Where do we stand on Natural Gas and European Inflation.

Are we looking at the wrong stats to determine whether we will have a recession in the U.S.? Slowly, concern for China's economy has edged into the picture, but not much is being said about Europe. 

Frankly, I don't see how Europe can avoid a recession and I wonder how that will impact the U.S. It is clear for all to see, the impact of natural gas will have on Europe. These aren't small numbers.

When you hear reports of the U.K. raising the cap to £4,200 annual, it might be overlooked that in early summer of last year... it was about £1,200 annual. Currently the cap is about £2,000 annual. Here is the latest futures, converted to USD...

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Inflation in Europe is edging up, even while the governments are trying to keep a lid on the natural gas impact to consumers. 

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Maybe a chart would be better...

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Generally speaking and from I can glean... the German natural gas storage is 78% of capacity, with a goal of 90%... just to get through this winter and then the cycle continues. The U.K. is near capacity and is using its LNG facilities to export to Europe. As winter nears the expectation is for U.K. prices to soar to that £4,200 annual.

Considering that not long ago, Asia was the recipient of one half of LNG. They are being subjected to very high LNG prices as well.

The U.S. is not immune to upward natural gas prices, but not to the extent of Europe. The recent CPI report seems to have somewhat mirrored the ebb and flow of Nat/Gas prices, but the ebb may be over, as the flow via LNG, is set to restart with Freeport and where there is money to be made... more facilities will come on line. Drawing against U.S. reserves. 

It was Freeport going off line, which created the dip, as the draw on reserves slowed.

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https://www.eia.gov/naturalgas/weekly/#tabs-prices-3

While this chart indicates some slipping in July, due to Freeport being offline, the current NatGas price is about $9 and expected to continue climbing as LNG exports pick up. While Freeport is not slated to come back on line until an October restart... the draw has begun.

Month to Month
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That July drop will reverse in August.

And it should not go unnoticed... electricity prices have been on a steady upward swing, which with about 40% of our electricity coming from natural gas generation. Winter is nigh upon us. Gasoline may be ebbing (?), but the rest of the overlooked energy index is not, and it will likely be overlooked until those heating bills come into play.

We have gotten rather used to cheap natural gas and those days are in the rear view mirror, imo. So what are natural gas stocks for the U.S. compared to last year.

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https://www.eia.gov/naturalgas/weekly/

3375Bcf last year to 2519Bcf this year, or down 25.3%. Certainly within the 5 year average, but only 119Bcf above the minimum.

Let's hope for a very mild winter.

Is It Still Too Early to Predict C.O.L.A.? And Some Other Observations...

I've had to revise downward, my previous forecast... by quite a bit. I am okay with that, as longing for inflation to continue upward, with the hopes of a higher check in the future... seems rather silly, imo.

While headline CPI was 0% for the month to month, the CPI-W declined -0.1%. Both were largely a product of the decline in energy, specifically gasoline. Gasoline has already fallen on this date, by similar numbers as July. Which will be more than enough to offset the rise in groceries (more later on groceries). Gasoline should fall a bit further over the next week, but seems to be set to stabilize.

It might even offset any expected increases in "core" inflation. My August projection in the chart is for a range of -0.2% ~ +.01% month to month for CPI-W.  September CPI-W ranges from -0.3% ~ 0.0%. So while the chart plots the C.O.L.A. increase range as 8.6%~9.0%, the lower number is much more likely, imo.

So call me suspicious of "non-partisan" groups that have headlined the potential for 10%+ S.S.A. C.O.L.A. and their adoring "journalists" that published this information for seniors on Social Security to read. To get 10%+, you have to have at least one month above 10% and likely 2. We haven't had even one. 

It does make me wonder what the aim of those "reports" were? Further divisions? Which brings me to politics. One side of the aisle plays up the 0.0% change in M/M and the other side reminds us, it is still 8.5% Y/Y.

I may sound like the latter, given what I am about to say. But first, another chart (BLS sourced, except projections)...

