The Bureau of Economic Analysis (BEA) released March and first quarter (Q1) data today on personal income and outlays [DATA HERE]. The results show an increase in Q1 wages of 4.5%. However, inflation is running 6.6% on the items workers need to purchase. The net result on Main Street is unsustainable inside the economy. The U.S. stock market is responding negatively to this release.
It’s easy to get caught up in the esoteric weeds, so my effort here is to show just what is happening by putting an overlay of checkbook economics into the BEA release. If we take out the noise it is very easy to see the problem. I have modified TABLE-4 to put the results into simple understandable terms.
By looking at the far-right column (Q1 2022) you can see the problem. Wage growth at $268.00, minus taxes paid $51.40, leaves disposable income or take-home pay at $216.60. However, our expenses for living (shelter, food, utilities, energy, etc) cost $398.50, leaving a deficit for our income of $181.90. We either dip into our savings to cover our expenses, or we go into debt. This is not sustainable.
If you look at Q1 last year, you can clearly see where all of the inflation is coming from. That massive increase in income came from the federal COVID bailout and stimulus funds. $4 trillion directly pumped into the economy at a time when Biden justified massive bailout spending by saying they needed to offset the economic cost of prior COVID intervention (businesses and workers shut down). That is the primary source of current inflation.
If you take out that Q1 spend from the economic activity, the U.S. economy was already contracting. This is why CTH has continued to say our economy was in a state of contraction since June/July of 2021. Everything after that massive dump of money was false economic activity; the GDP growth was artificial. That bailout spending dried up in the fall and winter of last year and now we see the 2022 GDP going negative.
In essence the GDP contraction that we should have seen in 2021 was delayed by the massive infusion of cash in April of 2021. However, that massive infusion of cash created inflation. That inflation has been a crisis that grew from the summer of 2021 to its apex in the last month.
♦ So, what does all of this mean?
Let’s cut to the chase. As CTH accurately predicted previously, inflation comes in waves because supplier purchases are done in contract terms of 30, 60 and 90 days. As each contract for purchased goods expires, the new prices for future goods are changed. We see waves of inflation in roughly three-month increments, and while prices were rising faster on a daily and weekly basis, those wave cycles started in October of 2021.
Wave 1, came Oct/Nov/Dec 2021.
Wave 2, came Jan/Feb/March 2022.
We talked about each wave as it was coming and as it arrived. Ultimately, Wave-2 was bigger than Wave-1 as the cumulative increases the total supply chain and manufacturing flowed into the products we purchase.
♦ Where are we now? There are two sub-sets:
• Inflation on durable goods is now at the apex. The durable goods price flatlines right now as all production costs are embedded in the cost of the product. The prices of finished goods are now set; inflation has caught up to production; the prices of on-shelf and inbound deliveries are higher, but stable.
Now, we enter the phase where consumer demand becomes the dominant factor in price. Simultaneously, demand is contracting because the higher rate of inflation in highly consumable goods (energy, utility costs, housing, gasoline, food) is now a spending priority for consumers and eating a larger portion of wages. As a result, the price of durable goods is now dependent on the ability of the consumer to pay for them.
Sellers of durable goods are going to be chasing a smaller customer base who can afford them. Durable goods prices will remain static, and now durable goods prices will likely become part of the competitive equation. The businesses within the durable goods sector are going to have to find customers in order to stay in business. Incentives will show up this spring/summer as businesses need customers. If you are a wise, careful and smart shopper for durable goods you will find deals
• Inflation on consumable goods is not yet at the apex. It’s likely close to production parity, but prices pressures are still volatile in the upward direction. The price of gasoline and transportation overall will be a big factor in current prices of highly consumable goods. We should see oil, gas and energy prices stabilize first.
Rents will likely increase for another three to six months, then stabilize (and, in my opinion start to fall late summer).
Housing overall is far more challenging as mortgage rates are climbing. Refinancing as a method to bridge the income gap between wages and expenses is a big problem now in this phase. There is going to be a period of massive fluctuations and instability in the housing market depending on region and employment stability as the recession phase of the total economy is going to bite hard.
