Inflation

[mullokintyre]

Mick, which manufacturer is adding to the inflation of their product -

View attachment 136168

Nice chart, but nothing to do with discussion.

Mick

 

[JohnDe]

Nice chart, but nothing to do with discussion.

Mick

"Inflation is a measure of the rate of rising prices of goods and services in an economy."

Advertising is an added expense which must be recovered by charging the consumer a higher retail price. Higher retail prices means that a workers wage buys less, wages need to increase to keep up.

What Causes Inflation? How It's Measured and How to Protect Against It

In this article, we examine the fundamental factors behind inflation, different types of inflation, and who benefits from it.

www.investopedia.com

 

[mullokintyre]

As seems to be a consistent theme recently, economists were surprised at the Jobless rate that came out today at 4.2%.
From Todays Australian

The unemployment rate has smashed expectations, falling in December to 4.2 per cent, the lowest since the GFC in 2008.
The number of employed increased by 64,800, a monthly change of 0.5 per cent. While the underemployment rate fell 1.9 per cent to 6.6 per cent. The participation rate remained constant at 66.1 per cent.
The positive figures continued the tightening of the Australian labour market, after the rate fell to 4.6 per cent in November. It has raised expectations that the Reserve Bank of Australia will increase the cash rate earlier than anticipated.

Taken in the first two weeks of December, however, the labour force figures didn’t take in the full extent of the Omicron outbreak.

The Australian dollar jumped more than 10 basis points on the news to US72.32c, its highest point in two months.

The next survey will be interesting when the full affects of the OMICRON outbreak are seen.
Mind you, according to Trading Economics there were a smidgin under 400,000 job vacancies at the start of January.
So, one might see a continuing tightening of the labour market, which will surely put pressure on the wages expectations.
The unions are already starting to flex their muscles partly to get pay rises for their members, and partly to make the Feds look even more inept as we head to the elction.
Mick

 

[JohnDe]

You suggest Tesla is now building cars faster and at a lower cost to their competitors without actually providing any proof of that statement. I will stick to some data.
If your statement above is true, and looking at the prices charged for the Tesla vehicles versus other vehicles, one would assume that Tesla must be making an absolute killing on their sales margins.
As sptrawler pointed out, revenue does not back up that sales margin call.
So what do we have left to support your statement?
Mick

Tesla did make a profit, and not a bad one for a company just about to open two more factories.

And as you mentioned sptrawler, he did say "With regard inflation, legacy car makers are pushing up the price of their ICE vehicles obviously to improve the profit margin to subsidies EV".

ICE vehicle manufacturers are not making a lot of profit on their EVs, some are having to subsidies their EV to make prices competitive.

Inefficiency, another contribution to inflation.

"Electric car maker Tesla has brushed off supply chain issues and the global microchip shortage to report record quarterly sales and profits.

Revenues rose to $13.76bn in the third quarter of the year, up from $8.77bn 12 months earlier.

The company, led by billionaire entrepreneur Elon Musk, posted a net profit of $1.6bn and sold 241,391 cars."

Elon Musk's Tesla reports record sales and profits

The electric car maker recorded its highest quarterly profit of $1.6bn and sold more than 240,000 cars.

www.bbc.com

 

[sptrawler]

For those who think inflation isn't an issue, how long the RBA keeps kidding people is the real issue IMO.

Fears for more industry collapses in 2022 as big builders go bust

The Master Builders Associations warn more firms could follow BA Murphy, Privium and Tasmanian Constructions as rising costs take a heavy toll.

www.abc.net.au

From the article:
More construction companies will fold this year as lock-in contracts leave builders unable to pass on the rising cost of labour and supplies, the Master Builders Association warns.
Two Queensland firms, Privium and BA Murphy, went into liquidation just before Christmas, with customers and subcontractors waiting to find out how much, if anything, they will get from the wash up
Liquidators FTI Consulting told the ABC that Sunshine Coast-based BA Murphy owed almost $11 million to about 550 creditors.

