Is another burst of inflation coming?

[tede02]

Do you think inflation will rise above 4, 5, 6% over the next 24 months? The elephant in the room is the Hormuz situation which has dramatically raised energy and input prices globally. But even before the war the US was running a massive budget deficit, the labor market has been constrained due to aging population and imigration policy, tariffs (on-again, off again, etc.), and on top of that, you have the Fed expanding its balance sheet. It's not helicopter money but it does seem like a potent mix for rising prices. What are you seeing out there?

[frommi]

trueflation says no. A lot is different than in 2021/22. I think its quite the opposite, recession is very likely and with that deflation. But who knows, macro is hard

[Gamecock-YT]

2 hours ago, tede02 said:

Do you think inflation will rise above 4, 5, 6% over the next 24 months? The elephant in the room is the Hormuz situation which has dramatically raised energy and input prices globally. But even before the war the US was running a massive budget deficit, the labor market has been constrained due to aging population and imigration policy, tariffs (on-again, off again, etc.), and on top of that, you have the Fed expanding its balance sheet. It's not helicopter money but it does seem like a potent mix for rising prices. What are you seeing out there?

 

This is skewed US centric. To really see it, you need to be in Asia or Europe and what the reaction is going to be with those governments. 

[Hoodlum]

I don't believe the situation in the Middle East will cause a significant spike in inflation as it will eventually be resolved.  The one area of concern is the amount of damage to infrastructure of Oil, Gas and processing facilities and how long that takes to repair and get back up and running.  We will not know the extent of this until some type of semi-permanent resolution is in place.  The longer this goes on, the greater the risk of some longer term impact.  The processing facilities (Petro-chemicals, fertilizer, plastics, etc) have the greatest risk to inflation due to the amount that comes out of the gulf and that there are no quick alternative replacements available.

 

The Core CPE (excluding energy and food) was 3.1% in January and we will see if this trend continued in February.  It would not surprise me if inflation started ahead of this war, but of course the average consumer will blame it on the war.  Do not underestimate the impact of AI growth on the Memory costs and how that will filter down to all electronic products and start impacting services (ie. server hosting) as those added costs get past down.   I don't see this situation changing unless there is a crash in AI growth.  I am also starting to see shortages in certain sectors due to memory costs, as some companies decide to focus on higher margin items.  We will see more of this as the year progresses.

 

A slow down in the economy is not going to quickly resolve these inflationary pressures, so the Central Banks will be hand-tied in what they can do with interest rates.

 

Edited April 9 by Hoodlum

[SharperDingaan]

Most would expect inflation to tick higher. Higher prices for anything that uses petroleum products, times lower demand as tariffs/taxes/higher prices does its thing. Same amount of money chasing fewer goods = inflation.

 

SD 

Edited April 9 by SharperDingaan

[frommi]

Isnt it same amount of money chasing the same basket of goods = some stuff gets more expensive (oil, etc.) but other stuff will get cheaper because you still have the same amount of money?

In 2021 the printing presses of all countries were running hot, covid checks were handed to people etc, this was the real driver of inflation. You dont have that now.

[frommi]

this is today:

And this was when oil last spiked in 2021/2022:

[frommi]

this was 2008:

There was a lag of 1-2 months back than, but as we all know in the end there where very deflationary forces at play. Interestingly Bond yields AND oil prices were at similar levels to today.

 

 

Edited April 9 by frommi

[Gregmal]

51 minutes ago, frommi said:

Isnt it same amount of money chasing the same basket of goods = some stuff gets more expensive (oil, etc.) but other stuff will get cheaper because you still have the same amount of money?

In 2021 the printing presses of all countries were running hot, covid checks were handed to people etc, this was the real driver of inflation. You dont have that now.

Exactly. I think its best to just ignore widespread inflation commentary and concerns at this point because there’s clearly a difference between real inflationary environments like 2021 and now, or a year ago, or two years ago, but most can’t understand it and even those that do have the 2021 PTSD. It’s not even remotely the same and we won’t see 6% inflation for at least another 5-10 years.

[SharperDingaan]

Yesterday you could buy your groceries for $100. Today you still only have $100 to spend, but at higher prices the grocery quantity is now a lot smaller (shrinkflation), and you eat smaller portions. With no substitution you have inflation; that same $100 divided over a smaller quantity.

