CPI tomorrow - another surprise spike?

[swag]

The Consumer Price Index comes out tomorrow. I really hate to go against Allen Sinai's forecast of .2% month-over-month or even the "consensus" estimate of .3%, but beyond the "core" CPI, energy prices at the consumer level have been astounding this winter, and February was a cruel month indeed. Gasoline prices were not exactly mild, and natural gas prices were just miserably high. Add this to the recent claims that "pricing power" is returning to both US manufacturers and to the retail sector. If inflation remains tame in February, it is likely to be the result of a some statistical fluke (beyond USDOL's regular downplaying of inflation in things like tuition and housing), and inflation is not bloody likely to remain low for long.

We might be seeing the dawn of a new era of "stagflation", brought about by too much of the wrong kind of stimulus (tax-cuts for the rich, who will just save or invest it? Say, that shit makes a lot of sense), and too little of the right kind.

I hate to think that Steve Roach of Morgan Stanley is correct, because if he is we're all in a lot of trouble, but it is seeming more and more evident that this recovery was rented from Walmart, with a credit that has gone way over its limit since January, 2001.

[Snow]

1. Is this the same one that didn't come out last week for

some strange reason about incomplete data or computer malfunctions?

[swag]

2. No, that's the PPI - the Producer Price Index

Basically, PPI is prices paid for materials by manufacturers.

[lastknowngood]

3. The PPI has been pushed back to June and it will only reflect

the info thrugh Dec 2003 boy are they trying to hid something big!

[swag]

5. The PPI data delay is just bizarre

I can't figure it out. But it's unquestionable that the invasion of Iraq has not brought oil prices down to the well-below $30/barrel the Wall Street cheerleaders (http://www.prudential.com/yardeni) were hoping would jack up US industrial profits.

China's rapid industrialization has contributed greatly to the spike in commodity prices. It has also contributed to the "disinflationary" pressures at the consumer level that the Fed has been so afraid of. The continued acceleration will be, needless to say, very bad environmental news.

[kalian]

9. You got that right....

Its amazing...6 month delay/gap because "software is too old"...
Geez, these people don't know what else to do. :eyes:

[whistle]

4. Something strange happened this past week...

...to prices at the gas pumps. After hitting a high of $1.779 per gallon for reg unleaded ten days ago, the prices fell back down for about five days by as much as 10 cents a gallon. Then just before the weekend they shot up again and are right around $1.759. These are not price wars just happening at certain intersections, but seem to be happening all over the area. So, could oil suppliers be manipulating prices, say when they have to report them for CPI reports? I think this whole issue of inflation and CPI are bogus numbers. From my perspective, the prices for basic necessities have been rising faster than the official CPI figures for quite awhile now. I think inflation is higher than GreenSPAM and company want everyone to believe. I'd like to know if anyone senses this in their areas and also if there are experts in the field (other than Lyndon LaRouche) who have written about this. Also, as the U.S. dollar continues to weaken against all currencies, the prices of imported goods (almost everything we buy anymore) are sure to go up.:think:

[swag]

6. where do you live, whistle

Here in Oregon, gas prices plateaud about a week ago, but remain at the highs.

CPI is calced month-by-month, so the pattern you're describing would only affect CPI for March, if at all.

I agree that CPI is not a good measure of actual inflation experienced by consumers, but I doubt oil co. collusion on CPI numbers. I just don't think big oil gives enough of a damn about the CPI.

[whistle]

14. I live in Florida Swag, Orlando to be precise...

...and gas today is still $1.769 (reg unleaded) in and around my neighborhood. I know that there is an impact from this being tourist season, but I live away from the tourist corridors. There gas prices are always 10 to 15 cent higher per gallon. Your right, it's supply and demand, market driven pricing. But oils companies set the prices I am certain of that and then the horse turds they generate just roll downhill on us little people.:nopity:

[Petrodollar Warfare]

10. Welcome to the economic phenomenon known as "currency risk"...

...for oil/energy purchases. Since OPEC has traditionally used a dollar based pricing band for 3 decades we as Americans have not felt what other nations experience re their currency valuations relative to the dollar(in 2000 the $22-$28 pricing band was created). This is one reason why all other nations tax gasoline so much - to provide a 'cushion' from oil currecny risk (avg world price of gasoline is about $4.50 to $5.00 US). As to your question...

<<<These are not price wars just happening at certain intersections, but seem to be happening all over the area>>>

...Well, I would recommend the following information for consideration....

Feb 20, 2004
'Crude futures prices rise in shortened NYMEX session'
by Sam Fletcher

http://ogje.pennnet.com/news/news_display.cfm?Section=NEWS&ArticleID=1 ...


"...The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes slipped by 8¢ to $30.44/bbl Thursday.

"The value of the OPEC basket has been above the $22-28 target range for 108 trading days over the past 8 months," Horsnell noted. "Over the same period, the value of the OPEC basket in euros has stayed within a 22-28 euros band on all just 2 trading days, and on those 2 days it was below the band."

He said, "This is of course just a rather bizarre statistical coincidence. It certainly does not imply that the target band has been secretly switched into euros or that the dollar has lot its primacy in the oil market."

******

It appears that OPEC is trying to maintain their purchasing power, so they may be *tacitly* pricing oil around 24 euros per gallon. Mr. Fletcher and others are still in denial, but rather than using the typical "conspiracy theory" to reduce their cognitive dissonance, they are using the "bizarre statistical coincidence" as their denial of evidence/reality coping mechanism. If the currency analysts are correct that the euro goes to 1.40 to the dollar by year-end, and OPEC continues to price oil in a more stable currency to maintain purchasing power, we might very well experience what happened in Europe when the euro was at its historical low to the dollar in September 2000 (82 cents to the dollar). The following pictures should illustrate the pain of currency risk plus a little dip in supply, especially when we do not have a "tax cushion" for our gas prices...

