Thursday, August 11, 2022

Producer Price Index for July 2022

Time for more painful inflationary discussion. The BLS has now released the July Report. (historical releases)

The basic graph...

Yeehaw!! We finally have a negative number -0.5%... the first since March, 2020. We can jump for joy, as the inflation peak is finally here. Or is it?

Maybe not, if you like to do certain things... like eat. Food +1.0% M/M and +15% Y/Y. Of course, we shouldn't put all our eggs in one basket, although eggs up are +44.2% for the month and 171.5% for the past year. Maybe one egg is all you can afford. Can you even afford the basket?

After a slowdown in beef and veal and some easing of pricing at both the CPI and PPI... guess what? Down -4.4% since last year, but up 9.5% for the month!! Maybe time for the other "white" meat, as pork continues to slip, -0.5% for the month and -7.7% annual. Maybe some chicken, as well. 

BTW, foods are largely weather dependent and in case you haven't noticed... hot weather + prolonged dry conditions, will impact food going forward. Even a change in diet will be hard to escape inflation, in my humble opinion. Food is a basic necessity.

Energy seems to be falling, but step away from gasoline for a moment and you realize that Electricity is rising and although Natural Gas slipped last month, expect a rebound going forward. The futures market says so.

Overall, energy is more about geo-political issues and demand/supply. Supply in some areas will continue to falter, while demand in others may slip. 

For the month...
  • All items, -0.5%
  • Food, +1.0%
  • Energy, -9.0%
  • All items less food and energy, +0.2%
One year...
  • All items, +9.8%
  • Food, +15.0%
  • Energy. +36.8%
  • All items less food and energy, 8.5%
There are many nuggets of information in the report, to fit whatever bias you may have.

The current state of July reports and releases (as always, the Eurostat/USA figure is my concoction based on the Eurostat formula)...


The upstream numbers are decreasing, but with PPI final demand at 9.8% and the CPI-U at 8.5%... I don't think inflation is quite done with us.

While you are enjoying your roasted coffee (-2.3% from June), please explain why corporate media is avoiding much discussion of this PPI release?😞


Wednesday, August 10, 2022

Review of EIA Weekly Report for August 10th 2022

The EIA released the latest weekly report, and I am still not seeing demand destruction. Yes, from this time last year, but it is hard to make a call on demand destruction, when the days supply of gasoline falls from 26.2 last week, to 24.9 for this week's report. 

Yes, Gasoline Inventories fell nearly 5.0M BBLS from last week's report. Might the imports/exports of gasoline have something to do with that. We did export 3.2M BBLS more than import... last week. I am not sure where all those numbers citing demand destruction are coming from. 

The market for gasoline has shot up 11¢, as of this writing. Not the only one... NOT seeing demand destruction. 


Yes, I could be looking at all this wrong, but it would take some proof, that I haven't seen

On to the Natural Gas stuff...
I have about give up on trying to understand the European (including U.K.) situation. I still track it and read about it, but figure there is enough to worry about on this side of the Atlantic. Although... whether or not we in the U.S. are in a recession or about to be, it is becoming very clear that the other side of the Atlantic will almost definitely be. Does it aggravate our situation?

While the U.S. natural gas prices are back on the rise, I would expect a bit of a jump going forward, depending on whether the Freeport facility gets up to full run. It has stated early October start-up. Plus, Calcasieu Pass has been granted approval for blocks 5 and 6, whatever that means.

Meanwhile, here's hoping for a mild winter...

We are staying ahead of the curve, so that is good. 

Breakdown of CPI DATA and Real Earnings, July 2022

It is that time of month, to survey the damage from inflation. The BLS report was released this morning and it was a surprise. (historical releases)

This is what I projected for the month...

So, I will project 0.3%~0.5% month to month and a reading of 8.9%~9.1%. I fervently hope I am over shooting, this time. 

I did overshoot, as well as many others. 

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in July on a seasonally adjusted basis after rising 1.3 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 8.5 percent before seasonal adjustment.
My own personal CPI was up a bit, after all the checks, credit cards, etc. were accounted for...

My annual rate is 7.8%, which is better than the CPI-U and CPI-W. Which brings me to the C.O.L.A. 

As July is 1/3 of C.O.L.A., it is very important. The forecast took quite a hit, from last month...

It would probably be best to state the 8.6%~9.0% is the high range, with expectations of a slide from there. 

However, while the CPI-U inflation number of 8.5% seems like an improvement, the food section is worrying. The report avoided the "food at home" on annual basis of 13.1%, although it did mention the 1.3% month to month rise, which is the 7th consecutive month of 1.0% or higher. Chew on that!!

While it is noted that gasoline fell, electricity has now risen 15.2% y/y and 3rd consecutive m/m increases of over 1%, with July at 1.6%.

The Real Earnings report also came out this morning...
Hooray, an uptick away from the downward trend, and getting closer to real earnings of pre-Covid.
Weekly earnings mirrored the hourly earnings. Both are due to a flat month to month CPI report, which is better than the opposite. Is it the start of a trend?

Not a bad set of number, considering the expectation. 

