Inflation

[mullokintyre]

From The Australian

Two-thirds of Australians expect rate hikes in the coming 12 months, and more than one in four believe rates will climb by more than a percentage point, according to a new survey.
The latest Westpac consumer sentiment report revealed another dip in confidence in February, despite declining Omicron case numbers and talk of unemployment heading to near 50-year lows later this year.

The bank’s confidence index eased from 102.2 points in January, to 100.8pts in a survey conducted over the week to February 6.
Westpac chief economist Bill Evans said it was “surprising“ households were more downbeat than a month earlier, given the improving health situation and the robust jobs market.

Questions gauging views on the economy showed a solid lift in sentiment, but those asking about the state of households’ finances now and in the future suffered large deteriorations.

Perhaps these citizens of OZ read the economic indicators and say what they actually mean to them, rather having an economic/political/financial agenda that so many of the professional players seem to have.
Mick

 

[mullokintyre]

That darn transitory inflation just won't go away.
From theWall Street Journal

A relentless surge in U.S. inflation reached another four-decade high last month, accelerating to a 7.5% annual rate as strong consumer demand collided with pandemic-related supply disruptions.

The Labor Department on Thursday said the consumer-price index—which measures what consumers pay for goods and services—in January reached its highest level since February 1982, when compared with the same month a year ago. That put inflation above December’s 7% annual rate and well above the 1.8% annual rate for inflation in 2019 ahead of the pandemic.

The so-called core price index, which excludes the often volatile categories of food and energy, climbed 6% in January from a year earlier. That was a sharper rise than December’s 5.5% increase and the highest rate in nearly 40 years.


Prices were up sharply in January for a number of everyday household items, including food, vehicles, shelter and electricity. A sharp uptick in housing rental prices—one of the biggest monthly costs for households—contributed to last month’s increase.

High inflation is the dark side of the unusually strong economy that has been powered in part by government stimulus to counter the pandemic’s impact. January’s continued acceleration increased the likelihood that Federal Reserve officials could speed up a series of interest-rate increases this spring to ease surging prices and cool the economy.

The average US household is now spending $250 more per month on an average basket of items compared to what they spent in 2018/2019 according to the New York Post
Even if the pundits who suggest inflation is only transitory are correct, it will not give back the extra 250 per month these households are paying, and will continue to pay forever, which makes it a boot of a moot point for those doing all the paying.

Mick

 

[Tyre Kicker]

But, but … it’s transitory.

Close relative in the US was saying he can’t believe the increase in food and eating out. Has noticed it acutely.

Interesting times ahead.

 

[over9k]

 

[over9k]

U.S numbers in case anyone's interested:

 

[CityIndex]

Despite Australian inflation looking tame relative to the 40-year highs in US, the difference in outlook between the RBA and Federal Reserve could be worth watching

Earlier this morning, Governor Lowe spoke about his willingness to temporarily tolerate inflation above the 3% target, on fears that raising interest rates too soon might hinder employment. Although stating that a rate hike is still possible this year, the RBA will remain patient and watch how local CPI figures develop before making any decisions.

This is in stark contrast to the Federal Reserve who are looking increasingly hawkish after last night’s hot CPI print. Fed President Bullard even added to recent speculation, stating that a 50bps rate hike in March and interest rates at 1% by July are now possible.

All trading carries risk, but it should be interesting to see if this divergence in policy plans results in broader gains for the US Dollar against the Aussie Dollar over the mid-term.

 

[sptrawler]

Despite Australian inflation looking tame relative to the 40-year highs in US, the difference in outlook between the RBA and Federal Reserve could be worth watching

Earlier this morning, Governor Lowe spoke about his willingness to temporarily tolerate inflation above the 3% target, on fears that raising interest rates too soon might hinder employment. Although stating that a rate hike is still possible this year, the RBA will remain patient and watch how local CPI figures develop before making any decisions.

This is in stark contrast to the Federal Reserve who are looking increasingly hawkish after last night’s hot CPI print. Fed President Bullard even added to recent speculation, stating that a 50bps rate hike in March and interest rates at 1% by July are now possible.

