The Bureau of Labor and Statistics (BLS) released the January inflation data [DATA HERE] along with the yearly data from 2021. The “first round” of retail grocery price increases starts to surface; but this is only the first round. January inflation was actually much worse than the bad data inside the BLS analysis.
Additionally, the BLS readjusted the weighting for relative price importance, putting added weight to urban economic priorities (ie. food at restaurants), which indicates their intent to downplay the scale of inflation overall. The topline statistic of 7.5% annual inflation (year over year) is bad; however, because of weighting that figure belies the bigger issue, it’s actually much worse. In January alone inflation jumped 0.8% (unadjusted), primarily driven by the first-round of 2022 consumer inflation that preexisted since early December 2021.
To give an idea of how much prices have increased, we modified BLS Table 1 to take out some noise. Look at the single month of January (red box).
Look at January “electricity” price increases. A jump of 4.5% in one month alone, and keep in mind the BLS puts far less importance on electricity than “food away from home”.
In fact, the weighting for economic importance of restaurants is 5 times greater than the electricity to power your house.
Always keep in mind inflation data is backward looking. So it is a capture of the price increase at a former moment. In this example the pricing survey was early January.
The timing part is important because gasoline has jumped again since this survey was completed. The BLS data only has gas increasing at 0.1% in January; in reality it increased much more.
You can see the statistical smoothing to present the softest inflation data by looking at Food at Home, Meats, Poultry and Fish. The actual rate of inflation in that category is 40%+ at retail. The BLS deemphasizes the price increase by putting less economic importance on the category and they come up with a 12.2% increase, one third of the actual price we are feeling.
Despite the BLS putting less emphasis on food we purchase to make at home, the overall scale of 7.5% aggregate weighted inflation would indicate to us that real inflation on all items is running around 23 to 28%.
Think about the inflation you are feeling at or near 20%, then compare that outcome to the 1970’s when we thought things were bad with 15% inflation.
On the positive side, well, actually just less bad side, some of the MSM is starting to realize the importance of looking at unavoidable inflation (food, fuel, energy) as the truer measure of the pain consumers are feeling.
(NBC) – High prices continue to hit American shoppers as inflation rose faster than expected to 7.5 percent for the month of January over the previous year, exceeding the 40-year high set in December.
The latest release of the monthly Consumer Price Index by the Bureau of Labor Statistics on Thursday shows that price increases were most pronounced in food, electricity and shelter.
The indexes for food and energy each rose 0.9 percent, and the index for shelter rose 0.3 percent.
The “core” consumer price index, minus the more volatile food and energy indexes, rose 0.6 percent in January, the same as in December.
Indexes for household furnishings and operations rose 1.3 percent, used cars and trucks increased by 1.5 percent, medical care went up 0.7 percent, and apparel increased by 1.1 percent.
The rise in consumer prices appears to be sticking around, despite earlier claims by Federal Reserve Chair Jerome Powell that the effects would be transitory. (read more)
A Gallup news survey [DATA HERE] indicates that eight out of ten Americans expect higher prices and continued rising inflation, as the working class can see the through the smoke and mirrors of the Biden economy.
Overall, there are multiple datapoints that show the economic quagmire that is taking place right now. Gasoline continues to rise in price, as oil costs continue to skyrocket as an outcome of Biden energy policy. Food store prices have only just begun to show the higher prices that are built into the replenishment process.
Newly arriving goods overall are at a much higher price that previous inventory. The 30, 60 and 90-day terms of purchase order fulfillment are now reflecting the cumulative cost increases at every stage in the supply chain. Inbound prices to retail are still climbing. This is an economic quagmire created by inflation that cannot be avoided.
Fuel, food, home energy and home prices overall are rising. As a result, durable good spending has contracted. CTH has pointed out this dynamic for almost five months; however, the actual data is difficult to extract, because the scale of government spending in 2021 has clouded all of the economic indicators.
The official government inflation statistics at 7 to 9% do not accurately reflect the real inflation being felt by consumers, which is in the 25 to 40 percent range for highly consumable products. If you look around your local community, it is not difficult to see that working class Americans have modified all of their spending priorities to deal with the food, energy and housing inflation that cannot be avoided.
The bottom line is this. Despite the indicators, which have been made useless by massive amounts of money pumped into the economy, we have been in a contracting economic position since mid-2021.
