The PPI is the Producer Price Index. The CPI is the Consumer Price Index. The PPI reflects the price product producers are getting for their goods and services. The CPI reflects the price consumers are paying for their goods and services. They generally run together as lower production prices usually mean lower consumer prices.
Here again today, the fed is perplexed. With a growing economy, and with labor market tightening, the people who control the monetary policy have continued to anticipate inflation, rises in the PPI and CPI. However, as we have outlined, it’s not happening.
It’s a little wonky, but basically prices are NOT going up. The Fed is perplexed. We predicted this:
[…] The Labor Department said its producer price index for final demand slipped 0.1 percent last month, weighed by decreasing costs for services. That was the largest decline since August 2016 and reversed June’s 0.1 percent gain.
In the 12 months through July, the PPI increased 1.9 percent after rising 2.0 percent in the year through June. Economists had forecast the PPI to tick up 0.1 percent last month and 2.2 percent from a year ago. (read more)
Neither the PPI nor the CPI measure changes in food or energy costs. Those high consumption sectors have always been removed from Fed measures.
IMHO the fed removed these sectors, used to calculate inflation, specifically because decades ago they decided to make the U.S. economy a pro-Wall Street ‘service economy’ and didn’t want people to see the data from rising costs in food and fuel.
You felt it at the grocery store, but the government never recorded those higher prices in their inflation numbers. It is all part of the scheme. –Outlined Here– This was the effect of allowing multinational corporations and multinational financial constructs to control large portions of American food, raw materials, and energy production.
However, President Trump’s economic policy runs directly counter to the historic (last 30 years) approach. The middle-class economy, the real economy, is now uncoupled from federal monetary policy which was primarily designed to help Wall Street. With the two economic engines detached you see puzzling economic outcomes like today’s report:
“Another twist of the screw tighter for this labor market but inflation is not able to gain a foothold in this economy,” said Chris Rupkey, chief economist at MUFG in New York. “The pot is on the stove boiling but no inflation steam is coming out.” (read more)
In 1984 a name brand polo shirt would cost around $45, a really good 26″ TV around $600 to $1,000, a decent couch $1500, and a pair of name brand sneakers around $100. However, eggs (.49), milk ($1.79 gal), and store bread (2 loaves for $1).
Electric bill $100, water bill $20, phone bill $50.
In 2016 an imported name brand polo costs around $20, a really good 42″ TV $300 to $400, a couch for $500 and a pair of sneakers $50 – All imported, all Asian, all about half of of what they cost in 1984.
However, eggs ($1.99), Milk ($4.00+), and store bread ($2+ each). All domestic products and all double or triple 1984. Electric bill $250, Water bill $100, phone bill $100+. Again domestic consumables, again double, triple or even more.
We consume and spend more on domestic goods such as food, energy, fuel, than we do purchasing imported durable goods. As a consequence, depending on lifestyle, the net out-of-pocket is essentially the same to a little more.
However, the income opportunity, the jobs, the good paying jobs, well, those are gone because the durables are no longer part of the domestic production.
To keep the unemployed pitchforks at bay, government policy (now directed by Wall Street globalists and corporations) subsidize the income gap. Ergo EBT, WIC and food stamp assistance necessarily increasing.
The pitchforks are dropped, but economic independence turns to dependence. With government policy adjusted accordingly – deficits necessarily explode. Stopping those deficits would require an actual budget. There hasn’t been a federal budget since ’07…. “Omnibus”,… Sound familiar?
Yes, under Donald Trump’s proposal the cost of “durable” goods -at least those we import- will increase. Your iPhone might cost $800 instead of $600. However, the North Carolina apparel, clothing and furniture manufacturing market will have an opportunity to revitalize – and with it, jobs, people as the tailors and the custom wood furniture makers would have opportunity to thrive again with their creations.
There’s going to be a period of pain as U.S. manufacturing finds its footing and begins to restart. However, in the longer term, it’s a shift from “dependency” to “independence”.
Those who were fully matriculated independent adults prior to 1984 know exactly what needs to be done.
Freedom is dependent upon it.