35.) German Truckers Fume Over Fuel Prices, CBS News, Sept. 26, 2000 http://www.cbsnews.com/stories/2000/09/15/world/main233748.shtml


E.U. Commerce came to a standstill in Germany due to high petrol prices in the autumn of 2000. The economic fall-out reached from the U.K., Spain, France to Germany and Greece.

“Thousands of truckers from across Germany clogged the streets around the capital's center Tuesday demanding relief from higher gas prices. And they got some when the government offered low-interest loans to some trucking companies.

”….The protest is the biggest so far in Germany, on the heels of demonstrations that halted traffic in France, Britain and Spain before easing in recent days. Elsewhere Tuesday, minor blockages continued in Spain, where markets ran out of fish, and Greek motorists fearing for shortages due to trucker strikes lined up for gas. <35>


36) French fuel dispute escalates, CNN.com, September 7, 2000 http://www.cnn.com/2000/WORLD/europe/09/07/france.fuel/

Similar protests erupted in Paris, with thousands of French farmers driving their tractors into Paris as a sign of their displeasure at the rapid increase in fuel prices.

“….French farmers are threatening to block access to the Channel Tunnel as a growing protest over fuel prices entered its fourth day with no signs of an agreement to resolve the dispute.

“….Oil prices are currently the highest they have been for 10 years. Prices have risen by 25% in the past 18 months.”

Opec, the organisation of petroleum exporting countries, is due to meet on Sunday to discuss the situation. <36>

*************

Me also thinks that OPEC/EU may want to facilitate regime change here in US....this is one way to challenge US hegemony/neocon policies in a very covert but painful way...(OPEC also recently mentioned a new $28-$34 pricing band, but that may not hold)

[rapier]

7. notes

The only surpise will be how low they can fake it.

Inflation is here. Commodities are on fire. THe CRB index is now at a 19 year high. Many grades of steel are 100%, yes, 100% higher, than a year ago, most of the increases this year. Import prices are rising.

Nothing is falling in price anymore.

Not to worry however. Greenspan says he won't raise short rates and the market sent the 10 year yeild down sharply today, to the very edge of an area that suggests a revist of last springs lows and attendent mortgage mania.

Inflation is our friend. It's that or disaster.

[swag]

8. Commodity inflation

does not necessarily transfer to retail inflation, in fact the correlation is rather low between commodity inflation and CPI.

But I agree with you that consumer inflation is gaining significant traction. What will be interesting to see is if it does indeed hit a tipping point and really take off in the next few months, will the Fed hike in an election year?

I don't see the tipping point coming, but there's a lot I haven't seen coming.

11. Partially correct

You made a common mistake in your statement.

You are right, inflation in a commodity or two doesn't necessarily mean an increase in CPI. One reason is temporary hedging can postpone price pressure.

HOWEVER
Inflation in a single IMPORTANT...or many...or all commodities--as in the current case--does spell an inflation disaster.

The tipping points are two:

Hedging runs out
Something important, like steel, goes way up. In no prior time has steel jumped like it has now

In which case, a dishonest government would simply cease producing the offending inflation statistics

[swag]

13. Well, I'm always eager to learn from the experts, so I'll ask

Which common mistake are you talking about?

Also, what sort of "hedging" are you talking about.

Also, overlay a one or two-year graph of the CRB commidities index and a graph of the CPI (including food and energy) and tell me what's going on?

Here's what I think is going on: China is still exporting consumer deflation, labor costs are down because of outsourcing and "productivity".

Anyway, I'd appreciate any sources (or your qualifications) on what you say, because what you say is quite interesting. I'm an IT guy, so this isn't my field of expertise.

Thanks.

[swag]

16. Okay, say you can't chart that

CRB's commodity index is up 60% in the past year.

CPI is up about 2%.

I'll need you to explain the "hedging" you think is going on.

What I think is going on is that China, et al. are exporting consumer deflation everywhere. Ed Yardeni, among others, seems to agree with me.

Thanks in advance.

[rapier]

12. inflate or die

The Fed will not raise rates. They can't. The market isn't going to either. As I said the 10 year looks like it will revisit or even go lower than last spring. 3% or even 2.5% isn't out of the question. The beauty part is that inflation has nothing to do with it. The oldest story in markets of the correltation between inflation and interest rates is now being thrown out.

Proving that markets trade on one thing and one thing only, liquidity. The flood of lending is providing its own liquidity to drive rates ever lower. Fundamentals have NOTHING to do with it.

It's inflate or die. With that choice what would you choose if you were a policy maker, aka Greenspan, the government, or anybody. You would choose inflation. Everyone would and does.

I believe we are in a window where rates will finally reverse on a long term secular basis, but I am not holding my breath. A blow off which makes the last two years and even last spring look puny might be about to occur. Negative interest rates would play a big part in that. Borrw for free and speculate and get rich is the reasonable thing to do. Since everyone now thinks wealth is built by inflating assets inflation is loved. Borrow for free and speculate is the order of the day. Approved by the Fed and the government..

[whistle]

15. Borrow for free and speculate...

...sounds like Big Daddy Economics. The speculation is on what? The risk must be astronomical, like a borrowers total wealth base. This sounds like 1929, at least what I've read about that era. Holy chits, this economy sounds really screwed up.:freak: