The Bureau of Labor and Statistics (BLS) has released the February capture of the current inflation situation {DATA HERE} – the results are alarming and unfortunately will get worse.

The February rate of inflation was 0.8% (adjusted), an increase from the prior month (Jan 0.6%), and the calculated year-over-year inflation rate is now 7.9 percent and climbing fast.   There are some important indicators and aspects that need to be emphasized.  [Modified table-1 graphic]

First, the capture of the current February data was BEFORE the Russia-Ukraine crisis came into play.  Despite the White House attempting to justify the release data today by blaming it on Russia-Ukraine influence on oil and gas prices, the data itself was assembled before the recent spikes in oil and gasoline.  This is an important distinction, because that means what is coming next is even higher.

Second, what is surfacing now in the data is what we previously outlined in October and November as the inflation hurricane heading our way.  All of this was predictable, given the nature of the inflation, at all three stages of the supply chain (raw material, intermediate and wholesale).

The price of goods is still rising inside the supply chain, and the rate of petroleum price increases (energy and transportation) is making the final products even more expensive.

Third, the forward-looking rate of annualized inflation is higher in almost every category than the year-over-year backward looking data. This means future price increases will be even higher than previous price increases.  The rate of inflation monthly (in almost every category) is exceeding the previous rate of inflation.

Stunningly, even Reuters has to give an assessment that is against the interests of the White House:

(Reuters) – […]  The broad rise in prices reported by the Labor Department on Thursday led to the largest annual increase in inflation in 40 years. Inflation was already haunting the economy before Russia’s invasion of Ukraine last month, and could further erode President Joe Biden’s popularity.

The Federal Reserve is expected to start raising interest rates next Wednesday. With inflation at nearly 4 times the U.S. central bank’s 2% target, economists are expecting as many as seven rate hikes this year. Lower income households bear the brunt of high inflation as they spend more of their income on food and gasoline.

“Consumers’ shock at rapidly rising gas prices at the pump will continue to put pressure on the Fed and policy makers to do something, anything, to slow down the speed at which prices everywhere are moving higher,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

[…] In the 12 months through February, the CPI shot up 7.9%, the biggest year-on-year increase since January 1982. That followed a 7.5% jump in January and was the fifth straight month of annual CPI readings north of 6%. February’s increase in the CPI was in line with economists’ expectations.

Last month’s CPI data does not fully capture the spike in oil prices following Russia’s invasion of Ukraine on Feb. 24. Prices shot up more than 30%, with global benchmark Brent hitting a 2008 high at $139 a barrel, before retreating to trade around $118 a barrel on Thursday (read more)

The perfect storm is upon us.

We already know, from our current reality, that next month’s inflation data will be significantly higher than this report.  Disposable incomes are gone, as consumers are now hunkering down to survive skyrocketing food, gas, energy and home living costs.

The rate of inflation in 2022 is going to triple wage growth, at the same time the Fed is claiming they will raise interest rates thereby creating unemployment and putting downward pressure on wages.   This is a perfect storm for an unavoidable recession, which -in my opinion- we have been manipulatively avoiding for the past seven to nine months.  FUBAR.

You can see the specific category price increases in BLS table-2 HERE.  If the trends hold similar to current status, moving forward we are looking at 42% price increases on milk, 15% more for vegetables, 31% inflation on fruits (80% on citrus), 9% price increases for beef, 20% for chicken, 18% inflation on coffee and roughly 35% price increases for butter.

Additionally, keeping in line with what we have predicted would happen with durable goods, the prices of luxury items like jewelry and even automobiles are now starting to drop slowly.  This would indicate a demand drop in non essential purchasing as spending is prioritized.

Last point…. the BLS data was collected at about the time of the red arrow in this graphic below (Feb 10 to 15).  You can see where the gas price goes from the point at which the inflation data was collected.  That 30% spike is what will roll-up into next month’s inflation data.

The White House Press Secretary, Jen Psaki, is lying when she attributes the current February inflation data to the Russian invasion of Ukraine.  That impact will not be quantified until next month’s BLS release.

Share