 

Kids go hungry, so you substitute with cheaper items, and give up quality. The same $100, same size grocery bag, same size portion on your plate, but now more veg and a lot less of the healthy proteins, if any. No inflation today, but a year out ... maybe you're visiting a doctor, as you're now very unhealthy.

 

Look at what people actually do, not what charts say they do.

Millions of people will loudly tell you that there is inflation, and that it is obvious !!! ; the grocery store bill, the gas bill, rent, utilities, yada, yada. Yet the economist will insist no; there is no inflation!!. How can the elites (economist) be so stupid, as to not see what is right in their face !!! .  Maybe ...... 'cause the economists (with little/no 'real world' experience) aren't measuring the right thing, and inflation isn't the message that policy makers want to hear.

 

Exploitable .

 

SD

 

Edited April 9 by SharperDingaan

[sholland]

Depends on how long the SoH stays closed.  Seems to me that losing >10% of the world’s daily oil flow for much longer crashes the world’s economy, not to mention the hits to LNG, fertilizer, helium, etc.  Could be even worse if more attacks to more infrastructure.  I am holding lots of cash.  If I am wrong and peace breaks out soon then I pay some opportunity cost, but if I am right then cash will be king.

[Red Lion]

1 hour ago, SharperDingaan said:

Kids go hungry, so you substitute with cheaper items, and give up quality. The same $100, same size grocery bag, same size portion on your plate, but now more veg and a lot less of the healthy proteins, if any. No inflation today, but a year out ... maybe you're visiting a doctor, as you're now very unhealthy.

 

I'm not disputing your example on the monetary side, but on a dietary level I feel like most Americans (Canadians too?) would probably be better off with some more beans, broccoli, and eggs in their diet and less processed death snacks. 

 

I will say though, grocery prices always move around, and I've noticed much higher prices on some things I like to buy (like beef and wild caught seafood), and plenty of other healthy foods are not going up. I've noticed better prices on produce, pork, eggs, etc. I think people need to be flexible, that doesn't always mean trading down to inferior food quality, it might mean learning how to cook with different ingredients as commodity prices inevitably fluctuate. 

 

I should also note that JUST as we were going through significant inflation after Covid, I started buying prime grade filet mignon as a staple. It seemed like cheaper cuts were going through an inflationary uptick and the premium cuts went DOWN in price. Now I'm keeping prime grade filets as a treat, and eating a lot more pork (which is also delicious and a hell of a lot cheaper). 

Edited April 9 by Red Lion

[Gregmal]

25 minutes ago, Red Lion said:

I will say though, grocery prices always move around, and I've noticed much higher prices on some things I like to buy (like beef and wild caught seafood), and plenty of other healthy foods are not going up. I've noticed better prices on produce, pork, eggs, etc. I think people need to be flexible, that doesn't always mean trading down to inferior food quality, it might mean learning how to cook with different ingredients as commodity prices inevitably fluctuate. 

Totally. It's really not hard with groceries. Did the same thing with seltzer waters a few years back. Everything that was cheap was now $5-7 a 12 pack. And La Croix which was always $6 when alternatives were $3-4, is still around $6....so thats all we buy now. 

 

It's like when people were whining about egg prices...you dont need to have eggs every morning! Now you can get a dozen eggs for less than $3. It's certainly not something that requires monetary policy adjustment lmfao. These concerns are just a broader product of victim culture. Everything's a crisis and I always need someone else to do something!

Edited April 9 by Gregmal

[Parsad]

2 hours ago, SharperDingaan said:

Yesterday you could buy your groceries for $100. Today you still only have $100 to spend, but at higher prices the grocery quantity is now a lot smaller (shrinkflation), and you eat smaller portions. With no substitution you have inflation; that same $100 divided over a smaller quantity.

 

Kids go hungry, so you substitute with cheaper items, and give up quality. The same $100, same size grocery bag, same size portion on your plate, but now more veg and a lot less of the healthy proteins, if any. No inflation today, but a year out ... maybe you're visiting a doctor, as you're now very unhealthy.

 

Look at what people actually do, not what charts say they do.

