Inflation

[divs4ever]

but that super fund might be all the current worker has left , they are still busy cranking up pension age towards 70 and beyond

 

[divs4ever]

going to be interesting to see if vaxx injuries start having folks unemployable by 55 ( and i mean LOTS of folks )

 

[3 hound]

but that super fund might be all the current worker has left , they are still busy cranking up pension age towards 70 and beyond

"Doing the right thing" will become dying as soon as you can no longer work anymore and before you start relying on government services to live.

Never saw the movie but I think this concept was explored in a movie called "Logan's Run" possibly from the 70's??

 

[JohnDe]

Yep, I can see this -

Profits — not war or weather — may be driving inflation and price hikes, as more Aussies report financial pain

No prizes for guessing the single biggest threat to our economy right now. It's inflation.

On its own, it's financially painful because the dollar in your pocket no longer goes as far.

Rubbing salt into the wound now, though, is the pace of wage growth. It's still sluggish. It makes rising inflation more difficult to manage.

Here's another curve ball: it seems the bulk of the "skyrocketing" inflation — as the Treasurer has put it — that we're wrestling with may be unnecessary.

Progressive think tank The Australia Institute has crunched the numbers and found profits are behind much of the inflation we're seeing.

That is, businesses are not just matching but exceeding rising costs with higher prices.

Understanding this could hold the key to how high inflation might climb and the risks it poses to Australia's economy.

What's driving inflation?​

The latest measure of inflation from the Bureau of Statistics (ABS) has prices rising at 5.1 per cent.

Next week, when the ABS publishes the June quarter data, it's expected to have risen above 6 per cent.

We're all pretty familiar with some of the forces behind the current acceleration in prices. The pandemic is causing supply chain problems, which is making it more expensive for businesses to stock inventory.

The war in Ukraine is also forcing up the price of fuel, which adds to transport costs across the economy.

Floods in Queensland and New South Wales, and an energy crisis up and down the east coast, have also pushed up the prices we pay for gas, electricity and food.

But according to The Australia Institute, this only accounts for a portion of the price rises we're seeing.

Indeed, it goes so far as to say the majority of the increase in living costs is due to companies marking up prices as much as they can.

"Profits have accounted for 2.5 percentage points of the increase in the GDP deflator (about 60 per cent of the total)," the Australia Institute reported.

The GDP deflator is another way of measuring inflation. It's not, however, based on a fixed basket of goods — it changes based on what people are actually buying.

Some economists argue it's actually a better measure of inflation.

Simply put, the Institute is saying that companies are raising prices for goods and services well in excess of the increase in the cost of procuring those products.

"When inflation is strong and growing, that's a great time for a firm to step in and increase their prices by even more because consumers are expecting prices to rise," says Matt Grudnoff, senior economist at The Australia Institute.

"They can blame it on supply chain issues. They can blame it on the war in Ukraine."

Businesses aware of pricing power​

Curiously, though, despite sluggish wage growth, shoppers seem willing to absorb these higher prices.

An internal Reserve Bank email thread obtained by the ABC via a Freedom of Information request last month revealed this phenomenon.

An email from RBA senior representative, Jonathan Kemp, to the bank's top brass including Governor Philip Lowe, indicated that retailers had reported that when they hike their prices, shoppers step up and pay more for their goods and services.

This is an excerpt from a Reserve Bank email thread:

Price increases from food suppliers have been broad based.
Retailers generally expect higher product and freight costs to persist for at least the next few months, due in part to higher oil prices and lockdowns in Shanghai disrupting shipping.
As a result, many retailers expect to increase prices further over the months ahead.
Retailers have also noted it's easier to raise prices on inelastic items — that is, products where consumers don't pay too much attention to their price.

Logically, some companies will keep pushing consumers as hard as they can until they pull back.

So, when will that be?

A third of households on the edge​

To answer that, we need to understand exactly how well positioned households are now to absorb further inflation or price shocks.

The Treasurer and the Reserve Bank have repeatedly said Australian households are well positioned with cash buffers in redraw facilities, offset accounts and bank deposits — to the tune of roughly $260 billion, according to the RBA .

The key question, though, is whether this is evenly spread among households or whether it's concentrated among the relatively well off.

The ABC has obtained a unique set of data from National Australia Bank's economics team.

It shows almost 1 in 5 Australians believe they are struggling to make ends meet "very much", with younger people more likely to say they're struggling — 21 per cent of 30-49-year-olds — than those aged 65+ (12 per cent).

Meanwhile, almost a third (31 per cent) of people in the lowest income group said they were struggling "very much" to make ends meet compared with just over 1 in 10 in the highest income group.


Naturally, those who are feeling financial stress more intensely are less likely to be able to save.

According to the NAB economics team, low-income earners are expecting their incomes to rise by $111 per week over the next 12 months.

This is not the amount of money they will have left over, the bank says, it's just an expectation or hope of what their incomes will do going forward. It is an average.

