Near End of the Month, So December 2021 Inflation Numbers and Other Stuff.

It's all the inflation numbers in one chart. As always, the MPI is most important to me, as it is what I spend.

The forecast across the board for January is upward... except maybe for the PPI. It's hard to imagine consumer spending slipping, inventories jumping and orders lagging... resulting in anything other than a deceleration of the PPI. But the experts seem to think May is when things will start to decelerate for all the above. In fact the PPI is forecast to reverse in May, back to 5 months ago range, which will somewhat stagnate the monthly CPI... not a reversal.  

BUT... a bit of history. Last year, there was consensus on helicopter money directly to the masses. Our leaders wanted it to jump start the economy and the FED said do it, we've got your back. The the term transitory became a popular word... until it was decided it might no longer be applicable to the current situation. 

So the FED is fixing to do something and the knives are out. Who knows what will happen?

Unfortunately for a lot of Americans on fixed income, it will not help, as the die is already cast. A fixed income limits any increases in spending and reduces the amount purchased. The alternative would be adding debt, which would now be costlier, if the rates are raised. It is a never ending cycle, imo.

Enough of the depressing news. I'll go watch some YouTube comedians or take a nap... or both.

2021 GDP Results and First Look at 4th Quarter 2021

GDP from the Bureau of Economic Analysis.

Real gross domestic product (GDP) increased at an annual rate of 6.9 percent in the fourth quarter of 2021 (table 1), according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.3 percent.

...

Real GDP increased 5.7 percent in 2021 (from the 2020 annual level to the 2021 annual level), in contrast to a decrease of 3.4 percent in 2020 (table 1). The increase in real GDP in 2021 reflected increases in all major subcomponents, led by PCE, nonresidential fixed investment, exports, residential fixed investment, and private inventory investment. Imports increased  

 All of which sounds really good and seems to be "great" news. Being the contrarian, I seem to find things that trouble me. The inventories and correlation to consumer spending. They look stellar on the annual basis, but 4th quarter seems troubling to me. 

The inventory numbers made up about 73% of the 4th quarter numbers. The difference being a chabe for the 6.9% annualized to something akin to 1.8% annualized. Which even at that lower number was better than the meager 0.48% rise in the goods category sans services and 3.2% annualized with services. Rah! Rah!

The report does make note of certain durable goods making up the increases in inventory, yet overall consumer spending in this category is barely making gains. That is not surprising, given the past year, but not sure how consumer spending will react going forward. 

Setting aside the inventories and intellectual property products... the Gross private domestic investment category slid -1.2% annualized. 

Personal consumption expenditures rose 3.2% annualized, but on the back of services with a respectable 4.8% annualized rise. Without the services... 0.36% annualized.

My small brain cannot find all that "wonderful" news, but I may be overthinking it, considering my small brain. 

To summarize, the consumer spending, which is the driver of the economy, is slowing considerably; the private sector sans the aforementioned... is slowing. 

So if inventory is rising dramatically, then one of the following would seem the likely cause...

• The supply chain snarls are finally becoming unsnarled
• Suppliers have increased production
• Consumers are slowing their purchases

Not real sure how this can be seen in such a positive light, especially with the doldrums of winter upon us, the negative outlook of the consumers, etc. Unless the latter weighs on inflation and slows it down a bit. 

Maybe Time for a Hoarding Update and Some General Trivia!

I should start by pointing out that I am starting this blog on 1-16-2022. At this time, I am sitting here, awaiting the big storm Izzy to descend upon us. No worries, as I have no need to leave the house until 1-31-22 and maybe not then, as I have become quite the hoarder. The only issue would be a prolonged loss of power, which should not be such a worry in my community.

1-19... There are apparently, a number of storms likely to cycle through the region over the next couple of weeks, so just need to hunker down. Have ordered the covid tests, but not sure if we will use them or need them anytime soon. Of course, it sounds like we won't get them anytime soon as well. 