This is a very important aspect to accept when you are thinking about your current financial position, and/or what you may need to do going forward.
If you recognize the absence of real economic activity surfaced mid-2021; and if you accept that absence was hidden by economic activity generated by the spending of government funds injected into the economy; then you can better predict the depth of the hole that was covered up by government intervention.
Accepting that reality then the irreconcilable data starts to make things make sense:
♦ November 2021 retail employment hiring was down. Why? This should have been the pre-holiday hiring spree. However, retailers saw something in their brick and mortar sales that stopped them from hiring.
♦ The third quarter U.S. productivity (June, July, August) was down 5%. Why? If everyone was spending their COVID stimulus, why wasn’t manufacturing making more stuff? The reality was that wholesalers were clearing out product inventories as they knew inbound replacements would cost more…. so, they replaced less.
♦ Inflation wasn’t “transitory”? Why? Because the inflation was driven by the perfect storm of energy policy, monetary policy and government spending.
♦ December 2021, retail sales were lower than December 2020. Why? Because people bought less stuff, because people had less disposable income, because food, fuel, energy, home heating and home living costs were chewing up our paychecks and savings.
♦ The U.S. savings rate started rapidly declining. Why? Inflation.
♦ In the third and fourth quarter 2021, U.S. workers started quitting more (JOLT’s report). Why? A combination of vaccine mandate (minor cause) and people jumping jobs to get higher wages because inflation was crushing them (major cause).
The people predicting more inflation all the way through 2022 are correct. We have only just recently seen the first wave of 2022 product inflation hitting the supermarket in the past two weeks. There will be more waves as the prices embedded inside the cumulative supply chain have yet to surface.
However, stop and think about this overall economic situation, a real quagmire, as identified by the simple datapoints above. The professional political class and financial pundits will never admit the Main Street economy started contracting in the middle of 2021. From their perspective, the money pumped into the system was real. It wasn’t. It was all artificial economic stimulus.
Now, into this very specific -and never before experienced- economic quagmire, where we are supposed to pretend not to know things, the Federal Reserve is about to raise interest rates.
Obama was a fall over the cliff and Divder,
Biden is the most worst we ever had down in the History
What a tough choice. The Criminally Corrupt Kenyan or the Demented Fraud as who is the worst. That’s like trying to decide what pile of dog crap in the yard is worse
The pile you just stepped in!
Doggie land mines, gotta hate ’em.
OMG… I do remember that. I also recall what they did to Ron Paul. I don’t know if Dr. Paul would have been a good president or not, but dang, he had to be better than the other two career criminals they put on the ballot.
Jimah Carter family is ecstatic.
These are not mistakes driven by ignorant administration.
Biden is only doing what he’s being led to do.
Destroy the economy take control of the country.
The AOC plan.
I agree w the Steve Cortes gatewaypundit post that claims joebama is 100% to blame for what we’re seeing, due to 1. killing keystone pipeline & crushing energy sector, 2. illegal, experimental vax mandates, and 3. joebama, piglosi and schumer spending like drunk democrats…
4. AOC = Communists energy plan
That plan:
A. Oil evil.
B. Cancel oil leases & stop giving new leases.
C. Cancel pipelines.
D. Talk down oil. (Prices up.)
E. (Europe hobbled as Green New energy production drops by 25%. Less wind.)
F. Force solar & wind (command economy = communism)
G. Oil & gas prices jump.
H. Economy sputters.
I. China and Amazon investments repaid (more ChiCom business).
Did I miss much?
Only the part about how we all have to live in earth-sheltered Hobbit homes, or in surplus sea-going cargo containers.
Actually, they are spending like sober Democrats!
As stated before:
Dollar Tree – 25% increase
Local Vietnamese binh mh (budget sandwich) – 50% increase – from $4.00 to $6.00 in 2 years (in a Vietnamese neighborhood).
Proctor & Gamble – up 8%?
I call this the Biden / AOC radicals plan. Pelosi got steamrolled.
Perot-
Yes, Bahn Mi is up in OC. Everything from building supplies to food is up 8 to 12% that I can tell.
Oh and my haircut was17 but now is 25 bucs. Nothing but a cut. I’m thinking I’ll be going crewcut style soon.
The gubmint LIES about everything to benefit themselves. I bet the inflation rate is closer to 20% or more. Let’s go Brandon.
