Consumer Inflation Rises 0.3% in August

[Kushinator]

If there is a gauge to measure the need for both greater increases in fiscal and monetary stimulus, this is as good as any. This stagnation in prices signal a significant demand deficiency that can only be alleviated by increases in business spending (the first step would be increased capital investment). With US businesses sitting on more than $1.5 trillion in cash, we can accurately state that they do not view consumer demand to be significant enough to warrant expansion.

The consumer price index increased 0.3% in August, led by higher energy and shelter costs, the Labor Department said Friday. The increase matched expectations. However, core prices -- which exclude volatile food and energy costs -- were flat, below the 0.1% gain expected by economists surveyed by MarketWatch. See calendar of major U.S. indicators with forecasts........................

In the past year, the CPI has risen 1.1% -- and at a 0.6% annual rate so far in 2010. The core CPI has risen 0.9%, the same rate over the past five months, and under of the 1.7%-to-2% comfort zone that Fed officials have talked about. The core CPI has risen at a 0.7% annualized pace so far in 2010.

“A dip below 1% shows that the economy is just one modest contraction away from dipping into a Japanese like deflation,” said Steven Ricchiuto, chief economist at Mizuho Securities USA, of the core inflation rate.

Source

In a release from BLS.gov:

The index for all items less food and energy was unchanged in August
after rising 0.1 percent in July. The shelter index, which rose 0.1
percent in each of the previous three months, was unchanged in
August, as was the index for household furnishings and operations.
Within the shelter component, the index for rent declined 0.1
percent, its first decline since November of last year. The index for
owners' equivalent rent was unchanged and the lodging away from home
index fell 1.3 percent. The index for medical care rose 0.2 percent
following a 0.1 percent decline in July, with both the medical care
commodities index and the medical care services index rising 0.2
percent. The index for hospital services rose 0.5 percent in August
after a 0.5 percent decline in July. The index for used cars and
trucks continued to increase, rising 0.7 percent in August, and the
index for new vehicles rose 0.3 percent. In contrast to these
increases, the recreation index continued to decline, falling 0.2
percent after a 0.1 percent decrease in July. The apparel index
turned down in August, falling 0.1 percent after rising in each of
the three previous months.

 

[tlmorg02]

Yes it seems we are entering stagflation now and that if something is not done to increase consumer demand and spending, ie.. jobs and consumer confidence the country is indeed set to follow in the Japanese footsteps.

 

[Kushinator]

Yes it seems we are entering stagflation now and that if something is not done to increase consumer demand and spending, ie.. jobs and consumer confidence the country is indeed set to follow in the Japanese footsteps.

Stagflation? You mean stagnation. Our problem is not as similar to Japan's as many would make it seem. The amount of retirees per population has increased as the amount of workers per population has decreased. Some might connect a similarity with the retirement looming of the baby boomer generation. However, this is not the case as the US policy for immigration is the polar opposite to that of Japan's. Add to that illegal immigration, and the difference is tremendous.

Krugman had a nice post about this last week.

I find that from 1992 to 2007 (eve of the crisis), Japanese GDP per capita fell from 88 percent of US GDP per capita to 76 percent. That sounds bad, and it is. But about two-thirds of that decline can be explained by the aging of Japan’s population. According to the OECD factbook, in 1992 working-age adults were 69.7 percent of Japan’s population, compared with 65.5 in the US; by 2007, the Japanese number was down to 64, while the US number was up to 67.

 

[Renae]

I don't blame businesses at all. Taxes and regulations are about to go through the roof, private investment is down and unemployment is up.

Oh, and if your business is big enough, you can always ask to get bailed out...

 

[tlmorg02]

Stagflation? You mean stagnation. Our problem is not as similar to Japan's as many would make it seem. The amount of retirees per population has increased as the amount of workers per population has decreased. Some might connect a similarity with the retirement looming of the baby boomer generation. However, this is not the case as the US policy for immigration is the polar opposite to that of Japan's. Add to that illegal immigration, and the difference is tremendous.