1-21... Checking the 2 week weather outlook and it seems to indicate prolonged colder than normal temps, with bouts of snowfall. Nothing is set in stone, so I'll keep checking. Typically order groceries for pickup on Wednesday's and Thursdays. 

This may seem odd, considering the first paragraph, but while I have stored a good amount of groceries and can claim starvation is not in the cards... there are certain food groups that don't store well over time. Such as veggies, fruits, etc. 

On one social websites I frequent, the following was posted... "there is a pasta shortage, as shipments from Italy cannot get into U.S. ports." This reminded me of the BBC show from the 50s, on an April Fool's broadcast... about spaghetti trees.

That is not to say we do not import some pasta from Italy, but it would be specialty brands, as most pasta is made in the USA. It was good for a laugh at least.

There are many nuggets of humor to be found on these websites, as long as you look for the humor, instead of looking to criticize. Shaking your head in disbelief and then having a good laugh is probably the best medicine. 

Retail Trade Report for December-2021

 

The Census Bureau released the advance data for December Retail. Last month the October number was revised up a tad, but this month it was revised down a tad and the November was revised down as well. Basically, this blunted the -1.9% fall in December Sales on an adjusted basis.

Furniture and Home Furnishings (-5.52%, -689M), followed by Clothing and Apparel (-3.06%, -824M), then Electronics and Appliances (-2.94%, -224M). It is no surprise that Department stores were (-6.95%, -817M) for the month.

Now for the eye opener... Non Store retailers, which includes Electronic Shopping and Mail order... (-8.7%, -7,867M)

Now for the stuff this ole Hillbilly can't fathom.

Headlines say Omicron was a factor and I would tend to agree, but the Electronic Shopping and Mail order segment would seem to benefit... but it didn't.

Supply Chain problems do exist, but with the Business and Wholesale Inventories up through November, I would have thought December would have been better.

Labor shortages, due to Covid... possibly, but hard to grasp how, considering the industries being impacted, etc. 

Then there is the major difference in unadjusted and adjusted, with the unadjusted indicating the opposite of what is possibly happening... 

Adjustment of estimates is an approximation based on current and past experiences. Therefore the adjustments could become less precise if current competitive pressures, changes in consumer buying patterns during holiday periods, and other elements introduce significant changes in seasonal, trading-day and holiday patterns.

Would Omicron/Covid have affected consumer buying patterns? 

Clearly, I am not a rocket scientist, so what do I know? However, I can speculate, opine/whine, etc. 

One year ago, the vaccine was being rolled out, the news was upbeat, inflation was tame, with those small stimulus checks rolling out in January... yet the February numbers lagged, as it was winter after all, until the big stimulus kicked in, and of course inflation followed. But the joy was everywhere, the end was in sight, the good ole days were almost here again.

1 year later and we don't have a lot of upbeat news and actually quite the contrary, no stimulus checks, inflation is running hot, but not enough to warm the weather. The supply chain is still snarled, covid is threatening to make it worse amongst our trading partners... etc. etc. Geo-politics is looking very unhealthy.

AND... if we haven't gotten sick by or of - Covid, it is an election year. So don't expect any help from D.C. - on anything. But you knew that already... or should have.

 

Producer Price Index for December 2021

 

The Producer Price Index as released by the BLS, this A.M. 

The Producer Price Index for final demand increased 0.2 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed advances of 1.0 percent in November and 0.6 percent in October. On an unadjusted basis, final demand prices moved up 9.7 percent in 2021, the largest calendar-year increase since data were first calculated in 2010. 

In December, the advance in the final demand index can be traced to a 0.5-percent increase in prices for final demand services. Conversely, the index for final demand goods decreased 0.4 percent. 

An ever so slight easing, imo, for the upstream inflation. As always, this is backward looking data and does not forecast what might happen in the future. 

The retail report tomorrow, while also backward looking, could provide some indication of future activity.

Breakdown of CPI DATA and Real Earnings, December, 2021

 

The BLS report for December, Indicated a 7.0% yoy inflation rate with the month on month being 0.3% unadjusted of 0.5% after adjustments.

