Inflation

[sptrawler]

The plebs are getting nervous, they've seen it before, it isn't covid that has made people stay at work, it is not knowing when inflation is going to back off.

The average retirement age in Australia is growing. An economist explains why

New analysis from KPMG shows how COVID has pushed more people over 55 back into the workforce, with the retirement age steadily increasing over the past 20 years.

www.abc.net.au

 

[divs4ever]

The plebs are getting nervous, they've seen it before.

The average retirement age in Australia is growing. An economist explains why

New analysis from KPMG shows how COVID has pushed more people over 55 back into the workforce, with the retirement age steadily increasing over the past 20 years.

www.abc.net.au

trying to suck the old(er ) folk into keeping working ( putting into super )

maybe super is doing all the heavy lifting in the stock market

 

[sptrawler]

trying to suck the old(er ) folk into keeping working ( putting into super )

maybe super is doing all the heavy lifting in the stock market

At least with them working, they aren't drawing down on the super funds stash of cash, must be easy doing the accounting.

 

[Chipp]

Jamie Dimon thinks 8% interest rates are coming so he clearly thinks inflation is not done with . He recently sold $150 mill JPM stock so he putting his money behind that opinion

Jamie Dimon—Head Of U.S.’ Largest Bank—Warns Of 8% Interest Rates Along With Recession

The billionaire chief of JPMorgan Chase said he’s “more concerned” than most about the American economy’s prospects.

www.forbes.com

 

[TimeISmoney]

Jamie Dimon thinks 8% interest rates are coming so he clearly thinks inflation is not done with . He recently sold $150 mill JPM stock so he putting his money behind that opinion

Jamie Dimon—Head Of U.S.’ Largest Bank—Warns Of 8% Interest Rates Along With Recession

The billionaire chief of JPMorgan Chase said he’s “more concerned” than most about the American economy’s prospects.

www.forbes.com

View attachment 174414

Yep, this could easily turn out like the housing bubble burst that never happened in Australia that everyone waited for. I wouldn't budge on my theory of not much happening in terms of interest cuts until I see large unemployment figures rise.

 

[Chipp]

Yep, this could easily turn out like the housing bubble burst that never happened in Australia that everyone waited for. I wouldn't budge on my theory of not much happening in terms of interest cuts until I see large unemployment figures rise.

Early in the fed rate cycle Powell stated many times he needed UE at 4.5% to put a full stop on ending inflation , that last print will have him sweating . US CPI this week also pivotal . Another hot MoM core of 0.4% will stir things up . Looking at ZQ futures these rate cuts are getting priced further out and shallower terminally . I would not be super surprised to see no rate cuts in '24 given the trend in interbank futures . In less than 4 months its gone from 160 BPS of cuts priced in dec '24 to 53 BPS this very minute . Thats a significant paradigm shift and the market just isnt seeing it at all .

 

[divs4ever]

Jamie Dimon thinks 8% interest rates are coming so he clearly thinks inflation is not done with

am not so sure about 8% ( maybe more maybe less ) , but yes i think inflation still has a healthy heartbeat

 

[divs4ever]

Yep, this could easily turn out like the housing bubble burst that never happened in Australia that everyone waited for. I wouldn't budge on my theory of not much happening in terms of interest cuts until I see large unemployment figures rise.

but that would mean accurate employment/unemployment data

so we have a chicken and egg scenario

 

[TimeISmoney]

but that would mean accurate employment/unemployment data

so we have a chicken and egg scenario

I know what you mean but trust me there's a lot of money still floating around, you're not seeing house prices going in reversal. Brisbane is pretty tough going when it comes to the cost of living problems with low wages. I live in a working class area and the eateries here are packed more than ever after working hours, never seen it like this in the 50 years I've been alive.

 

[Smurf1976]

I know what you mean but trust me there's a lot of money still floating around, you're not seeing house prices going in reversal. Brisbane is pretty tough going when it comes to the cost of living problems with low wages. I live in a working class area and the eateries here are packed more than ever after working hours, never seen it like this in the 50 years I've been alive.

General observation there seems to be a lot of conflicting things going on at the moment.

It's either gloom or boom depending which side of the same street you look at. The restaurant's packed meanwhile anyone selling tickets to a major event is struggling to find buyers especially if it's a festival. etc.

My thought is to what extent does this relate to people actually doing well versus struggling? And to what extent is it really just some maintaining spending by running up debt etc whilst others have seen the writing on the wall and are cutting back spending now?

Logic tells me assets ought have a lot to do with it. Individual exceptions aside, it's hard to see that those without significant assets would be doing well at the moment - housing costs are up, interest rates up, consumer prices up etc. Those with assets might have an offset but the rest mostly wouldn't.

 

[Value Collector]

The plebs are getting nervous, they've seen it before, it isn't covid that has made people stay at work, it is not knowing when inflation is going to back off.