Now for next month's CPI-U, and here's hoping I am once again overshooting... month over month at 0.0%~0.2% and year to year of 8.3% to 8.5%. 

While gasoline is expected to have similar drops, relative to July's numbers... they are currently nearing their floor. The rest of the energy section will continue to rise, and likely food at home. This ain't over.

Even the 16% Trimmed Mean and the Median says it ain't over. Tomorrow's PPI might provide a hint.


Sunday, August 7, 2022

Oh My! Social Media is Hilarious!

Spain raises temperature requirements to 25°C.

That was a headline that popped up on one of my social media feeds from a reputable(?) news organization. It was saying how Brits would suffer in air conditioned rooms, that cannot be lower than 77°F. The horror of it all. (Didn't they once rule India)? I think it might be hot, although I have never been there. Maybe it was a lot cooler, before global warming, /s

I have never been to Spain, but would think it is a rather warm country and traveling there to stay 24/7 in an air conditioned room, would seem to be a waste of time for me. I would expect myself to be out and about most of the day... sightseeing. 

If the room was too darn hot at night, I could pack my bags and go sightseeing in Norway or something. But, it may be the Brits are required by law to visit Spain during hot weather. Not familiar with their laws. 😀

Begging  on social media site.

There are some folks that have no problem talking about others behind their back. Then there is talking on one website about others on another website, while not mentioning the other person, but mentioning the website.

This happened recently and the complaint was about someone on another website "begging" for some type of monetary or donation assistance.

In my life, all manner of instances regarding someone wanting something for some cause.

  • High school kids selling magazines for some cause.
  • Girl Scouts selling cookies for some cause.
  • Door to door salesman trying to sell stuff for their profit.
  • Emails galore about some charity
  • Charities infiltrating the work place
  • Charities congregating outside of stores.
  • Churches passing the collection plate
  • Panhandlers all over the place.
The list is endless, so why complain about something on a social media site, that can easily be scrolled past, unlike some of the above? I sometimes wonder, if these complainers about that other social media site, are also complaining on that website... about the the current one they are complaining on?

(I have not mentioned any websites by name, as is frequently done on these various websites, so I can pretend to be above the fray).

Elon Mush and social media

The basic premise being that Elon Musk is really not so important, other than through social media, and does not deserve the social media attention. 

I saw this complaint about Elon Musk ON SOCIAL MEDIA. 

It comforts my soul to realize there might be stupider people than I. Which, when I think about it a bit more... is not so comforting and actually downright troubling. 😓Maybe we are doomed!

A round earth was a scam and now Flat earth is a scam.

A while back the nutcases were proffering the notion the earth was flat and the Illuminati or whomever are lying to us. 

Now some of these same cretins are saying the earth is not flat, and the United Nations is attempting to deceive us, by saying the earth is flat. 

Which spins faster... the earth or some of these loonies' heads?😲

via GIPHY

Saturday, August 6, 2022

Are We, Or Aren't We...

... in a recession?

No one truly knows, although many have an opinion, and depending on political stripe... we either are or we aren't. And it is always because something is a clear sign. Never mind, those government stats containing revisions from previous months, it must be deemed as absolute. 

Then there are the BIG money folks, that have gotten rich off QE and want those glory days to return... meaning the FED to reverse policy. BIG money really needs there to be a recession for that to happen and will lobby long and hard, that we are already in a recession and are betting on the FED to ease off rate hikes, etc. 

GDP gets revised a couple of times and then is revised once a year thereafter. 


Yep... revised from a negative in June 2015, to a positive in one month after third release and by 2021, was downright stellar.

Citing GDP as some guarantee, one way or the other... is based on something likely to be revised. Besides, it might just be possible that the 3rd quarter of this year could be positive. Would that mean the recession is over?

Employment situation... the word revised is used 4 times in the latest report. This month...
The change in total nonfarm payroll employment for May was revised up by 2,000, from
+384,000 to +386,000 https://www.bls.gov/news.release/archives/empsit_08052022.htm

The previous month...

The change in total nonfarm payroll employment for April was revised down by 68,000, from +436,000 to +368,000, and the change for May was revised down by 6,000, from +390,000 to +384,000 https://www.bls.gov/news.release/archives/empsit_07082022.htm

Which is it? 

My goal is not to cast doubt on government reports, but putting my heart and soul into a specific set of data as gospel... is just plain foolish, in my opinion. 

Earlier I mentioned the possibility of a 3rd QTR GDP print being positive. I base that on the blowout of trade balance and how it impacted the 1st two Quarters.


The trade deficit started blowing out in 3rd Qtr. 2020 and then accelerated, with another major drop down in the 1st Qtr, and barely easing the 2nd Qtr. That would be the period when our business leaders went nuts with over ordering. That may ease back a bit going forward. 

In an alternate universe, where the trade imbalance did not drop so dramatically, the 1st Qtr. GDP would have been +2.3% and 2nd Qtr. at +1.6%

Of course on the potential negative side is the extreme jump in credit. I have no idea how much longer that can last, but with the Federal Reserve ready to push up rates further... something's got to give, in my opinion. BUT, that set of data might likely also be revised. 

There is an old adage of "When your neighbor is out of a job... it's a recession. When you're out of a job... it's a depression". Probably the most accurate of all metrics!