When I earlier mentioned a near repeat of July's numbers for August, I was not kidding. Which brings me to food... something I rather enjoy. It also brings up the looming food insecurity and a phenomena called "hangry" . The latter of which is a smash-up of hungry and angry.

August's food at home will most likely be +14.3% Y/Y. How can I say this? This is the PPI (BLS) from July and while it was down -0.5%, that did not mean everything went down. NO! It did not!

Somehow I believe, some of this will get passed on. It is already an issue on the websites I frequent, just as gasoline prices were. Were, as in it has shifted to lower pump prices, but still unhappy, as it isn't what it was 1 year or 2 years ago. So remember the 2.0% finished consumer goods, one month jump of the PPI. It is coming to a home near you.

Food is becoming more and more the topic, with many expressing some form of hardship. What intrigues me, is they are still hanging on to their smart phones, internet connections, etc. 

However, there are people that either haven't had any of those items or have had to cut back. People do change their spending habits for one reason or another, but keeping food on the table is rather constant, imo. 

I am referring to the USA in this instance, as I cannot imagine the hardships being foisted on a large swath of the population in Europe. And as food is a global commodity... the rest of the world as well. Seriously, I cannot fathom what it is like in some areas of Africa where food scarcity is the issue.

Food scarcity... lack of basic nutritional food.

Food insecurity... inability to afford basic nutritional food.

We have enough angry people in the USA, without increasing food insecurity and making even more people angry or hangry. 

Which goes to show a tried and true historical method is once again being used. Our "elected leaders", "corporate masters", and their "media shills" must ensure we are blaming each other, rather than focusing on the real problem... which is "them".

I'm sure we will be informed how things are "looking up" or the "sky is falling". Most likely all spin, just like water circling the drain.  

Whew! I got that off my chest! Time for a nap?

Even A Broken Clock is Right Twice a Day!!

In this digital age, there will be many that do not understand a reference from way back in the age of analog clocks. But on to the meat of the matter, or where’s the beef?

After months of American citizens complaining about inflation, certain politicians have determined it is a problem and are focused upon the problem. We should also understand the “rest” of the world is also experiencing inflation.

Except there was rarely a peep, until the “rest” of the world caught up with the U.S.A.

Here is a nice graph with annual inflation rates since August 2021. (Click on Picture for larger view).

Eurostat is the source for the EU, France, Germany, as well as the harmonized inflation rate of the U.S. Oddly the U.S. is not in the EU and is tracked, yet U.K. no longer appears anywhere. Someone is taking Brexit very seriously, imo. The U.K. is represented by its own Office of National Statistics, which has both HCIP and CPI. Then Canada data is taken from Statistics Canada. (I estimated the Eurostat numbers for the U.S. at 9.1%, but put 8.8% on this chart/graph to be safe on the low side).

Here is a chart as well...

There does seem to be inflation in these countries, but they are just now joining the inflation party, we have been experiencing for several months. As they say… numbers don’t lie, but politicians do. In this case, our politicians may not be lying, but have put off telling the truth until it could be spun as impacting a lot of countries. 

Clearly, we can see the impact of the natural gas pricing in the EU and UK, as well as the impact of the Ukraine invasion, for all including Canada. The U.S. can certainly join in the chorus blaming Putin, but what about the earlier periods, when both the EU and the UK were experiencing less inflation than the United States?

Why wasn’t inflation an issue then? Did our politicians need to wait for someone else to blame and then proclaim it's not my fault, everyone is having high inflation?

Hey, it will probably work... given the short attention span of most Americans. 

Funny, Strange, ODD, and Disinformation!

Where France's Macron buys his suits is front page news on one of the many international news websites I peruse. 

Germany's Chancellor has done another about face, which has left the columnists spinning, trying to keep up.

Europe is cooperating on gas, which suggests some sort of united front, but really ends up with several countries in Europe not cooperating and even one stating they will veto. I got to look up "cooperating", in the dictionary. Hungary claims there are 10 countries using the Rubles for Energy scheme.