Millions of people will loudly tell you that there is inflation, and that it is obvious !!! ; the grocery store bill, the gas bill, rent, utilities, yada, yada. Yet the economist will insist no; there is no inflation!!. How can the elites (economist) be so stupid, as to not see what is right in their face !!! .  Maybe ...... 'cause the economists (with little/no 'real world' experience) aren't measuring the right thing, and inflation isn't the message that policy makers want to hear.

 

Exploitable .

 

SD

 

 

100%!  The demand curve has weakened because people are spending less.  But if you include shrinkflation and actual reality for most people, there is definitely some inflation in several areas offset by weaker consumption/demand. 

 

The same groceries in Canada I was buying 2 years ago for $100-120 a week, is now $150-170 a week.  Exactly the same stuff, but a few things are slightly smaller.  That 1L bottle is now 837mL...that 280g back of chips is now 240g.  Meat, other than pork, has risen in cost dramatically.  Produce prices are rising dramatically now with increased fuel costs. 

 

And regardless of any peace agreement or drop in oil, most grocers in Canada have already said that prices will start increasing from next month, and many people, including delivery services and airlines, have already instituted 3-5% or flat fee fuel charges. 

 

Now all that being said, I go back to Buffett's perennial proverb on investing...buy cheap, sell dear!  And my own little addition...fuck the rest!    Cheers!  

[Parsad]

42 minutes ago, Red Lion said:

 

I'm not disputing your example on the monetary side, but on a dietary level I feel like most Americans (Canadians too?) would probably be better off with some more beans, broccoli, and eggs in their diet and less processed death snacks. 

 

I will say though, grocery prices always move around, and I've noticed much higher prices on some things I like to buy (like beef and wild caught seafood), and plenty of other healthy foods are not going up. I've noticed better prices on produce, pork, eggs, etc. I think people need to be flexible, that doesn't always mean trading down to inferior food quality, it might mean learning how to cook with different ingredients as commodity prices inevitably fluctuate. 

 

I should also note that JUST as we were going through significant inflation after Covid, I started buying prime grade filet mignon as a staple. It seemed like cheaper cuts were going through an inflationary uptick and the premium cuts went DOWN in price. Now I'm keeping prime grade filets as a treat, and eating a lot more pork (which is also delicious and a hell of a lot cheaper). 

 

Red Lion, are you in Canada?  Also are you in the Prairies?  Because that's the only place I know of where beef prices are maybe flat...everywhere else, they have gone up dramatically.  Pork is definitely cheaper right now.  I also agree...consumers are having to be very selective in their choices and that may be a good thing health-wise. 

 

At the same time, many have little disposable income to be choosey from to begin with and they are probably the ones tapping into credit or falling behind in payments.  Cheers!

[Red Lion]

22 minutes ago, Parsad said:

 

Red Lion, are you in Canada?  Also are you in the Prairies?  Because that's the only place I know of where beef prices are maybe flat...everywhere else, they have gone up dramatically.  Pork is definitely cheaper right now.  I also agree...consumers are having to be very selective in their choices and that may be a good thing health-wise. 

 

At the same time, many have little disposable income to be choosey from to begin with and they are probably the ones tapping into credit or falling behind in payments.  Cheers!

 

No I'm in the US, although we do have family in Canada. I should have been more clear.. Beef prices skyrocketed here in California starting around 2025. But from around 2020-2024 (right during our 9% CPI) I was buying top quality cuts of beef for lower prices than in 2019 (at the same time as previously economical cuts of beef like Chuck Roast and trip-tip were going through the stratosphere).  

 

These days I'm back to eating lots of pork, pacific rockfish, and eggs and needing to schedule a fishing trip. 

 

This year I'm seeing great deals on fruits and vegetables (although I try not to buy them at the grocery store), avocados, pork. Terrible deals on big name wild caught fish and beef. The last 12 months or so I've been eating a lot more pacific rockfish (which hasn't changed for several years now), pork, and eggs. 

 

So at least where I live, you can definitely eat a healthy diet, but you might need to ask ChatGPT for some recipes (this may be ChatGPTs highest function, I've developed my cooking skills substantially since I began experimenting). 

[SharperDingaan]

Grocery prices will move around for many reasons; if you can substitute beef, for cheaper lamb or pork, all good. If you're American, and it results in smaller portions spaced further apart (healthy or not); that might not be a bad thing either. Thing is; that grocery shopper is substituting, because the price of what they usually buy has gone up. In your face inflation, whether or not policy makers choose to recognise it.