Modified and weighted tells the tale. Fake News.
Are you better off than a year ago? Dems could make it through year two without mucking the economy in ways one couldn’t imagine.
Resident Potato Head really meant to say “Build Bongs Better”.
Wait till you see how this bites them in the as z in April and may….standard gubber mint practice is to push it off till later…..Bill comes due soon than you think
I’ve read and reread SDs numbers and for the life of me cannot figure out how 40% food inflation can be turned into 7. Now as far a weighting goes for electricity vs. Restaurant Food, I can agree with a few assumptions.
Let’s say a family of four spends $100/week eating out vs. $150/month on electricity. It would make sense to weight restaurant food more.
On a large scale, looking at only home electricity spending, omitting commercial power bills, I would surmise more family money is spent eating out than powering one’s home. Even more so in the winter when the majority of Americans are heating with gas vs. Cooling with AC.
If someone could take the time to find all the faults in my argument I would very much appreciate it.
families can eat at home and not in fooderies but they will always need gas and electricity . In my opinion grocery store food prices and energy will hurt more that pampering with a restaurant bill .
I believe it is correct that the fraction of personal consumption expenditures (PCE as reported by BEA) for energy has been in a secular decline.
I think someone at CNNBuisness has been reading CTH,
“Stocks tumble and bond yields climb after worse-than-expected inflation report
Feb 10 4:16pm:
The 10-year US Treasury bond yield rose past the 2% mark for the first time since the summer of 2019 Thursday and stocks traded sharply lower after a key inflation figure rose to its highest level in nearly 40 years.
I take these numbers with a grain of salt.
With all the massaging they did on the labor numbers, there should be a healthy skepticism of this data.
It’s worse than reported.
We all know the 7.5% number is bs…check out news from South Korea. Even with 15% export rate growth (reporting appears to stick strictly with sales vs volume) their trade deficit is growing due to raw material price increases… that’s mind boggling to me.
Meanwhile, here is something US news won’t acknowledge so bluntly:
“Imports of crude oil, gas and coal cost US$15.95 billion in January, more than double US$6.89 billion a year ago.”
https://www.todayonline.com/world/s-korea-exports-grow-slowest-11-months-trade-deficit-hits-record-1805386
There was a lot of job hopping to get better wages, and there was sheep steeling to get new employees. The majority of employees were willing to jabberdoo for the sake of a job, and acquiesced to being stripped of their human rights and medical autonomy. There were only some who were totally unwilling to go along with it, but this will become a key factor in the next few years. It’s not going to be pretty, but the work force that survives will be spread thin, and paid handsomely for a while, until automation and robotics tools up to replace them. The only thing I have left out of this whole dystopic vision is God. I don’t know what God is going to do, although I’m quite sure it won’t be letting them get away with what they have done to us. Fight back by keeping the faith, helping one another, and keeping each other’s backs. The Deep Statists hate that, but they’re done for anyway.
“Now, into this very specific -and never before experienced- economic quagmire, where we are supposed to pretend not to know things, the Federal Reserve is about to raise interest rates.”
Think of the drowning man who cannot tread water any longer. As it said, the real Main St. economy was tanking last summer. The drowning man begins to weakly flail his arms to keep head above water, but along comes the Fed and says, “Having trouble? Let me help you!” whereupon in heavy-handed CB fashion, this inhumane foreign-owned corporation pushes the drowning man’s head under water by raising its interest rates. If they finish off one drowning man this way, what of it? The effect will be minimal. But what if millions go down because of this? And what will it do to their derivatives book? Will it explode? I think it will take down the entire world, it will be scorched earth and no way to stop it.
Remember that for 4 years Obama had to listen to Sleepy Joe take all his thunder. I did this, I did that.
Then when the stupidcrats couldn’t come up anybody other than Sillery he saw his chance for payback. Push Sleepy Joe, use the MS Stupids to help the grand mufti install his shill, and wallah, payback big time.
All his detractors, all the criticism for 8 years, it is a tale worthy of Odysseus the king of Ithaca. His journey home lasted 10 years. Unfortunately ours has just started.
And we approach the Super Bowl with it’s wonderful advertisements…
Simulating that all is well..
Selling products you cannot get and no longer can afford.
But at least they will “look like America”.
7.5% my ASS!