The company's 30 employees were owed more than $400,000.

BA Murphy also had 50 unfinished building projects across Australia, including 21 in Queensland, 18 in Victoria and about 11 in New South Wales.

Meanwhile, the final amount owed by Privium is likely to be more.
The company has 831 unfinished contracts around Australia and records show a $28m dollar loss in the 2020 financial year.

Sunshine Coast regional manager for Master Builders Queensland, Nicola Scott described the collapse of BA Murphy as "absolutely devastating".

She said the prices of supplies, from timber and steel to plumbing and tapware, had risen substantially over the past 12 months amid increased home building demand globally.

"I think it would be a miracle if somebody wasn't affected by that, because they're continually having to absorb the cost," Ms Scott said.

Lawyer Steven Burton deals with builders trying to adjust or get out of contracts.

As a partner in the Construction and Infrastructure Group at Holding Redlich, he said he was seeing a growing number of builders struggling with prices of supplies and labour.

 

[Smurf1976]

Another thought on inflation is what for want of a better term I'll call automatic compounding.

Examples:

Councils often use CPI as a basis for rate setting, on the logic that so long as they don't increase rates by more than CPI then they haven't increased them at all in real terms.

Wages in large organisations, especially government, tend to be negotiated for the entire workforce at one and either CPI is a reference point in those negotiations or the outcome includes CPI as a reference for the calculation of increases beyond the first year of the agreement. Eg x% now plus CPI after 12 months and again after 24 months.

Regulated monopolies, for example gas and electricity networks, very commonly use CPI as a reference in the calculation of permitted rate increases.

Things like bus fares, parking fees, fixed rate government charges (eg car registration) tend not to be directly linked to CPI but it does form the basis when a periodic review is done. Whoever's in charge works on the basis that they can hike the price by CPI and, since that's not a "real" increase, they can easily defend doing so.

I've just become aware that in some countries consumer mobile phone and similar contracts commonly include a clause for CPI indexation. So you've signed up to a (say) $50 per month plan but that's automatically annually incremented by CPI and as a customer you're deemed to have agreed to the new rate.

And many more.

The common theme and my underlying point being a positive feedback loop. As CPI increases that of itself automatically triggers, or at least opens the door to, further price rises. The higher CPI goes, the higher will be the increase in those things for which it forms the basis of determining.

I suspect that sort of arrangement was far less common last time inflation was a problem since the basis of price setting was quite different. Years ago manufacturers commonly "recommended" what price shops should sell products at and things like utilities were based on actual costs with or without a fixed profit ratio. CPI wasn't a direct reference in the setting of prices, the statistic itself didn't directly feed in to future prices whereas now it does.

Even the excise tax on petrol automatically goes up with CPI whereas that used to be a purely political decision to change it. The higher CPI goes, the higher petrol goes and that pushes the CPI up. Feedback loop.

 

[divs4ever]

Another thought on inflation is what for want of a better term I'll call automatic compounding.

Examples:

Councils often use CPI as a basis for rate setting, on the logic that so long as they don't increase rates by more than CPI then they haven't increased them at all in real terms.

Wages in large organisations, especially government, tend to be negotiated for the entire workforce at one and either CPI is a reference point in those negotiations or the outcome includes CPI as a reference for the calculation of increases beyond the first year of the agreement. Eg x% now plus CPI after 12 months and again after 24 months.

Regulated monopolies, for example gas and electricity networks, very commonly use CPI as a reference in the calculation of permitted rate increases.

Things like bus fares, parking fees, fixed rate government charges (eg car registration) tend not to be directly linked to CPI but it does form the basis when a periodic review is done. Whoever's in charge works on the basis that they can hike the price by CPI and, since that's not a "real" increase, they can easily defend doing so.

I've just become aware that in some countries consumer mobile phone and similar contracts commonly include a clause for CPI indexation. So you've signed up to a (say) $50 per month plan but that's automatically annually incremented by CPI and as a customer you're deemed to have agreed to the new rate.