All trading carries risk, but it should be interesting to see if this divergence in policy plans results in broader gains for the US Dollar against the Aussie Dollar over the mid-term.

Maybe the RBA want the AUD in the US60- 70c range, rather than the US70-80c range?

 

[qldfrog]

Maybe the RBA want the AUD in the US60- 70c range, rather than the US70-80c range?

I think the rba will take what it gets.if AUD is at 69c, that is a big jump in inflation here: fuel, meat, importS aka everything consumed but fruit and vegies and local services..which are already going up the roof

 

[DannyB0000]

Despite Australian inflation looking tame relative to the 40-year highs in US, the difference in outlook between the RBA and Federal Reserve could be worth watching

Earlier this morning, Governor Lowe spoke about his willingness to temporarily tolerate inflation above the 3% target, on fears that raising interest rates too soon might hinder employment. Although stating that a rate hike is still possible this year, the RBA will remain patient and watch how local CPI figures develop before making any decisions.

This is in stark contrast to the Federal Reserve who are looking increasingly hawkish after last night’s hot CPI print. Fed President Bullard even added to recent speculation, stating that a 50bps rate hike in March and interest rates at 1% by July are now possible.

All trading carries risk, but it should be interesting to see if this divergence in policy plans results in broader gains for the US Dollar against the Aussie Dollar over the mid-term.

The EU central bank is reluctant to raise interest rates as well despite record inflation, 5.1%. Am not sure what’s wrong with normalising interest rates for a change.

 

[divs4ever]

Maybe the RBA want the AUD in the US60- 70c range, rather than the US70-80c range?

that won't take much of a nudge , but MAYBE they should attach a safety line first , lest it continue sliding into the 50s and beyond

 

[divs4ever]

The EU central bank is reluctant to raise interest rates as well despite record inflation, 5.1%. Am not sure what’s wrong with normalising interest rates for a change.

far from normal times .. so many ( Central ) banks buying bonds to keep up the appearance that the bond market is invest-able ( AKA the mug instos will still buy this stuff )

 

[over9k]

Despite Australian inflation looking tame relative to the 40-year highs in US, the difference in outlook between the RBA and Federal Reserve could be worth watching

Earlier this morning, Governor Lowe spoke about his willingness to temporarily tolerate inflation above the 3% target, on fears that raising interest rates too soon might hinder employment. Although stating that a rate hike is still possible this year, the RBA will remain patient and watch how local CPI figures develop before making any decisions.

This is in stark contrast to the Federal Reserve who are looking increasingly hawkish after last night’s hot CPI print. Fed President Bullard even added to recent speculation, stating that a 50bps rate hike in March and interest rates at 1% by July are now possible.

All trading carries risk, but it should be interesting to see if this divergence in policy plans results in broader gains for the US Dollar against the Aussie Dollar over the mid-term.

Same story in aus as usa:



They've been telling us they're going to err on the side of too hot inflation than too low unemployment ever since the pandemic began.

The only question is where the line for overdoing it is.

 

[over9k]

Speaking of which, brent crude is now knocking on the door of $97/barrel

 

[CityIndex]

Speaking of which, brent crude is now knocking on the door of $97/barrel

WTI also began testing $95 today as tensions in Eastern Europe continued to escalate this morning, adding to the speculation of further supply disruptions.

If Russia does move ahead with their invasion of Ukraine as many reports are suggesting, we could see both WTI and Brent Crude test $100 and potentially breakout in this week. However, a more diplomatic approach by the parties involved could cause those supply fears could quickly cool, resulting in oil prices pulling back.

All trading carries risk, but it’ll definitely be worth keeping oil on the watchlist as this story unfolds.

 

[mullokintyre]

Damn that persistent inflation!/
Why can't it be transitory like its supposed to?
From Zero Hedge

January saw US producer prices rise 1.0% MoM (twice the expected 0.5% jump) and is the 21st straight month of MoM rises. This sent prices up 9.7% YoY (record highs and well above the expected +9.1% YoY)...



