US Price Inflation in at New Highs ... Again
A Continual Repudiation of the "Transitory" Talking Point
CPI for All Urban Consumers: All Items in US City Average
The update of the US Consumer Price Index (CPI) has been released this morning by the Bureau of Labor Statistics. The index data corresponds with the start of last month — November, 2021 — and came in at 278.88 for all urban consumers (US city average). This is a year-over-year change of 6.9%.
This measures slightly higher than last month’s year-over-year rate of 6.24%, so certainly no a sign of abatement in sight.
Annualized Trend
If we look at the CPI from a monthly change basis, we see a month-to-month change of 0.78%. This shows a slight dip in the monthly increase compared to last month, but it is still a significant increase, way up on the chart. This equates to a forecasted annualized price inflation of 9.36% (0.78 x 12) from the perspective of consumers.
The November PPI data is scheduled for release next Tuesday, December 14th. So, check back in for that update.
Abandon the Term “Transitory”
If your income is not going up by an equivalent ~10% this year to keep pace with price inflation, then, like most of us, you are on the losing end. The sentiment on the street is starting to reflect the realization that the experts haven’t exactly been honest with the American people.
Even Fed chairman, Jerome Powell, has come out publicly to “retire” the use of the term, transitory. Of course, he does this just a few days after he was re-nominated by President Biden. Huh.
Mohamed El-Erian at Bloomberg gets it right when he says,
“For months, Powell asserted that inflation was transitory. Rather than revisit in a timely basis his assertion in the face of ample evidence to the contrary, he adopted an ever-more elastic concept of the word that favored longer and arbitrary time periods at the expense of economic analytical rigor. That ensured that the Fed continued with massive monthly purchases of market securities at a time when the economy was doing just fine, the housing market was red hot, and the liquidity-fueled ‘everything rally’ in financial assets was showing growing signs of excessive risk-taking. …
Powell’s repeated reassurance that inflation was transitory led many investors to believe — or, at least, act as this unusual market construct could last forever. The result was not just record risk assets, including stocks and cryptocurrencies, but also high prices for risk-free government bonds (low yields) despite what’s supposed to be a negative correlation.”
The whole transitory talking point was a farce from the start. Just look at the CPI over the course of the last 50 years. It’s a constant climb to the moon. There has been no real transitory relief of price inflation ever.
I know, I know … but people will say that what they really mean by transitory, is that we’ll soon be back to the “good ol’ days” of only losing ~2% of our purchasing power per year. As if that is a good thing. Do not worry about these higher-than-normal prices, they say.
But, for price inflation to ease, monetary inflation must be tamed first. And it doesn’t appear that the Fed has any intention of taming that beast any time soon.