Marching toward Stagflation..!
Stagflation, or recession-inflation, is an economic phenomenon marked by persistent high inflation, high unemployment, and stagnant demand in a country's economy. During a particularly severe period of economic conditions in the 1970s, rising inflation and slumping employment put a damper on economic growth in the United Kingdom and seven other major market economies, and investors in equity markets suffered greatly as a result. (Investopedia)
https://www.investopedia.com/articles/economics/08/stagflation.asp
CPI and Inflation data will be out tomorrow!
"The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by consumers in urban households for a basket of goods and services.
Changes in the CPI reflect changes in the cost of living in the U.S.
The CPI is an economic indicator that is most frequently used for identifying periods of inflation (or deflation) in the U.S.
While the CPI is the most widely watched and used measure of the U.S. inflation rate, many economists differ on how they believe inflation should be measured.
For a more accurate and comprehensive measure of inflation rates in the U.S., look to the Personal Consumption Expenditures (PCE) Price Index, or use the Producer Price Index (PPI) and the gross domestic product (GDP) deflator in tandem along with the most recently reported CPI measurements." (Investopedia)
https://www.investopedia.com/ask/answers/012115/consumer-price-index-cpi-best-measure-inflation.asp
Now let's look at PCE in the past 2 years:
GDP:
The growth rate of real gross domestic product (GDP) measured by the U.S. Bureau of Economic Analysis (BEA) is a key metric of the pace of economic activity. It is one of the four variables included in the economic projections of Federal Reserve Board members and Bank presidents for every other Federal Open Market Committee (FOMC) meeting. As with many economic statistics, GDP estimates are released with a lag whose timing can be important for policymakers.
What is the FED solution for controlling prices(demand side)?
Nothing but increasing rates..!
Lest look at historical data:
Forecast:
If CPI keeps rising at the same pace as the past 24 months, by the end of October 2022 YOY Inflation rate will be 10.1%..!
Then,
I think it will be highly likely we experience a similar scenario to the 1970-1980
Best,
https://www.investopedia.com/articles/economics/08/stagflation.asp
CPI and Inflation data will be out tomorrow!
"The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by consumers in urban households for a basket of goods and services.
Changes in the CPI reflect changes in the cost of living in the U.S.
The CPI is an economic indicator that is most frequently used for identifying periods of inflation (or deflation) in the U.S.
While the CPI is the most widely watched and used measure of the U.S. inflation rate, many economists differ on how they believe inflation should be measured.
For a more accurate and comprehensive measure of inflation rates in the U.S., look to the Personal Consumption Expenditures (PCE) Price Index, or use the Producer Price Index (PPI) and the gross domestic product (GDP) deflator in tandem along with the most recently reported CPI measurements." (Investopedia)
https://www.investopedia.com/ask/answers/012115/consumer-price-index-cpi-best-measure-inflation.asp
Now let's look at PCE in the past 2 years:
GDP:
The growth rate of real gross domestic product (GDP) measured by the U.S. Bureau of Economic Analysis (BEA) is a key metric of the pace of economic activity. It is one of the four variables included in the economic projections of Federal Reserve Board members and Bank presidents for every other Federal Open Market Committee (FOMC) meeting. As with many economic statistics, GDP estimates are released with a lag whose timing can be important for policymakers.
What is the FED solution for controlling prices(demand side)?
Nothing but increasing rates..!
Lest look at historical data:
Forecast:
If CPI keeps rising at the same pace as the past 24 months, by the end of October 2022 YOY Inflation rate will be 10.1%..!
Then,
I think it will be highly likely we experience a similar scenario to the 1970-1980
Best,
Comment:
YOY inflation rate 9.1%, FED will have no choice but to be as much aggressive as they could be..!
Comment:
Message is clear from the negative US GDP print (-0.9%) and unfavorable miss on jobless claims:
The US #economy is slowing at a significant rate.
Add to that the 8.7% price change in today's data and the bottom line is clear:
Deepening stagflation and flashing red #recession risk
twitter.com/ele...638568509476864?s=20&t...
The US #economy is slowing at a significant rate.
Add to that the 8.7% price change in today's data and the bottom line is clear:
Deepening stagflation and flashing red #recession risk
twitter.com/ele...638568509476864?s=20&t...