Source: Bloomberg
Final demand services: Prices for final demand services advanced 0.7 percent in January, the same as in December. Three-fourths of the rise in January can be traced to a 0.9-percent increase in the index for final demand services less trade, transportation, and warehousing. Likewise, margins for final demand trade services moved up 0.6 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand transportation and warehousing services were unchanged.

A major factor in the January increase in the index for final demand services was hospital outpatient care prices, which rose 1.6 percent. The indexes for machinery and vehicle wholesaling; apparel, jewelry, footwear, and accessories retailing; traveler accommodation services; portfolio management; and truck transportation of freight also moved higher. Conversely, margins for fuels and lubricants retailing fell 9.7 percent. The indexes for transportation of passengers (partial) and for physician care also decreased.

Final demand goods: Prices for final demand goods advanced 1.3 percent in January after declining 0.1 percent in December. Over 40 percent of the broad-based increase can be traced to a 0.8-percent rise in the index for final demand goods less foods and energy. Prices for final demand energy and for final demand foods also moved higher, 2.5 percent and 1.6 percent, respectively.

Within the final demand goods category in January, the index for motor vehicles and equipment rose 0.7 percent. Prices for diesel fuel, gasoline, beef and veal, dairy products, and jet fuel also increased. In contrast, the index for iron and steel scrap decreased 10.7 percent. Prices for unprocessed finfish and for natural gas also moved lower.

OOI prices rising at 1% MOM translate into some larger increases in final prices, so inflation will not be going away any time soon.
And just to add to the misery,

The pipeline for PPI continues to suggest more upside to come as Intermediate demand prices are soaring still...

There still seems to be plenty of pent up inflationary effects in coming months.

Mick

 

[over9k]

OK NOW THINGS ARE REALLY DIRE

 

[mullokintyre]

From Todays Australian

Unemployment was steady at 4.2 per cent in January but hours worked across the country plunged by 9 per cent, as the Omicron wave which triggered severe staff shortages across many industries did not translate into job losses.
The number of employed Australians lifted by 12,900 to 13,255,000 people, seasonally adjusted figures from the ABS showed.
Full-time employment was down by 17,000 people, and part-time employment increased by 30,000 people.
The Reserve Bank expects the jobless rate to reach 3.75 per cent by the end of the year.
Recruitment activity powered ahead at the start of the year despite the latest Covid-19 wave, sending another signal the labour market remains extremely tight and demand for workers strong.
The number of job ads on online classifieds site Seek jumped by the most in the 25-year history of the data, up 4.9 per cent to be up 40 per cent on a year earlier, and a third higher than pre-pandemic.
Hospitality and tourism, trades and services roles, and manufacturing, transport and logistics drove the big January increase, Seek said.

The worry is the hours worked.
A drop of 9% is significant. It suggests that employers are trying to keep the workers they have, rather than cutting staff.
Job ads increasing the most in the 25 year history of them keeping them is also a sign that the labour market is still pretty tight.
So long will it be before workers start demanding significant pay rises?
Mick

 

[over9k]

Oh in case anyone is wondering, russia invading ukraine = sanctions = lots of oil supply gets cut off

 

[frugal.rock]

The worry is the hours worked.

Maybe.
I think the real worry is politicians grandstanding about low unemployment rates without mentioning participation rates creating a false picture.

It's all too common these days for metrics to be redefined so they look better.
"Lies, damn lies, and statistics"

Comparing current unemployment rates to being near all time lows is an absolute farce, as unemployment itself has been redefined.

How can unemployment be so low with job vacancies at highs.... the wool is being pulled over our eyes.

The reality is a lot of people are now unable to work due to being medically or mentally unfit. Then there are those that have retired early, some will re enter the workforce over the coming years, but not the majority, imo.

 

[JohnDe]

The reality is a lot of people are now unable to work due to being medically or mentally unfit.

Yes, it seems like every third person has an issue these days. Everyone complains and whines about everything, and then wonder why they have mental and health issues.