Previously, Germany got the blame for obstinance regarding sanctions, but any meaningful sanctions have seen the EU bloc in disarray. Conveniently, the Germans are now pushing back by laying blame on "other" members of the EU. No doubt they will eventually coalesce their blame shifting and lay all this at the feet of Americans. Some things never change. 

Pelosi has been to Ukraine and is seen posing with Zelensky. Is it one of those selfies Zelensky was so critical of?

India is on pace to have a record wheat crop. Oh wait, India is undergoing a massive heat wave which may dramatically limit the wheat crop. 

Musk buys twitter and Homeland Security announces, "Disinformation Governance Board". DGB... not to be confused with KGB, which was a completely different committee. What qualifies as disinformation, misinformation, etc.? Who decides when a lie is no longer a lie, or when the truth is no longer the truth?

Speaking of disinformation... CNN is boldly proclaiming "3 Signs that Prices Could Soon Come Down." Prices coming down would be a sign of "deflation". The rate of inflation might come down, but prices... not so much. But it is CNN, so excuse the confusion or is this what the KGB DGB will soon remedy? Not intentionally leaving out FOX, MSNBC, et al, but it is way too much.

I keep reading where China's economy may be stalling, but until China says it is... it isn't. I fully expect them to say they are meeting targets. <wink> <wink>

A lot of concern about U.S. farmers cutting back on fertilizer and the potential for much lower crop yields as a result. The big farmers bought their fertilizers and inputs and had it all delivered by December 31st. Granted the big farmers does not equate to all farmers, but the weather is still the biggest factor. That weather has not been very cooperative at the start of this planting season.

This nugget from a Deutsche Welle opinion piece, regarding North Korea...

Pyongyang claims the most advanced weapon in its armory can carry multiple warheads and has a range of more than 15,000 kilometers (9,300 miles), putting the entire continental US within striking distance.  

Note that the continental US is singled out. That distance puts all of Asia, Europe, Oceania, the North American Continent, most of Antarctica, most of Africa, and South America above the equator. It would not be difficult to understand the continental U.S. would be the main objective, but the wording seems to indicate only the U.S., while ignoring fallout, etc. 

Run out of things to ponder, so time to wrap this up. 

Works of Fiction

From Deutsche Welle

Ran across this in Deutsche Welle... 

The fiction debut of the former US presidential candidate with mystery author Louise Penny has again stirred a discussion on what prompts politicians to write fiction.

How can I resist? Clinton and works of fiction. Politicians and works of fiction. I can find no satire tags in the article, but how can it be anything other than satire. 

So yes, I frequently observe foreign news websites, as everyone tends to favor their own government/ideology and what we see in the U.S. is not what others see. The truth generally "lies"  somewhere in the middle.

Many of those European papers are lamenting the U.S. shift to the Pacific and the need to possibly come together and form a European Union military alliance... in place of NATO.

Apparently this is due to the U.S. not seeking European consultation over Afghanistan, but rather seeking to further U.S. interests. The E.U. seemed to think that they could tell the U.S. what to do and somehow are deeply concerned the U.S. hasn't done what they are told.

Not sure how the EU arrived at their former illusion or should it be delusion. At what point did the U.S. indicate the EU held any sway over U.S. policies?

Good, bad or whatever, the U.S. under Trump stated the U.S. was leaving Afghanistan. Biden was in agreement, although attempting to blame it all on Trump. In any case, Biden made it clear the U.S. was leaving and gave hard dates. 

Granted the final exit was terrible and poorly planned, but for the EU to attempt to blame the entirety of the mess on the U.S. is ludicrous at best. These complainers had ample time to gather forces to secure a better outcome... but didn't. 

It's because they couldn't or wouldn't. Simply easier to blame someone else and say the U.S. has failed some obligation to the EU that never existed. The EU has had its weakness exposed and does not like it. There is a lot of talk, but nothing will ever come of it, imo. 

Until then, I will consider the discussion of a EU military as a work of fiction.