And many more.

The common theme and my underlying point being a positive feedback loop. As CPI increases that of itself automatically triggers, or at least opens the door to, further price rises. The higher CPI goes, the higher will be the increase in those things for which it forms the basis of determining.

I suspect that sort of arrangement was far less common last time inflation was a problem since the basis of price setting was quite different. Years ago manufacturers commonly "recommended" what price shops should sell products at and things like utilities were based on actual costs with or without a fixed profit ratio. CPI wasn't a direct reference in the setting of prices, the statistic itself didn't directly feed in to future prices whereas now it does.

Even the excise tax on petrol automatically goes up with CPI whereas that used to be a purely political decision to change it. The higher CPI goes, the higher petrol goes and that pushes the CPI up. Feedback loop.

you forgot the 'extra sting ' ... plus GST

interesting times coming

 

[ducati916]

"Inflation is a measure of the rate of rising prices of goods and services in an economy."

Advertising is an added expense which must be recovered by charging the consumer a higher retail price. Higher retail prices means that a workers wage buys less, wages need to increase to keep up.

What Causes Inflation? How It's Measured and How to Protect Against It

In this article, we examine the fundamental factors behind inflation, different types of inflation, and who benefits from it.

www.investopedia.com

This definition is simply incorrect. Rising prices (CPI) are the symptom, not the disease.

Excessive currency and credit creation are the cause of the disease (inflation). You can have credit creation for productive assets, whereby the asset can pay for itself + interest, which is the type of inflation which productivity will ameliorate.

But when you have credit creation for consumption...then you get the inflation that drives currency devaluation and debasement. This drives PPI inflationary pressures which bleed into CPI pressures. If continued unabated, this can and will lead into a collapse of the fiat currency, which is a hyper-inflation.

The COVID hand-outs were the classic version of currency/credit creation for consumption worldwide.

Inflation is simply a loss of purchasing power of the currency due to debasement of the currency via credit creation.

jog on
duc

 

[ducati916]

Tesla did make a profit, and not a bad one for a company just about to open two more factories.

And as you mentioned sptrawler, he did say "With regard inflation, legacy car makers are pushing up the price of their ICE vehicles obviously to improve the profit margin to subsidies EV".

ICE vehicle manufacturers are not making a lot of profit on their EVs, some are having to subsidies their EV to make prices competitive.

Inefficiency, another contribution to inflation.

"Electric car maker Tesla has brushed off supply chain issues and the global microchip shortage to report record quarterly sales and profits.

Revenues rose to $13.76bn in the third quarter of the year, up from $8.77bn 12 months earlier.

The company, led by billionaire entrepreneur Elon Musk, posted a net profit of $1.6bn and sold 241,391 cars."

Elon Musk's Tesla reports record sales and profits

The electric car maker recorded its highest quarterly profit of $1.6bn and sold more than 240,000 cars.

www.bbc.com

Looking at some of the competition.

If you were going to buy today:

TSLA, F, GM, TM.



The best of the bunch is TM from an investment perspective.

Of course if you are buying simply on marque preference, well everybody has their own preference. On the numbers, whatever technical brilliance TSLA may/may not have, TM is right there with them, based on the numbers.

Of course if you bought TSLA stock back in 2015 or earlier and held it till today:



Of course, you are laughing all the way to the bank.

But to the argument of 'productivity', TSLA does not seem to be that far ahead of the industry.

jog on
duc

 

[JohnDe]

Of course if you bought TSLA stock back in 2015 or earlier and held it till today:


Of course, you are laughing all the way to the bank.

But to the argument of 'productivity', TSLA does not seem to be that far ahead of the industry.

jog on
duc

Not 2015 but still laughing.

“But to the argument of 'productivity', TSLA does not seem to be that far ahead of the industry.” Anything is possible, the majors have had a few years to catch up, though taking the chip shortage during 2021 into account your conclusion is lacking evidence. Show me your reasoning and and figures.

