You probably heard that the "headline" (i.e., including food and energy) CPI number today was +.03. You may have scratched your head, wondering what planet these guys are on.
Well, they were on the "seasonally adjusted" planet. Generally speaking, inflation runs hotter in the first part of the year, and cools down dramatically towards the end of the year.
So, for the best year over year comparisons, turn to the non-seasonally adjusted CPI number. And that number today was +.09. Much closer to our actual experience, no?
And yet, as the below table (from the Bureau of Labor Statistics) shows, inflation so far this year is running on the non-seasonally adjusted basis, at exactly the same clip as last year: +1.7 for the first quarter. Here's the table:
Jan 07 0.3
0.5
0.9
0.6
0.6
0.2
0.0
-0.2
0.3
0.2
0.6
-0.1
Jan 08 0.5
0.3
0.9
The year over year numbers for the last 6 months including today look like this:
Oct 07 3.5
4.3
4.1
Jan 08 4.3
4.0
4.0
We have hit a "plateau" in the inflation rate. Whether there is going to be a further upward spurt of inflation, or whether we are at the top, or will hit it this summer, is something I will address tomorrow in a longer post.
P.S. On a non-seasonally adjusted basis, energy went up 5.1% last month, while food only went up 0.1%. I'll discuss more on food vs. energy peaks in inflation tomorrow.
Comments
food?
I don't know, about food being so low in reality. I'm also wondering if food inflation is becoming geographical dependent, due to transportation costs.
This is YAI - yet another issue.
BLS assuredly does not accurately measure the unemployment data anymore because they do not count those who have rolled off the looking for work, the fact they count guest workers into the statistics, while corporations push and push for more guest workers to lower labor costs (displace US citizen workers), do not count the permatemp workers, the contractors and finally any small business owner and the health of how they are doing or the people underemployed, pushed out of their original and chosen career fields.
So, I look forward to you picking apart CPI stats and explaining the details.
My YAI is we need legislation to change a lot of the data collected by BLS, CBO and others to get an accurate read on what is going on.
One example we still don't know about is how many jobs have been offshore outsourced just as an example.
Yes, if you do the comparison Year on Year ...
... then there's no need for a season adjustment ... more to the point, if it is primarily cost-push inflation rather than demand-pull inflation ... and with U6 in excess of 8% even at what was supposed to be the peak of the business cycle, there's nothing to indicate a strong driver for demand-pull ...
... then there's no reason to expect it to accelerate, since cost-push inflation seems to have been self-amplifying primarily when it involves imported inflation from a melt-down in the exchange rate.