Thursday, February 17, 2011

CPI Up 0.4%

The Bureau of Labor Statistics (BLS) is reporting this morning that the Consumer Price Index (CPI) rose 0.4% during the month of January. For the year-to-year January 2010 through January 2011, CPI was up 1.6%.

So-called “core inflation” (CPI minus food and fuel) was up 0.2%
Not reported in much of the mainstream media were the following paragraph from the BLS report:
Over the last 12 months, the food index has risen 1.8 percent with the food at home index up 2.1 percent; both 12-month changes are the highest since 2009. The energy index has increased 7.3 percent over the last 12 months, with the gasoline index up 13.4 percent. The index for all items less food and energy has risen 1.0 percent.
This was the key news—and what will be driving the overall CPI number up over the coming months. Because really, is there any product in the wider economy that is not affected by the price of oil, gasoline, or food?


  1. Gonzalo, what do you think about this?
    BEIJING, Feb 17 (Reuters) - Chinese banks should make lending and investment decisions based on their own judgment rather than rely on ratings provided by other agencies, the country’s banking regulator said in guidelines published on thursday.
    Chinese officials have been consistently critical of international rating agencies, saying they helped provoke the global financial crisis by giving top ratings to complex structured securities, many of which turned out to be junk........The statement said that foreign banks MUST also comply withthe new guidelines for their China-based operations.

  2. Just curious...I read on another site that company margins are the lowest they've ever been since 1979. Wouldn't the fact that companies are eating higher costs artificially lower the real inflation number?

  3. To red6:

    Inflation isn't one size fits all, since inflation affects different businesses and different people in different ways. When the government publishes a single number that is identified as "the real inflation number",this tends to disguise the fact that inflation's effects are uneven.

    Up to a point, inflation in commodities will hurt businesses, not consumers. No business wants to raise prices before its competitors do, so in the early stages of an inflationary spiral upward, businesses will pay more for commodities and accept lower profit margins rather than raise prices. Thus, in the beginning, consumers are shielded from the full force of inflation.
    Businesses are taking the pain for them.

    At a certain point, if commodities keep going up, businesses are faced with a stark choice: raise prices or close your doors. Because a business has to make at least some profit to survive. So if commodities keep rising, businesses will eventually raise prices or shut their doors.

    If most businesses can pass the rising prices on, consumers will start feeling the bite of inflation. Then the same power struggle happens again except this time it's not businesses versus consumers, it's employees versus employers: employees who are in a position to demand higher wages, because they are especially skilled or experienced or whatever, will be able to get higher wages to offset inflation and they'll break even. Employees who can't demand higher wages will suffer and their living standards will drop.

    On the other hand, if the businesses are not able to pass the rise in prices on to consumers, we're in really bad trouble of a different kind because the businesses will close, workers will be laid off, and we risk spiralling from recession downward into depression (and, possibly, deflation).

    Damned if you do and damned if you don't.


  4. So, I read on a blog that corporate margins are 50% higher than the average from 1947 to present. A dip in the margin is expected as the margin regresses to mean. Lowest since 1979? Tyler is the only one saying that (and everyone who is syndicating his blog).

    BTW, source I reference is seeking alpha JFYI.

  5. Doug

    So you're saying there's lies, damned lies and statistics huh?

    I'm wondering why these two stats have to be mutually exclusive.

    I don't know but it'd be an interesting comparison

    PS Thanks Katie

  6. Seems like the corporate margins are merely a reflection of level of corporate charity/greed (depending on how you want to look at it) in the face of inflation that most will admit is a problem. Don't need corporate margin statistics nor Tyler nor SA blogs to demonstrate this.



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