 

That 4, 5, 6% interest rate at term X; is the real rate for the Central Bank + the nations inflation rate + a premium for the higher risk in lending to a bum (vs the Central Bank). Everybody and his brother, now borrowing big from the same creditors, and a growing distaste for USD (maturing T-Bills routinely not rolling over in full), suggests a higher real rate for the US Fed. Growing credit issues within the US suggest higher premiums. Even if inflation remained dead flat (highly unlikely), it's hard to see interest rates NOT rising; the poorer the credit, the higher the rise.

 

Maybe the 1-yr T-Bill rate rises 75-100 bp. Enough to screw up your day, but not kill you .

 

SD 

Edited April 9 by SharperDingaan

[Spekulatius]

6 hours ago, frommi said:

Isnt it same amount of money chasing the same basket of goods = some stuff gets more expensive (oil, etc.) but other stuff will get cheaper because you still have the same amount of money?

In 2021 the printing presses of all countries were running hot, covid checks were handed to people etc, this was the real driver of inflation. You dont have that now.

I think military spending is surging and now the Gulf states will have to join in all financed by fiscal deficits. Thats sounds inflationary to me.

[frommi]

5 hours ago, Spekulatius said:

I think military spending is surging and now the Gulf states will have to join in all financed by fiscal deficits. Thats sounds inflationary to me.

You may be right, i forgot about government spending and the deficit.

[winjitsu]

17 hours ago, Spekulatius said:

I think military spending is surging and now the Gulf states will have to join in all financed by fiscal deficits. Thats sounds inflationary to me.

But I think this also means they have to pull funding to the US economy to focus on their own reconstruction. Some EPC and OG names set to benefit, but no more OpenAI / Claude / EA LBO funding. 

 

[Marco Van Basten]

I think that the mistake people make is that they focus on one or two things that support their thesis, without thinking about the rest.  Yes, energy is up, yes food is up, yes healthcare is up, yes airplane tickets are up.  However, it seems that rents are flat, housing prices seem to be roughly flat.  Insurance prices should be coming down given the profits that the insurance companies have been making.   300,000 federal employees are no longer on the payroll, may be they are doing some more productive than before?   Given the impact of the student loan reforms, fewer people may be going to college to get degrees in historical preservation and may be doing something productive?  College costs may be coming down due to lower federal student loan limits?  Food stamp work requirements may send a million or two or three people into the labor force keeping wages and prices flat?

 

I have no idea how all of this shakes out, but everyone here seems to focus on one thing and one thing only.  That is just foolish.  

[Gregmal]

15 minutes ago, Marco Van Basten said:

I think that the mistake people make is that they focus on one or two things that support their thesis, without thinking about the rest.  Yes, energy is up, yes food is up, yes healthcare is up, yes airplane tickets are up.  However, it seems that rents are flat, housing prices seem to be roughly flat.  Insurance prices should be coming down given the profits that the insurance companies have been making.   300,000 federal employees are no longer on the payroll, may be they are doing some more productive than before?   Given the impact of the student loan reforms, fewer people may be going to college to get degrees in historical preservation and may be doing something productive?  College costs may be coming down due to lower federal student loan limits?  Food stamp work requirements may send a million or two or three people into the labor force keeping wages and prices flat?

 

I have no idea how all of this shakes out, but everyone here seems to focus on one thing and one thing only.  That is just foolish.  

It's how the dogs have been trained. Anything up...equals inflation. After the massive oil rally...we're at a 3 handle....so anticlimactic given all the noise. 

 

https://ycharts.com/indicators/us_inflation_rate#:~:text=Basic Info,in price over a year.

[DooDiligence]

Nah, affordability is just a hoax.

[Spooky]

This chart really says it all. CPI is up but just back to levels we saw recently. Core is still above target but not affected since it ignores food and energy. Meanwhile WSJ headline is “Inflation Soared”. Hopefully elevated energy prices don’t stick around too long.

[Gregmal]

10 minutes ago, Spooky said:

WSJ headline is “Inflation Soared”.

Hence the stupid liberals now hooting in retribution because after Bidens 6-9 inflation…they “got” Trump with a “soaring” 3 handle lmfao

Edited April 10 by Gregmal