'Team Persistent' Wins This Week's U.S. Inflation Debate
(Bloomberg) -- In the hottest debate in economics, this week saw a fairly decisive win for those who expect U.S. inflation will prove more stubborn than short-lived.
The Federal Reserve Bank of Dallas summed up the latest state of play by declaring underlying price pressures are now “strong” even after pandemic-related cost spikes such as autos, hotel stays and airfares are excluded.
This week’s economic reports and price action in commodities markets continued to lean in favor of a longer-lasting inflation shock, which runs counter to the expectation of most Fed officials.
Below is a rundown of how the latest figures align with each side of the transitory or persistent inflation discussion.
- Consumer price index accelerates, matching the largest annual gain since 2008. Elevated home prices and rising rents are beginning to filter into the data
- The producer price index, while dragged down overall by easing costs of services, showed prices paid to producers for goods increased the most in four months. Energy prices rose the most since March, while food prices climbed another 2% after a 2.9% increase a month earlier
- New York Fed consumer survey shows pickup in year-ahead inflation expectations to 5.3%. Median rate three years ahead climbed to 4.2% in August. Both marked the highest on record
- The University of Michigan’s latest survey of consumers showed a pickup in one-year inflation expectations -- to 4.8%, the highest since 2008. Share of respondents saying durable goods buying conditions were bad because of high prices matched a 41-year high
- Cleveland Fed median CPI rises 0.5% MoM, the most since the early 1990s. Median CPI is up 2.8% YoY, the most since March 2020
- Commodity Research Bureau BLS spot raw industrials index climbed to a record on Friday and is up about 26% this year
- National Federation of Independent Business data showed 30% of small businesses expect to boost compensation in the next three months, the largest share in monthly data back to 1986
- Brent crude oil climbed above $85 a barrel for the first time since 2018. The shortage of gas and coal is triggering extra demand for oil products from the power market
- Smallest gain in PPI of year amid cooling costs of services like airfares as coronavirus concerns impacted demand
- The trade services PPI, which measures changes in margins received by retailers and wholesalers, posted the smallest gain in three months (though still rose 0.9% MoM)
- The CPI report showed prices of used cars and trucks fell for a second month after a pandemic-related surge earlier this year; car rental prices and airfares also declined
- Drewry’s composite measure of shipping container rates eased back below $10,000 in latest week, suggesting supply-chain disruptions may be peaking. As recently as Sept. 23, it reached $10,377 -- the highest in data back to 2011
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