This month inflation was 5% year over year. If we annualize the inflation this year (May/Dec)^(12/5) it would be 8%. In normal years, the first 5 months are usually where most of the increases take place and inflation usually moderates after May. If I remove 2020 and use the average Dec/Dec to May/Dec ratio to project this years inflation it comes out to over 5%.
I don’t think this is a normal year and while I believe inflation will probably moderate in the second half of the year, I’m guessing inflation for 2021 is going to be >6%.
What say y’all? And to make it more political, will this kill Biden and the Democrats plans for more spending?
The filibuster is what kills the Dem agenda. Deficits are just the excuse.
Inflation…the pandemic is the primary cause, not money supply. We have folks at the low end of the wage scale holding out for higher wages. Working as intended, welcome to markets 101. And then supply issues, check out the price of lumber lately? Used cars and trucks are up like 20%. These price changes are not likely to repeat through the upcoming years.
And the bond market is clearly saying no inflation beyond the fed target.
The pandemic was deflationary, but the stimulus to offset obviously offset that. Coupled with further stimulus and residual unspent original stimulus. And now we’re opening back up so we’ve got remaining stimulus spend coupled with a removal of the deflationary pandemic effect.
All the while we’re guns blazing on easy monetary policy.
I think inflation is poorly determined, in that some aggregate determines my cost increases. Costco meats are way up in price. Home Depot wood is up in price. New pool heater are up in price. These things affect me more than that basket of goods. (Also, when the quality of those basket of goods drops, the inflation calculation ignores that.)
Inflation is affecting me a lot more than the aggregate. So, what am I going to do about it? Well, delay those projects, for one.
Guess what’s already happening? I think overall inflation is going to level out pretty quickly as more countries get vaccinated. Ending unemployment benefits will also move workers more quickly back online. Inflation fears will be a nothingburger pretty quickly.
When 1/3 of the overall inflation increase in the month is due to used car prices, the number doesn’t mean much. Not everyone needs a used car, and like lumber, it’s the result of compounding pandemic related effects that won’t persist.
IMO the only thing I see persisting is real estate prices. I think there will be another wave of home buying as post pandemic work situations start to solidify and people find out whether they are forever remote or not. That will spur even more migration south of the Mason Dixon line IMO. In fact I think more and more technology and data workers are going to keep moving south. I don’t see any reason that trend doesn’t continue.
I just went to look at their new board and it says the last post was a day and a half ago. Seems like they have a great community actively engaged over there now.
