Thursday, December 9, 2010

Inflation update

With the recent rise in interest rates I thought revisiting inflation rates would be helpful.

3 data series on this graph [click to enlarge]:
Blue for total Consumer Price Index (CPI) aka 'inflation'
Red for inflation minus (food and energy)
Green for housing subset

Notice how overall inflation tends to peak at the onset of a recession.
Headline inflation is still very low overall at near 1%
Housing inflation is still negative.
Inflation less food and energy is at a low for this timeline and is trending down.  Yes, we all need to eat and consume energy but both of those items are extremely volatile and stripping them out of the data series can provide additional useful information.

China comes to mind when people speak about energy and food inflation and like almost every other basic commodity the Middle Kingdom overshadows other negative factors such as Europe's continuing austerity drive and our own tepid domestic growth.  To me it appears whichever way China goes the energy, food, metals, etc. complex will follow.


  1. i say strip out housing(i think they use rents or something) too cause its been volatile lately-ya think?

    and add beer(my girlfriend says its not food) and i can promise you my brand has gone up 18% in 3yrs.

    construction is 60% of china GDP.....consumption down 40 to 35%
    exports 5%

    per chanos 30 seconds ago CNBC


  2. Right now it appears housing is dragging CPI down with food and energy pulling it up. The latter 2 are much more volatile so right now there's an upside swing to CPI in my opinion. Sorry the beer is more expensive, but remember, life is too short to drink cheap beer.

    I think Chanos will ultimately be proved correct. Timing is the issue.....