For most regions with mixed blend underlying economies (products and services) macro housing prices have peaked in the last 15 days. For ordinary housing purchases, not institutional investments, we should start to see price decreases again as the customer base for high prices shrinks. Obviously, this is driven by inventory and regional specifics; however, I am talking in the aggregate within the macro housing situation.
Food prices still have some upward pressures through Memorial day. Then a period of stability will settle, before the third wave of food inflation hits later in the summer/fall of this year; that’s when the increases in farming costs will reach the fork.
Late summer and fall food prices will likely be 15 to 20 percent higher than current prices at the supermarket. The fresh foods will be on the upper side of the future price wave, and the processed foods on the lower end; however, both will increase.
The last factors in the food price are far more challenging to predict…. Supply? Any problems within the food production cycle that impacts supply will drive prices, beyond what we already expect. If there are major shortages, the prices will go even higher.
This food environment is unfortunately the best time for Big Agriculture, the Wall Street multinationals, to make the most profit. The Big Ag multinationals will exploit every possible angle within inventory, supply and harvest controls to maximize their profit equation. There are a great deal of unknown global variables right now that could impact U.S. food prices later this year. The only certainty is that prices will further increase.
Joe Biden sucks.
.
Footnote, pray for good weather and stability this summer. If it is an active hurricane season, gasoline, oil exploration and refinery issues will make matters worse. The southern coastal areas, especially Florida, Louisiana and Texas need a non-dramatic summer.
All of these numbers are based on the heavily adulterated and “weighted” numbers churned out by yet another branch of Deep State. Your real cost of living will be worse.
The ability of the Fed to do anything about is null. They can not raises rates without causing short term federal debt to explode.
However, there is nothing to prevent private banks from raising rates on their own against individual customers. I expect we will see another “outsourcing” of government policy to “private” business.
Good time for citizens to execute their economic bomb against the banks and government. We got a hint of it in Canada. It’s much larger than that. God bless those who think we’ll get out of this without some major-league suffering for some to many segments of the population.
Those of us who have been suffering, I hope we’re ready. I’ve been working at it diligently for decades. The human disease in this country is large. So must be the cure. We can do it. PDJT taught us how.
Sand in the machinery. Identify and target the fascist corporations and go to work.
“All of these numbers are based on the heavily adulterated and “weighted” numbers”
Yes
so called Consumer Price Index (CPI)
— EXCLUDING food and fuel
True. For any leftists listening, let me exhibit my personal example – which represents many.
I’ve done without to save, in order to get ahead. And I was doing quite well. Now, I’ve been forced to move and buy a car, during the height of inflation and housing shortage. All I’ve saved is nearly gone.
My secure job will not be enough to sustain me. I’ll be lucky to find another job where I can ever start saving again.
All this, because of Covid bullsh!t, a stolen election, and Democrat policies.
What we need is more MAGA and a mild summer.
And less RINOs in congress!
Speaking of RINOS,
https://www.breitbart.com/politics/2022/04/28/tillis-cornyn-start-talks-democrats-promote-amnesty-hundreds-thousands-illegals/
They just dont give a chit.
Because they don’t have to give a chit. The CoC and open borders RINO donor base take very good care of Senators like John Cornyn.
Hundreds of thousands!?
Tens of millions.
My sellout senator, Cornyn, is a noted fan boy of the Chamber of Commerce. A detestable human being.
Yes, Senator Cornyn has been in DC way too long. He needs to go back to Texas like Sen Gramm & Sen Kay Hutchison.
Agree…except we don’t want him.
You are spot on. Hoping someone better will challenge him.
I do as well. Our life or death duty now is to make sure Abbott stays in the governor’s chair. He’s a Bushie RINO, but the alternative would destroy this state in ways I’m sure we haven’t even considered yet.
My total sellout DemoCommunist senators, Benjamin Cardin and Christopher Van Hollen, are fanboys of any money from leftwing globalists. They are way beyond detestable…more like “corrupt scum of the under-earth.”
Keep voting for the challengers and they never even come close to making Hutchinson or Cornyn break a mild sweat. It’s infuriating to feel like I’m wasting my vote and then watch teachers get a pay raise and and tax increase get passed on the 2020 ballot when so many businesses were under lockdown. Seeing many transplants moving here past two years, just know it’s not getting better; homeless drifting out from city centers, we now have a guy sleeping in the neighborhood park. The neighbors have compared notes: called non-emergency police who says it’s park & rec who needs to act, park & rec doesn’t get there early enough to find him…if they’re going to screw up TX might as well move to CA and have nice weather year round. Maybe with them all moving out of CA it might be possible can vote CA back towards TX. Frustrated in stadium row town.