Krugman had a nice post about this last week.

Here is the definition of stagflation and we are basically in it.

stagflation: Definition from Answers.com

As far as the comparison to Japan, my point was that we are losing the competitive edge, just as they are to China. Couple that with their retiree rate, which ours will simply be cured with immigration which also works to lower wages, and we will remain flat and then sink.

 

[Kushinator]

Here is the definition of stagflation and we are basically in it.

stagflation: Definition from Answers.com

Nope! As the CPI number states, there is little inflationary expectations.

As far as the comparison to Japan, my point was that we are losing the competitive edge, just as they are to China. Couple that with their retiree rate, which ours will simply be cured with immigration which also works to lower wages, and we will remain flat and then sink.

The partisan hacks will argue lower wages boost business investment!

 

[Kushinator]

I don't blame businesses at all. Taxes and regulations are about to go through the roof, private investment is down and unemployment is up.

Oh, and if your business is big enough, you can always ask to get bailed out...

Do you have anything to add other than your ill informed opinion? This is a demand issue, please try and keep up.

 

[tlmorg02]

Nope! As the CPI number states, there is little inflationary expectations.

As far as the comparison to Japan, my point was that we are losing the competitive edge, just as they are to China. Couple that with their retiree rate, which ours will simply be cured with immigration which also works to lower wages, and we will remain flat and then sink.

[/QUOTE]

Let me tell you, the cost of the things I buy continue to rise. Even my energy rates continue to rise, though my check stays the same. The whole measure of CPI must certainly ignore lots of things.

 

[Slartibartfast]

Do you have anything to add other than your ill informed opinion? This is a demand issue, please try and keep up.

Yup. Notice the spike in the sales category.

 

[Kushinator]

Let me tell you, the cost of the things I buy continue to rise. Even my energy rates continue to rise, though my check stays the same. The whole measure of CPI must certainly ignore lots of things.

Costs are much lower than they were only a few years ago (remember oil @ $140+ per barrel?) Inflation is a non issue at the moment.

 

[tlmorg02]

Costs are much lower than they were only a few years ago (remember oil @ $140+ per barrel?) Inflation is a non issue at the moment.

The oil fiasco was nothing more than a fleecing of the people guised under hurricanes. As far as inflation at the moment, it seemed quite possible by Augusts numbers, not to mention the rush of investors into gold certainly are signs of inflation fears.

 

[Kushinator]

The oil fiasco was nothing more than a fleecing of the people guised under hurricanes. As far as inflation at the moment, it seemed quite possible by Augusts numbers, not to mention the rush of investors into gold certainly are signs of inflation fears.

The state of long term debt qualms all inflationary concerns. Remember, foreign entities play a major part in the spot price for gold (industrial demand). The treasury recently sold over $10 billion in TIPS bonds at yields around 1.4-1.7% (ten year).

The 5 year "break even" rate between TIPS and Treasuries continue to fall!

Again, inflation is a non-issue.

 

[tlmorg02]

The state of long term debt qualms all inflationary concerns. Remember, foreign entities play a major part in the spot price for gold (industrial demand). The treasury recently sold over $10 billion in TIPS bonds at yields around 1.4-1.7% (ten year).

The 5 year "break even" rate between TIPS and Treasuries continue to fall!

Again, inflation is a non-issue.

By what you are showing it would appear that deflation may be more of an issue.

 

[Kushinator]

By what you are showing it would appear that deflation may be more of an issue.

Hence stagnation, not stagflation rof

 

[tlmorg02]

Hence stagnation, not stagflation rof

Most articles I find on the issue say that at this point it could go either way.

 

[Lord Tammerlain]

The threat of inflation exists only if the government (nee Fed) starts using qualitative easing to a greater degree to fund government expenditures. The price of gold is reflective of that as gold is a good store of value and is readily transportable.

Most gold buyers are not afraid of inflation without said government intervention I believe.