The average retirement age in Australia is growing. An economist explains why

New analysis from KPMG shows how COVID has pushed more people over 55 back into the workforce, with the retirement age steadily increasing over the past 20 years.

www.abc.net.au

I think it’s a combination of things, a lot of people have just not saved enough to retire and want to maintain their hyper-consumption life styles, while also blood pressure and cholesterol meds are keeping the population healthy enough to work longer.

 

[farmerge]

I think it’s a combination of things, a lot of people have just not saved enough to retire and want to maintain their hyper-consumption life styles, while also blood pressure and cholesterol meds are keeping the population healthy enough to work longer.

@Value Collector And then are the types like me who are still working full time and way past that magical mark of 65.
I choose to do what I do
a) because I can.
b) because I enjoy working
c) doing so keeps the grey matter ticking along and the body reasonably healthy.

As a side issue I was told when residing in RPH for a week that I would probably never walk again and be confined to a wheelchair for the rest of my days and most definitely never work again.
In both instances proved the specialists Wrong.

 

[divs4ever]

I know what you mean but trust me there's a lot of money still floating around, you're not seeing house prices going in reversal. Brisbane is pretty tough going when it comes to the cost of living problems with low wages. I live in a working class area and the eateries here are packed more than ever after working hours, never seen it like this in the 50 years I've been alive.

well depending on the gearing ( some home loans were approved with as little as 5% deposit ) some lenders can't afford house prices to fall too far , or they are in long term negative equity , given many mortgages are over 25 years , or even interest only repayments

my last trip to the big smoke , did highlight the number of businesses closed ( and not replaced ) and i don't get into the weeds ( industrial estates ) , that often either to see what is happening there

is Brisbane now mainly driven by consumption

 

[mullokintyre]

In another thread on currency ( post # 3 in This Thread ), I quoted Shane Oliver on his reasons why the AUD would rise.
Thats been a less than spectacular prediction.
Perhaps his following prediction may be a little closer to the money.
Mick

 

[Dona Ferentes]

This is doing the rounds, it's all academic in a way, but the commentary is interesting.:


.
" ...Some of you will be aware that they changed the way they calculate U.S inflation in 1983.

In essence they changed how they calculate housing related costs.

The NBER paper can be found here.
https://www.nber.org/system/files/working_papers/w32163/w32163.pdf

The following is an extract from the paper.
“This changed with the CPI redesign of 1983 (Bolhuis et al. 2022a, b). Before January of that year, homeownership variables, including housing prices and mortgage rates, entered directly into the CPI.

The inclusion of these components made inflation increase mechanically at the beginning of a tightening cycle and decline once policy normalization began.

It also led to a volatile series with disproportionate weight for a component—housing—that is both a consumption and an investment good.

After years of research, the Bureau of Labor Statistics (BLS) moved to a system of owners’ equivalent rent, which has a stronger theoretical justification (Gillingham, 1983).

Housing prices and financing costs were removed from the index. But it did not disappear from the effective costs borne by would-be home buyers or others reliant on financing due to liquidity constraints, including those borrowing to finance cars and other forms of consumption.

This paper argues that this disconnect in inflation measurement, on the one hand, and actual increases in the cost of living due to higher financing costs faced by consumers, on the other, underpins the recent divergence between official inflation data and consumer sentiment.”

"As you can see in the chart above, if they had continued to measure housing/shelter costs in the same way that they had prior to 1983, then U.S CPI would have reached a level above 16% in 2022.

This would have exceeded the rate of inflation seen in the late 70s and early 80s. .... "

 

[mullokintyre]

This is doing the rounds, it's all academic in a way, but the commentary is interesting.:

View attachment 174458
.
" ...Some of you will be aware that they changed the way they calculate U.S inflation in 1983.

In essence they changed how they calculate housing related costs.

The NBER paper can be found here.
https://www.nber.org/system/files/working_papers/w32163/w32163.pdf

The following is an extract from the paper.
“This changed with the CPI redesign of 1983 (Bolhuis et al. 2022a, b). Before January of that year, homeownership variables, including housing prices and mortgage rates, entered directly into the CPI.

The inclusion of these components made inflation increase mechanically at the beginning of a tightening cycle and decline once policy normalization began.

It also led to a volatile series with disproportionate weight for a component—housing—that is both a consumption and an investment good.

After years of research, the Bureau of Labor Statistics (BLS) moved to a system of owners’ equivalent rent, which has a stronger theoretical justification (Gillingham, 1983).

Housing prices and financing costs were removed from the index. But it did not disappear from the effective costs borne by would-be home buyers or others reliant on financing due to liquidity constraints, including those borrowing to finance cars and other forms of consumption.

This paper argues that this disconnect in inflation measurement, on the one hand, and actual increases in the cost of living due to higher financing costs faced by consumers, on the other, underpins the recent divergence between official inflation data and consumer sentiment.”

"As you can see in the chart above, if they had continued to measure housing/shelter costs in the same way that they had prior to 1983, then U.S CPI would have reached a level above 16% in 2022.

