Two words: base effects.<p>Year-over-year comparisons reflect the abysmal economic conditions during the pandemic. It's like comparing your current net income to one year ago but one year ago you were unemployed and paying off student loans while today you have a job at Google.<p>The comparisons to watch are month-over-month (MoM). The BLS reports MoM CPI increased 0.6%, after a 0.8% MoM increase in April:<p><a href="https://www.bls.gov/news.release/cpi.nr0.htm" rel="nofollow">https://www.bls.gov/news.release/cpi.nr0.htm</a><p>So the rate of CPI change is negative MoM.<p>From the same page, BLS reports CPI less food and energy fell MoM from 0.9% in April to 0.7% in May.<p>The real headline here should be that inflation is slowing on a MoM basis.<p>It's that rate of change of inflation that matters. If it remains negative (disinflation), then price increases will continue to subside.<p>But if CPI growth remains negative for long enough, it can translate into deflation. That's not an outcome being discussed widely now, and for that reason (among others) it should be considered seriously.<p>Policy makers talk and act as if only one of those two outcomes truly terrifies them: deflation. Japan has been in an on-again-off-again deflationary slump for decades, despite the BoJ now owning a good chunk of the Japanese stock market, many years of QE, and substantial deficit spending.
It's worth noting that it's 5% annualized, ie. if inflation kept growing at the same rate for a year, it would be 5%. Prices didn't actually rise 5% in one month.<p>edit: it isn't annualized, but rather YOY<p>edit2: annualized == YOY, so either statement is correct
From what baseline? The pandemic dip? Or pre-pandemic levels?<p>Here's some actual journalism: <a href="https://jabberwocking.com/the-price-of-bacon-is-up-8-1/" rel="nofollow">https://jabberwocking.com/the-price-of-bacon-is-up-8-1/</a>
The Consumer Price Index (CPI) is a measure of inflation and you should be aware of the adjustments it makes to accurately interpret the measure. It uses "owner equivalent rent" instead of housing prices and makes substitutions for example. Rob Arnott poked fun at the index a few years ago when they substituted chicken for beef.<p>It's incredible to reflect on how different the macro landscape is now compared to the last time inflation was this high. In 1984, inflation was 4%, the long bond yield was 14%, and the cyclically adjusted priced to earning ratio was 10.<p>Now, the long bond yield is 2.3% and the CAPE is 37.4.<p>Real long bond yields (nominal yield minus inflation) have gone from 10% in 1984 to -2.7% now. The yield on Treasury Inflation Protected Securities is negative, see the government website: <a href="https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield" rel="nofollow">https://www.treasury.gov/resource-center/data-chart-center/i...</a>
It's important to remember that inflation hurts the poor most. The wealthy will have their money in assets that may benefit from inflation (stock market up 30+% since pre-covid seem a little odd to anyone else?). The poor spend a larger percentage of their income on consumer goods that will most likely be affected.<p>Inflation is a nefarious way to finance spending without hidden consequences and distortions.
Thats from May2020 to May2021, and includes a collapse in consumption (for example fuel).<p>Look at chart 1:<p>Apr2021 had 0.8% month to month
May2031 had a 0.6% month to month.<p>Which annualize ((1+i)^12) to: 10% and 7% respectively.<p>Or, a better estimate:<p>((1.008)*(1.06))^6=1.087<p>Or 8.7% annualized inflation using the data of the last two months.
I feel like all these numbers are bogus. Housing? Seeing as it's nearly half of people's spending, I feel it should be weighted appropriately. And if so, real prices would be closer to 20% inflated in most markets YOY.
the reason wallstreet is poshing this as positive news is because investors react positively to the idea of pandemic recovery. most commenters have already proven this false. even if the 5% were true, it doesnt erase the billions in back-rent debt most americans are saddled with due to the eviction moratoriums. recovery IMO is still 2-5 years out.<p>The reason you should be seriously concerned about this inflation is because the fed never backed off quantitative easing from 2008, and in doing so has created a corporate credit bubble. To combat inflation in 2021, all they can do is hand-wave and insist this is "transient" inflation. nudging interest rates would cause a corporate debt crash.<p><a href="https://en.wikipedia.org/wiki/Corporate_debt_bubble" rel="nofollow">https://en.wikipedia.org/wiki/Corporate_debt_bubble</a>
Oh no! The experts told me that the record April inflation was a one time thing.<p>The dollar index also shows that the dollar is down ~10% in value since 2018-2020. Which is concerning, because the USA is the strongest economy so you would expect people to flee to the dollar in times of crisis, pushing up its value.
China has grown successfully with inflation ranging from 5-15% over the last 3 decades.<p>If inflation maintained a persistent 5%+ clip over the next 10 years how would that effect VC funding and startup formation?