Yeah this oughta go well during the midterms.
Yep, 2024 election fortification.
No RINOs on Capitol Hill preferred.
Idealy made into an extinct species.
Whatever the government giveth…it taketh away…and gives to someone else.
The government makes it its primary mission. And always keeps some for itself.
Here is what I KNOW: One my portfolio is down 11% since January 3,2022 and I remember the same thing in 2008; two any US government report is shit.
Can we get another 16 cents off hot-dogs ?
Only if they are plant based.
Jen Psaki says the aged braindead ghoul doesn’t suck. Ooooookay….delusional? Or scared out of their wits. This is a runaway train and there is no engineer in the cab.
She is most likely right.
Biden can only spit slobber and drool anymore.
/s
(my ewwwwww face)
And that wage increase further adds to inflation. And what are the odds that those wage increases will be rolled back when inflation is tamed?
I think it depends on where the money comes from. If the CEO is takes a pay cut, and uses that money to increase wages. Or the company becomes more efficient, and thus can afford to pay workers more while charging customers the same. Those cases would not increase inflation.
If inflation is at 6.6%, I’m the emperor of France.
Shadowstats puts lie to that manipulated figure.
so called Consumer Price Index (CPI)
— EXCLUDING food and fuel
Right. And I’m the queen of england
The Dow Jones fell 1.2%. The S&P 500 sank 1.65%. The Nasdaq retreated 1.6%
Futures look nearly just as bad……
and its all intentional<FLAGGED FOR DISINFORMATION!!!!FJB: bringin da pain to Americans
Paper losses are mounting for many. Hard to say how far it drops before we bottom out. And there are some now forecasting a decline in home prices. Put those two things together with the cost of food and fuel and pretty soon people are seriously worried. Maybe even liberals.
Any idiot can forecast this decline,…..until we are on our knees begging for food!!!
This deliberate take down of America is as crystal clear as it comes.
I have a feeling workers aren’t intended to keep up.
Biden sucks, as do all in his admin and those who openly and tacitly support and profit from its actions.
With all the money that has been spent and is owed, our govt benefits from inflation to help with payments and to allow for more spending projects. The current regime probably views it as a priority.
I wonder what is this money stuff. What is behind it? the us govt? so do we soon go back to barter real goods?
People need to view this from a currency standpoint. Imagine you are in a restaurant in Berlin in 1926. You order bacon and eggs for 10,000 marks. And while you are eating the waiter changes the price to 25000 marks. What’s changed? The value of your currency has been debased. The eggs/bacon (commodities) haven’t changed.
Now Imagine you are in Vietnam. You just sold 2000 tons of rubber to the US for 2 million dollars. Which was transferred to your account in the federal reserve bank in San Francisco. Then you hear the federal government just printed 40 billion dollars to give to Ukraine. How do you feel about your 2 million dollars now? You say I’ve got to get my money out of dollars fast! Buy something. Ought oh. They don’t make anything. That’s the situation country’s around the world find themselves in. There is a concerted effort right now, led by China and Russia and many Asian countries to develop a basket of currencies on an exchange, that will be tied to commodities. Rice, wheat, fuel, soy and even gold. If they are successful, the financial collapse of the dollar will be total.
….END (insert blinking cursor)
Good analysis Sundance. One thing to throw in is mortality factor; a lot of boomers know they have a ticking clock and will, in the face of this, lead their best lives. Certain industries will continue to thrive… because why not.
Additional footnote: And the western part of the country needs rain.
I’m curious to understand, and maybe there’s no way to measure it, of how the “stocking up/panic buying” is going to play into the rest of this year. Millions of people have spent all their disposable income stocking up on food and supplies because of the “food and supply shortages”. Once you’re stocked up, which is constricted by available space, you stop spending. I have put all my disposable income into improving the farm so that it can be self-sustaining. I have a date in my mind where I’m just going to stop spending, and that date is in the very near future. I have a couple more big purchases related to backup power and then that’s it. Thoughts?