This would have exceeded the rate of inflation seen in the late 70s and early 80s. .... "

According to the BLS there have been six majpr revisons in the methodology of calculating the CPI since it stated collecting the data in 1913, with the first being in 1940, the last being in 2018. There have also been numerous small changes in data collection and additions or withdrawals of data points.
The ABS is not shy of altering the way it defines CPI, as This Paper from ABS highlights, there have been major revisions every decade, with little fiddles along the way.
Increases in things like excise and royalties, sales tax, GST can affect the prices that the suckers at the end pay, but the bureacrats argue that is not an increase in the CPI, as they are not accompanied by an increase in inputs.

Mick

 

[TimeISmoney]

well depending on the gearing ( some home loans were approved with as little as 5% deposit ) some lenders can't afford house prices to fall too far , or they are in long term negative equity , given many mortgages are over 25 years , or even interest only repayments

my last trip to the big smoke , did highlight the number of businesses closed ( and not replaced ) and i don't get into the weeds ( industrial estates ) , that often either to see what is happening there

is Brisbane now mainly driven by consumption

The running costs are up so profits are down but in general, people are still spending. My main point is if people continue to spend with credit or savings with highly inflated prices, it still adds to inflation, Unfortunately.

Many businesses run on credit and in the long term it will shake the tree of all the poorly performing ones, it's just how life works. Farmers can't expect to have bumper crops every year, they have to plan for the poor-performing years otherwise they'll fold.

I read somewhere that they expect retail figures for March to be up.

As for home buying it seems full speed ahead, some people are doing it tough some ain't.

$200k income not enough to pull Aussie family out of ‘hamster wheel’​

The family-of-four doesn't splash their cash on luxurious things and moved to an area more than a decade ago where property wasn’t too expensive. Despite that, the rising cost of living and necessary expenses like childcare keeps chipping away at the Craig’s combined income.

​

​

Surprising detail in rate hike pain​

Demand in Australia’s housing market remained robust through February with the value of new home loan commitments climbing even as the effects of the Reserve Bank’s recent run of rate hikes continue to flow through the economy.

The value of new loans written rose 1.5 per cent in February to $26.4bn, the Australian Bureau of Statistics reported on Monday, falling slightly short of the 2 per cent increase analysts had forecast.

In the 12 months to February, the value of housing finance commitments were 13.3 per cent higher, the figures showed.

The increase came even as house prices push higher as a result of a post-pandemic surge in migration, underpinning increased demand, and an anaemic pipeline of new housing construction, reducing supply.

The value of new loan commitments to owner-occupiers was the primary driver of the increase, rising 1.6 per cent across the month, and 9.1 per cent over the year, the seasonally adjusted figures showed.

New loan commitments to first-home buyers rose a solid 4.3 per cent in February, and up 13.2 per cent on the year, the figures showed.

The strong gain brought the number of new loan commitments for first home buyers to 9377 across the month, following a 5.6 per cent fall in January.




Feb ABS Retail stats.

 

[over9k]

the housing bubble burst that never happened in Australia that everyone waited for.

The question(s) to ask with any of this stuff is why

 

[over9k]

I would not be super surprised to see no rate cuts in '24 given the trend in interbank futures . In less than 4 months its gone from 160 BPS of cuts priced in dec '24 to 53 BPS this very minute . Thats a significant paradigm shift and the market just isnt seeing it at all .

How much denial of this have we seen for what, a year now?

A lot of people still think the post-gfc interest rate environment is normal and it isn't.

 

[sptrawler]

This is doing the rounds, it's all academic in a way, but the commentary is interesting.:

View attachment 174458
.
" ...Some of you will be aware that they changed the way they calculate U.S inflation in 1983.

In essence they changed how they calculate housing related costs.

The NBER paper can be found here.
https://www.nber.org/system/files/working_papers/w32163/w32163.pdf

The following is an extract from the paper.
“This changed with the CPI redesign of 1983 (Bolhuis et al. 2022a, b). Before January of that year, homeownership variables, including housing prices and mortgage rates, entered directly into the CPI.

The inclusion of these components made inflation increase mechanically at the beginning of a tightening cycle and decline once policy normalization began.

It also led to a volatile series with disproportionate weight for a component—housing—that is both a consumption and an investment good.

After years of research, the Bureau of Labor Statistics (BLS) moved to a system of owners’ equivalent rent, which has a stronger theoretical justification (Gillingham, 1983).

Housing prices and financing costs were removed from the index. But it did not disappear from the effective costs borne by would-be home buyers or others reliant on financing due to liquidity constraints, including those borrowing to finance cars and other forms of consumption.

This paper argues that this disconnect in inflation measurement, on the one hand, and actual increases in the cost of living due to higher financing costs faced by consumers, on the other, underpins the recent divergence between official inflation data and consumer sentiment.”

"As you can see in the chart above, if they had continued to measure housing/shelter costs in the same way that they had prior to 1983, then U.S CPI would have reached a level above 16% in 2022.

This would have exceeded the rate of inflation seen in the late 70s and early 80s. .... "

From memory we don't include housing or rent rises in our CPI calculations.
I'm on limited wifi access, or I would look it up.