With this release comes a variety of other numbers...

I am at the 5.0% annual rate...

I had a better than expected outlook for my personal rate of inflation, but this continues to be due to medical costs rising at a much slower rate than everything else, AND at a slower rate than in recent years. I just cannot be so optimistic as to call this a long term trend.

I had previously forecast...December is likely to be between that 6.98% and 7.16%.

The likelihood of January's numbers falling between 7.04% and 7.40% are fairly high at this point. While there was joy in the easing of energy prices, not sure the rough patch of weather in the next 2 weeks will not negate some of that joy. For comparison... June 1982 was 7.06% and then February 1982 was 7.62% and January 1982 at 8.39%. I throw that out as we heard highest inflation in nearly 40 years for last month and again for this month. Also, for the record, that 7.62% (2-1982) was the lowest rate since June of 1978.  

Also, beef prices are easing a bit, but Covid may mess up the work force in that category. In any case, the month to month changes will be the real guide going forward, as YOY increases might start to ease. Not that inflation is easing, but January 2021 saw inflation percolating and then lifting off in February. 

Historically, the June 1982 YOY inflation was pegged at 7.06%, compared to last months 7.04%. From there it is February 1982's 7.62%. Next month's headline will be highest inflation in nearly 40 years.

On to Real Earnings...

Basically the report indicates wages are keeping up with inflation on month to month, but still below the recent peak of September.

Political Prognosticating

 

via GIPHY

It is important to stir the pot, as well as smoke it. Although I suspect a lot of pot has already been smoked.

Never the less, it is time for me to review the current state of the 2024 presidential election and to properly undertake that assignment, I must review a bit of history.

Throughout my lifetime, there were always those that were strictly far right or far left. A lot of us were caught in the middle. Generally speaking, we decided the election on which candidate was least objectionable. Somehow that seemed to change, going into the 2016 election. Granted, you might say it was earlier, but never was there such a hue and cry as after the 2016 election. Even the 2000 election was somewhat settled amicably. At the most, it was not long for those protesting to fall back into the shadows. If you say 2008 and the tea party, it hasn't really had an impact... other than to taint future republican candidates, and a renewed distaste for a certain democrat.

2016 was as much about not electing Clinton, as anything else. Trump won by 304-227-7 over Clinton. If Clinton had gotten 44,285 more votes in Pennsylvania, it would have been 284-247-7 for Trump. AND if Clinton had gotten 10,705 more votes in Michigan, it would have been 267-263-4 for Trump. AND if Clinton had gotten 22,749 more in votes in Wisconsin, it would have been 273-257-4 for Clinton. A total of 77,739. Granted Clinton had more popular votes, but the elections are decided by electoral votes. If 38,870 voters in those 3 states had voted the opposite... the results would have been different.

So 2020 was about not re-electing Trump. Biden won 306-232. If Trump had gotten 10,458 more votes in Arizona, it would have been 295-243 in favor of Biden. AND if Trump had gotten 11,780 more votes in Georgia, it would have been 279-259, still in favor of Biden. And if 20,683 more votes in Wisconsin had voted in favor of Trump... We would have deadlocked at 269-269. Which would have ended up in Congress, which would likely have resulted in Trump being re-elected, due to the structure of the Constitution surrounding such a matter. If 21,438 voters in those 3 states had voted opposite, the result would have been different.

So forget about the 7M popular vote difference in 2020 or the near 3M popular vote difference in 2016. It really only takes a small swing in critical areas to make a YUGE difference, imo.

Therefore 2024 will hinge on such small swings. There seems to be a lot of glee from the right about the "troubles" of Biden, which in turn means they think he can be beat in 2024 by any Republican. Therefore it would seem almost certain that Trump would take another whack at the Presidency. 

However, I don't think Biden will even attempt to run for re-election in 2024. Harris might give a try, but will fail miserably. That in itself would seem to sabotage the Trump candidacy. If anybody could beat Biden or Harris, then what would be the point of risking a repeat of 2020... when anybody would be better than Trump. 

Been there and done that.