Now for MY opinion. We are not in a recession yet. We may soon be, but the severity is unknown, until we are actually in the middle of it. I would say that any looming recession in the U.S. will be exacerbated by the current economic morass of Europe. 

I am trying to get a grasp on why Germany's trade balance is narrowing, when the Euro is cheaper now than 1 year ago. Is it difficulty in obtaining necessary materials to manufacture items? Is it the high cost of Natural Gas that is offsetting any gains from the weak Euro? Is it a combination of both, or several other factors. 

I don't know, but do worry about the impacts on Europe as a whole, which would include the U.K. in this instance. The natural gas issue, will not go away anytime soon, in my opinion. The materials issues are likely not to go away anytime soon, as well. 

This appears to be a very challenging time for Western Civilization. 

We seem to have a situation where many folks are being duped by big money into believing we are already in a recession, which could cause a recession via lack of confidence. Be careful what you wish for. 

Of course, we also have folks in the U.S. eagerly anticipating and repeating statements of a C.O.L.A. being above 10.5% or more, without considering how much additional inflation is required to get us to that level. But then, the point might be to inflate expectations and then cry foul, when it doesn't happen. Be careful what you wish for.

Wednesday, August 3, 2022

Review of EIA Weekly Report for August 3rd 2022

I am still looking for the demand destruction in gasoline... and just not seeing it. There was likely a pull back in June and early July, but demand seems to be on a plateau. Crude Inventory is up +4.4M BBLs, distillates down -2.4M BBLs and gasoline up slightly at 163K barrels.

The U.S. exported 3.8M BBLs more Crude and Petroleum products, than imported, with the tally from March 1st at 151.1M BBLs. Gasoline exports outweighed imports by 1.6M BBLs last week and that tally now stands at 19.9M BBLs since March 1st.


At this point in time, the futures market suggests pump prices will continue to fall and should go below the $4 mark, by mid August and then maybe another 15¢ or so by end of month. A word of caution as we are heading into peak hurricane season. Let's keep our fingers crossed. 

The natural gas futures aren't signaling any big changes...
I have somewhat delved into U.K. futures and the current price is suggestive of a 49% rise in bill to £2,972 annual. I have been reading about another potential rise for 1st of the year and it would tack on another £600 annual, based on the December futures price. I don't think I have any publicly appropriate adjectives for any of those rises. 

Nearer to home, the big question is our natural gas.
A year ago, we were at the top of the 5 year maximum and now we are near the minimum. Not sure how to feel about that. I do not directly use natural gas, but I do use electric generated by natural gas, products that were made in factories that use natural gas, etc. 

I'll just have to monitor my utility bills, my grocery bills, other purchases, etc. I think there is a word for when things go up in price... is it transitory? No wait it is inflation! Crap, I thought I left that in the rear view mirror... some 40 years ago. 


Friday, July 29, 2022

GDP, PCE, Income and Outlays, Inflation Summary and July Wrap-up!

 

The real GDP for the 2nd Quarter was released and it was below forecasts. I think it was generally in the 0.8% annualized. My pathetic attempt was 0.6% annualized. The result was -0.9%. The pundits have fixated on the falling inventories, but I noticed the imports/exports did not match expectations. 

The consumer was steadfast in increasing spending, but slowly. (Did I mention real GDP is after adjusting for inflation?)

Here is a bit of history for consumer spending relative to real GDP.
And this is fun with numbers, which is consumer spending after taking out a major contributor or detriment to GDP. I'll let you guess what that is.

While the consumer edged up, and some gains in net export, Gross Private Domestic Investment was the big drag, it was the inventory numbers that pulled it down by $107B from last quarter. That was the surprise for many people and the difference between the result and what was forecast. 



Then we have Personal Income and Outlays, which...
Personal income increased $133.5 billion (0.6 percent) in June, according to estimates released today by the Bureau of Economic Analysis (tables 3 and 5). Disposable personal income (DPI) increased $120.4 billion (0.7 percent) and personal consumption expenditures (PCE) increased $181.1 billion (1.1 percent).

The PCE price index increased 1.0 percent. Excluding food and energy, the PCE price index increased 0.6 percent (table 9). Real DPI decreased 0.3 percent in June and real PCE increased 0.1 percent; goods increased 0.1 percent and services increased 0.1 percent (tables 5 and 7). (emphasis added)

Even with disposable income sliding after inflation adjustments, the consumption increased after inflation adjustments. Borrowing?

Then the various inflation numbers...

Not much to be enthusiastic about. It would appear that some of the forecasts are starting to downgrade inflation number for July and I would tend to agree. At best it would seem to have peaked. 

As to whether we are in a recession or not... the idea of "technical" recession is an imported idea. The U.S. has never jumped on the 2 quarter as recession bandwagon. Harken back to the Great Recession. It was deemed the U.S. started into recession in December 2007, yet we did not have back to back negative GDP, until 3rd and 4th quarter 2008.

I would think we are likely heading into a recession, but not at the moment. Then the issue is how long and how deep? 

So good luck and on to next month's data. 

1-17-2025 Week In Review

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