CPI for October, 2021

Holy Toledo!!! And other places as well. The CPI-U came in at a staggering 6.2% YOY, well above anybody's expectations. Although given yesterday's PPI, the expectations should have been revised upward. 

There were no hints of slowdown in nearly any category, with maybe the medical category, which has been rather benign over the past 12 months. I cannot accept that as being a long term trend, no matter how much I wish it were true. 

Even my own personal household cpi rate, woke me up. While not in the same impact as the CPI-U, it was 

4.16%, with the monthly increase similar to the CPI-U.

Realistically, my being under the CPI-U is largely due to hoarding prior to the referenced timeframe and subsequent easing of quantities. Seriously, there are only so many cans of pork and beans that a person can eat in a lifetime. (Unlike the annual revision of various weighting of items, I revise monthly.)

The Real Earnings report was also released. While it is oft cited that wage increases are inflationary, it should be pointed out that current wage increases are a result of previous inflation.

Real Hourly earnings based in 1982~1984 dollars, fell this past month, as did a dip in hours worked, which translates into even steeper weekly earnings drop. 

With both Producer prices at the final and intermediate demand levels still rising, it is hard to foresee any glimpse of peaking anytime soon. Then there is the importation of inflation. We are a net importer and inflation is ramping up among our trading partners. 

Most notably would be China, where producer price inflation is north of 10%, but where the Government is forcing producers to hold the line to keep Chinese consumers in the 1% inflation range. 

How could these companies survive in such a climate? Cranking up prices well beyond 10% for foreign customers.  Some of that is likely a part of the intermediate demand increases, which are not tapering at this time. 

The forecast for November is 6.6%~6.9%. October was 6.2% compared to a 5.7%~5.9% expectation. For the record, 6.6% would be the highest since June, 1982.

Then there is some theoretical relief from the Federal Reserve, with an interest rate increase to slow inflation. The FED looks that the CORE inflation and not the core CPI-U from the BLS, but rather the Core of the PCE, from the BEA. 

The FED has frequently cited the need to establish this Core at 2%... over a period of time. Not real sure what the timeline would be, but the past 5 years has shown a 2.11% annual rise. Yet the thinking is the FED action will not happen until next summer. 

The problem is the FED is stuck between a rock and a hard place. When that theoretical raise occurs, the capital/financial markets could be damaged. 

In my opinion, the FED keeps talking up transitory, while hoping the consumer finally capitulates on spending due... to inflation. They can then claim they were right all along.

It is so difficult to remain optimistic. 

Trying To Push That Proverbial Rope.

We are familiar or should be... with the causes of current supply chain problems.

Let's be clear... the bottleneck is EMPTY containers taking up room on chassis and spilling over into container warehouses, docks, etc. This is clogging up the system and creating situations where multiple movements of both empty and full containers beyond the normal efficient "just-in-time" movement cannot take place.

To keep the goods moving, more containers are being built and a premium is being placed on empty containers. Just as the goods traffic is snarled, so are the return of empty containers. This is why the major rails shut down for one week in July and have since started metering to their midwestern hubs. For every chassis laden with goods inbound to that midwestern hub, the port must take one chassis laden with either an empty container or outbound goods. Here's a sampling from Freightwaves.

Until such time as the hubs in middle America are "un" choked, the ports will remain congested. And yes, there are driver shortages throughout the system. Truckinginfo.

It was nice optics to have some politico state the ports were now going to function 24/7 and then get 24/7 news coverage of the statement, but saying that and doing that are very different things. Where is the in-depth coverage and follow-up?

COP26

A meeting in Glasgow is to begin soon, to discuss ways to reduce carbon emissions and achieve some targets. A noble cause and more power to them BUT... apparently China and India can't even supply the expected paperwork AND at least one of their leaders is simply skipping the conference.

The current goals are cutting emissions in half by 2030 and net zero by 2050. Considering China and India are nearly one half of current emissions... it would require the rest of the world to be net zero right now. As both China and India are having difficulty finding enough coal to currently generate electricity and driving prices of coal upwards... if they were the only emitters, that 2030 goal is toast, imo. 

This is no reason to give up on emissions reduction, but realism needs to be on the table. It is certainly admirable to hope for the best but... we need to prepare for the worst as well. 

It should be noted Jaguar Land Rover is furnishing 240 electric vehicles to transport these folks around. However, there is likely not enough recharging capacity available, so Diesel generators will be used to re-charge. But this is not going to be that dirty oil, but HVO (hydrogenated vegetable oil). The type in fryers. Presumably this makes everything alright... even these vegetable oils were grown and harvested with old fashioned diesel vehicles. Or maybe all farm vehicles in the U.K. are now electric. /s

Oh, and before I forget, this from Deutsche Welle - UN says national climate targets 'fall far short'. So the even promises are not making the grade and we should recognize that promises often fall short of expectations.  

Note: Article written on 10-16-2021 and links may no longer be viable OR behind a paywall.