 

[JohnDe]

This definition is simply incorrect. Rising prices (CPI) are the symptom, not the disease.

Excessive currency and credit creation are the cause of the disease (inflation). You can have credit creation for productive assets, whereby the asset can pay for itself + interest, which is the type of inflation which productivity will ameliorate.

But when you have credit creation for consumption...then you get the inflation that drives currency devaluation and debasement. This drives PPI inflationary pressures which bleed into CPI pressures. If continued unabated, this can and will lead into a collapse of the fiat currency, which is a hyper-inflation.

The COVID hand-outs were the classic version of currency/credit creation for consumption worldwide.

Inflation is simply a loss of purchasing power of the currency due to debasement of the currency via credit creation.

jog on
duc

"This definition is simply incorrect. Rising prices (CPI) are the symptom, not the disease." I am not sure what you're saying, it could be that I am a bit foggy being a Friday and I've had a very busy week, or you are the foggy one

It has been a long time since my High School Economic Study's, I remember the definition in the same way that my first link describes it and also as the RBA puts it -

"How is Inflation Measured?
Inflation is an increase in the level of prices of the goods and services that households buy. It is measured as the rate of change of those prices. Typically, prices rise over time, but prices can also fall (a situation called deflation).

The most well-known indicator of inflation is the Consumer Price Index (CPI), which measures the percentage change in the price of a basket of goods and services consumed by households...."

Inflation and its Measurement | Explainer | Education

This series provides short, concise explanations for various economics topics.

www.rba.gov.au

 

[ducati916]

Not 2015 but still laughing.

“But to the argument of 'productivity', TSLA does not seem to be that far ahead of the industry.” Anything is possible, the majors have had a few years to catch up, though taking the chip shortage during 2021 into account your conclusion is lacking evidence. Show me your reasoning and and figures.

The numbers are already provided, but here they are again:



So in the same order moving L to R: TSLA, F, GM, TM:

Return on investment (ROI) has TSLA slightly ahead at 5%, which is still a real negative return if using CPI inflation at 7%. But of course the more accurate figure is the PPI number which for 2021 was 9.7%. Which provides a return of (- 4.7%). The reason that we use the PPI is because TSLA is a manufacturer sourcing raw materials and selling to consumers, the CPI number.

The PPI is knifing higher, which is why CPI numbers are driving higher: producers are trying to pass their cost structure forward to the end consumer.

So TSLA is the best of a bad bunch (industry) at least as far as these examples demonstrate. Possibly Volkswagon might have better numbers.

So as regards 'productivity' TSLA does not outrun inflation. Not even close.

jog on
duc

 

[ducati916]

"This definition is simply incorrect. Rising prices (CPI) are the symptom, not the disease." I am not sure what you're saying, it could be that I am a bit foggy being a Friday and I've had a very busy week, or you are the foggy one

It has been a long time since my High School Economic Study's, I remember the definition in the same way that my first link describes it and also as the RBA puts it -

"How is Inflation Measured?
Inflation is an increase in the level of prices of the goods and services that households buy. It is measured as the rate of change of those prices. Typically, prices rise over time, but prices can also fall (a situation called deflation).

The most well-known indicator of inflation is the Consumer Price Index (CPI), which measures the percentage change in the price of a basket of goods and services consumed by households...."

Inflation and its Measurement | Explainer | Education

This series provides short, concise explanations for various economics topics.

www.rba.gov.au

Your memory may well be reliable. Your High School however was deficient in its understanding.

CPI prices measure inflation much the same way as a thermomemeter measures your temperature. It does not however disclose the cause of your fever.

jog on
duc

 

[JohnDe]

Your memory may well be reliable. Your High School however was deficient in its understanding.

CPI prices measure inflation much the same way as a thermomemeter measures your temperature. It does not however disclose the cause of your fever.

jog on
duc

Sorry I still am not understanding your analogy.

Are you saying that the RBA is incorrect?