I’m in coastal Oregon where we have plenty of rain but the water table is way down. Like a leak in the tub. My sister is in the Sacramento area with neighbors on both sides, behind and across the street. Her family has been stocking up in the spare bedroom. I tell her don’t let your neighbors know you have all that food. She laughs at me and tells me the neighbors are wonderful. I respond: wait til they get hungry.
I am going to ride the train while it runs. My thoughts are pretty soon the dollar is going to be worthless so I am going to use them to get stuff while I can.
I can always find more room for ammo, books, canning jars, feed, seeds, etc. Once it goes bust, it won’t even be proper toilet paper.
thinking of Confederate money “Or a brand-new government dollar-bill that you can use for a trousers-patch or lightin’ a fire , if you’ve got a match, or makin’ a bunny a paper collar, or anythin’ else – except a dollar.” Benet
Imagine the oval office briefings.
Americans are really feeling the pinch across all cost of living categories. What should we do?
Send billions more to Ukraine and promote that crazy b!tch who sings all the time to a position where she can censor what our people say. That ought to shut them up.
Exactly!
It is so hard believe this is where we are at. Apparently the insanity knows no bounds.
In much the same way as I have always said of the left, their hypocrisy knows no ceiling and their shame knows no floor.
Table 4 is how much the numbers in Table 2 changed.
Americans are rapidly losing ground with costs increasing much more than income.
And that is after they fudged the numbers to look better than things really are. (That is their job after all)
Correct. Table 1 (monthly data) shows that personal saving was 6.2% of personal income – way down from 16.6% for the full 12 months of 2020 (Table 2) with its stimmy checks.
Fiscal policy is tightening at the same time as monetary policy. Next week, the Fed hikes its policy rate by an expected 0.5 percent. On top of that, the Fed plans to start dumping its bond portfolio into a bond market that’s just suffered its worst dip ever. Nice timing, genuises!
Euthanasia of the middle class is just starting, though. Wait till the housing bubble pops, in a 2006-2010 replay.
You’ll own nothing, rent your residence from Blackstone, and be happy.
Future housing and rents are facing a tsunami of illegals swamping the system this summer. No one really knows what that will do. But feeding all of those folks is going to suck a lot of slack out of the food pipeline for sure. We may be begging Putin for help before it is all over.
Unfortunately Putin is THE only one with a working brain cell.
On a somewhat related note; while not housing, just recently the fund managers have been buying up nearly every bit of real estate that comes on the market. A couple of examples are lake side resorts regardless of location and condition and large storage unit complexes. Also, it appears there is a rather large building boom in these storage unit complexes. There are several of these under construction in Eastern Washington and North Idaho. If people can only afford to rent small apartments, they still need a place to store their belongings. It’s not just residential real estate the Blackrock types are eating up, but it appears any real property is where they’re parking money.
“joke biden sucks”. You really mean the puppet masters pulling the strings. These are aka obama, rice, jarrett, etc. joke biden doesn’t have a clue. All he knows at this point is that ice cream tastes good, depends works well for incontinence and he better follow the Easter Bunny and others around so as not to get lost or say something stupid.
Pretty well sums up the potato head
Good explanation.
Non drama Summer….. yeah….. about that…..
Economic Collapse? YOU ARE IN ONE. Very Important Updates… Mannarino – YouTube
FOR AN ACCURATE EXPLANATION OF WHAT AND WHY THE FINANCIAL CHAOS IS PLAYING OUT THE WAY IT IS TAKE A COUPLE OF MINUTES TO WATCH THE VID.
For durable goods, supply shortages have resulted in pent-up demand, even with inflation. But once that backlog gets cleared. look out. I wonder how many electric trucks Ford is going to sell?
The true blue Democrats in the deep blue state where I live continue to rewrite history to pin the blame for today’s economic problems on Donald Trump. These people claim that Trump lost the 2020 election because he lost the support of the American middle class.
That claim raises a question. Suppose there had been no COVID pandemic and the American economy had continued along the path it was following throughout 2019 into the spring, summer, and fall of 2020.
Under that scenario, would Joe Biden still have been installed as president in January, 2021?
