketchy. But in September, demand for electric power, a “bellwether for China economic activity,” fell 8.4% from the prior month, the second straight monthly decline.
“Deflation is the real risk in China,” stated the chief economist at a Hong Kong bank.
In Europe, deflation is no longer a possible risk; it’s reality.
In September, eleven of fifteen European Union members experienced lower goods prices, and the latest quarter-over-quarter Eurozone growth in real GDP is zero. The next chart shows the Eurostat Eurozone year-over-year change in goods prices, which is -0.3% in September.
Follow this link to continue reading about the latest deflation figures from the U.S. >>