PS. I did no mention CPI, you have.

How is Inflation Measured?
Inflation is an increase in the level of prices of the goods and services that households buy. It is measured as the rate of change of those prices. Typically, prices rise over time, but prices can also fall (a situation called deflation).

The most well-known indicator of inflation is the Consumer Price Index (CPI), which measures the percentage change in the price of a basket of goods and services consumed by households.

Inflation and its Measurement | Explainer | Education

This series provides short, concise explanations for various economics topics.

www.rba.gov.au

 

[JohnDe]

The numbers are already provided, but here they are again:

View attachment 136212View attachment 136213

So in the same order moving L to R: TSLA, F, GM, TM:


jog on
duc

Sorry but they are just numbers with no reference. Anyone worth half their salt would give some sort of proper information with either

1. company names linked to the figures, with a source reference or
2. a link to the information so as it can be confirmed.

What you have supplied is just a pictures with numerical figures with no dates, no references and your description that we are supposed to take for granted.

I have seen the figures for the automotive industry ad it does not look good. They are only just starting to ramp up production due to the chip shortage, something that Tesla was able to work around. Tesla vehicle production was at full capacity, they sold everything that they build. No other manufacturer could claim that, many had to shut down lines while they waited on parts.

 

[ducati916]

Sorry I still am not understanding your analogy.

Are you saying that the RBA is incorrect?

PS. I did no mention CPI, you have.

Inflation and its Measurement | Explainer | Education

This series provides short, concise explanations for various economics topics.

www.rba.gov.au

Yes, that is exactly what I am saying.

jog on
duc

 

[ducati916]

Sorry but they are just numbers with no reference. Anyone worth half their salt would give some sort of proper information with either

1. company names linked to the figures, with a source reference or
2. a link to the information so as it can be confirmed.

What you have supplied is just a pictures with numerical figures with no dates, no references and your description that we are supposed to take for granted.

I have seen the figures for the automotive industry ad it does not look good. They are only just starting to ramp up production due to the chip shortage, something that Tesla was able to work around. Tesla vehicle production was at full capacity, they sold everything that they build. No other manufacturer could claim that, many had to shut down lines while they waited on parts.

Fine: https://finviz.com/quote.ashx?t=TSLA. For the rest just type in: F, GM, TM.

jog on
duc

 

[MovingAverage]

Average annual wholesale spot prices (calendar years):

Queensland:
2019 = $86.30
2020 = $52.65
2021 = $119.89

Any insight into what gives in QLD...most states trending downwards or flat but QLD is bucking the national trend and climbing.

 

[JohnDe]

Yes, that is exactly what I am saying.

jog on
duc

"CPI definition - the RBA is incorrect"

Big call.

Shame all those past and present RBA people have wasted their education

 

[JohnDe]

Fine: https://finviz.com/quote.ashx?t=TSLA. For the rest just type in: F, GM, TM.

jog on
duc

None of that shows that the other manufacturers are producing vehicles at a more efficient rate than Tesla, and that was/is my original theme.

Your link does go further by giving links to related news proving that the manufacturers had issues producing vehicles, thus not able to sell. And as I mentioned before, Tesla increased its production and sold everything that they produced. Have a look at the last quarter figures.

Produce less = sell less + factory idle time + staff idle time = poor efficiency = poor productivity

TOKYO (Reuters) - Toyota Motor Corp is slowing production at as many as 11 plants in Japan because of rising COVID-19 infections among its workers and those at parts suppliers, it said on Thursday.

That disruption, which comes amid a shortage of semiconductors that is already forcing it to curb output, could cut production plans this month by about 47,000 vehicles, a Toyota spokesperson said.

Toyota on Tuesday said it expects to fall short of an annual target to build 9 million vehicles because it did not have enough chips. The company's business year ends on March 31.

TM - Toyota Motor Corporation ADR Stock Price and Quote

TM - Toyota Motor Corporation ADR - Stock screener for investors and traders, financial visualizations.

finviz.com