After having seen the array of evidence of massive election fraud which has been revealed in the last six months, and after gaining a better understanding of the methods and means through which the steal was accomplished, it is my opinion that the Democrats would still have been successful in stealing the 2020 election even if there had been no pandemic.
The Democrats and their RINO fellow travelers are just too good at manufacturing fraudulent votes for their candidates; at injecting those fraudulent votes into the vote counting processes; and then after the fraudulent votes have been counted, at shielding the fraud from investigations and from legal action once the elections have been stolen.
Build Back Better was a priority for the WEF crowd, votes be damned. Restructuring the economy without fossil fuels was the imperative. Any fraud was justified so that they could save the world, and also structure industries so that they could control it all. The election fraud was baked in the cake, just as you say.
If the 2020 election does not get rectified, there will no longer be fair elections, period. No one held accountable tells the same criminals to do it again 2022, 2024 forever.
I was walking along a path in the woods today when…I heard hoofbeats behind me.
I turned and beheld…a magnificent Black Stallion.
The rider of this stallion was dressed all in black and held a balance.
In a deep voice he bellowed “A quart of wheat for a denarius, and three quarts of barley for a denarius; but do not harm oil and wine.”
Then, I woke up from my nap and thought…we must be in economic recession if I’m dreaming about the third horseman of the Apocalypse.
End the Fed
I do think that is the end result.
Remember that during the Trump administration there was legislation that moved the Fed from being a private matter to being wrapped into the Treasury Department.
The Treasury Department is in the hook as the final back up liquidity source for the Depository Trust Company, which is the back up liquidity source for stock companies.
Remember when Gamestop went into a feedback loop due to the naked shorts and Robinhood had to tap Citadel, and then there was the possibility of the situation draining every cent out of the Treasury, and Janet Yellen got involved and changed the rules and screwed the apes? A key weakness was exposed (along with the fact that the whole system is a rigged sham that lets the big boys play the retail investors for suckers).
Imagine someone shorting the dollar the same way Soros shorted the British pound and also the Rouble, timed in with Fed Reserve interest rate hikes truly tanking the Nasdaq, all forcing international money out of treasury notes and into gold-backed roubles.
Russians have long memories, and revenge is a dish best served cold. They and China have prepared a very long time for the moves they are making now. The first coal shipped from Russia to China paid for in yuan today. European companies are already paying for gas in roubles. Paying for Russian oil in roubles is next. Russia is making its intent to bring an anti-Bretton Woods III into being (that is, a rouble backed by gold and basket of commodities/ currencies).
A gold backed currency is the Kryptonite to the central bankers’ petrodollar. Add in that American banks simply do not have enough paper money in existence to satisfy a run on banks, and pretty soon you have a situation where the only thing holding up the value of the US dollar – our collective belief that a dollar is worth something as a measure of value – disappears like a cloud of dust in a windstorm.
So . . . Not sure exactly how, or exactly how long but . . .
Gold ends the fed.
That doesn’t mean land or factories or cars or railways or skills or trucks go poof. It means the money printer breaks. And then America gets rid of the Third Bank of America. Andrew Jackson will be smiling down from Heaven, good old Presbyterian that he was.
I remember President Trump prominently displaying a portrait of Andrew Jackson in the Oval Office while he was there.
Make of that, what you will.
Only 5 quarters into the Occupant and Cheat’s regime and we are net negative for the entire period and the best has already been had with the worst ahead. Only 11 quarters at most to go!
I need some ice cream!
It’s only “TEMPORARY.”Or Pelosi said today…as she wiped her nose, an “ABERRATION”
My company makes products for many industries, but the top customers are Oil & Gas and Semiconductor Equipment makers. we are about to announce a 10% across the board increase in prices for the Semi component. Probably higher for the industrial component. This is due to raw material increases, Freight increases, and increases outside of materials from our vendors. We’ll see how our customers react in the next month or so.
I just want to know if I should buy a house now. Previously, I read here prices were going to peak last summer, but clearly that didn’t happen. It’s hard to plan anything in such an uncertain world!
Well no shit!🤔And this is a surprise how?
No one believes these reports anyway. They are bunk. Completely made up out of thing air.
On the bright side, my potatoes have gotten off to a good start.
All this fun will collapse when the southern border is completely open. How long do you suppose us taxpayers can pay for the entire world coming to the US.