Low-income earners were asked the same question back in the first few months of the year and they responded with the much higher figure of $145.

In other words, there's a realisation that the real incomes of less wealthy households are falling, and quite rapidly.

Something has to give​

After the pandemic period where savings rates boomed on low interest rates and government stimulus, clearly fewer households have spare cash to put aside as prices and mortgage bills surge without wages keeping pace.

This process is starting from the bottom up, with those on the lowest incomes and/or the biggest debts the first to feel the pinch.

But it is spreading.

Recent surveys show consumer confidence plunging towards levels usually seen during economic crises, such as during the initial pandemic lockdowns or the global financial crisis.

Something will have to give.

Perhaps wage growth will pick up significantly, so that people can meet their rising cost of living (though this would also be a signal for the Reserve Bank to raise interest rates even higher and faster, as it fears inflation being locked in longer term).

Or more and more consumers will start cutting back. There is already early evidence in the Commonwealth Bank's near real-time spending data that this is starting to happen.

This will be a clear message to companies that enough is enough with the price rises, and profit growth may need to be dialled back.

The bitter pill to swallow is that you could argue some — how much, who knows — of the financial pain millions of households are experiencing is unnecessary.

That needs to be understood.

 

[waterbottle]

It's GDP and Federal Reserve week!

The latest GDPNow figures remain in negative territory, -1.6%! Albeit up from previous estimates although the trend is clear. I heard an economist on ABC news saying that there was expectation for a GDP of 0.4%!!!!!! WHAT!
If expectations are for a positive figure then I'd expect blood in the streets thereafter.



The federal reserve meeting will also be interesting. WSJ published an article last week stating that the expectation will be for a 0.75% hike. Last time this same author published the expected figure (0.75% at the time) it was true. Whether or not he can be believed is difficult to say. Some whispers of a 1% hike, although CME FedWatch tool giving a 79% chance of a 75bps lift.

Will be interesting to see what happens to risky assets regardless. My main indicator here is BTC. It seems to be leading the NASDAQ, perhaps given how ubiquitous it has become and perhaps because its reflection of how much free cash there is to throw at risky assets...

 

[divs4ever]

"Doing the right thing" will become dying as soon as you can no longer work anymore and before you start relying on government services to live.

Never saw the movie but I think this concept was explored in a movie called "Logan's Run" possibly from the 70's??

Logan's Run , and Soylent Green gives a different scenario

but if you don't rely on the government ,.. there is no need for a government

just stating the obvious

but if trying to implement a Logan's Run scenario , government officials and politicians should lead by example ( maybe a productivity test needs to be run through the public service ranks )

 

[JohnDe]

"Doing the right thing" will become dying as soon as you can no longer work anymore and before you start relying on government services to live.

Never saw the movie but I think this concept was explored in a movie called "Logan's Run" possibly from the 70's??

Logan's Run, I enjoyed the book. The movie and TV series was good, back in the day.

The world had gone through a disastrous period of war and shortages. Only one major city survives, the people living in relative luxury but strict control. Not many seem to mind, because when they reach the age of 35 they are teleported to another place with more freedoms. Some people run because they do not believe that there is another place, they think it's a way to control the population. Those that run are exterminated without trial. The runners are correct, there is no place. Those in charge worked out the ideal population size, 35 years old was deemed the age that people started to question the system.

A bit like the old wars, population control.

 

[over9k]

vs




So how are those growth bets going lads?

 

[waterbottle]

It begins... Retailers now warning of smaller profits... I wonder what will happen to Amazon. Biden administration in damage control trying to redefine recession

Walmart warning sends stock price plunging, renews retail worries

Walmart becomes the latest big-name retailer to strike a downbeat tone on the health of the U.S. consumer.

finance.yahoo.com

Yellen says signs of U.S. recession aren’t in sight 'when you’re creating almost 400,000 jobs a month'

Treasury Secretary Janet Yellen expressed confidence in the Federal Reserve’s fight against inflation and said she doesn’t see any sign that the U.S. economy is in a broad recession.

fortune.com

 

[over9k]

Still playing energy. Energy prices are much stickier

 

[waterbottle]

Still playing energy. Energy prices are much stickier

What time frame though?

 

[over9k]

What time frame though?

Until something looks like changing.

 

[waterbottle]

Online retailers now reporting lower incomes... Shopify stating the covid e-commerce transition is reverting... Planning to lay-off 10% of staff! Down by 16% on open, followed by PayPal down 4%. This is not looking good.... Watching to see what happens with Amazon...

Shopify stock sinks as company plans layoffs and says e-commerce projections were too upbeat

At the height of the COVID-19 crisis, many companies levered to online spending predicted that the pandemic would permanently alter the trajectory of e-commerce growth for the better as people built new shopping habits online.

finance.yahoo.com

Meanwhile, no Fed meeting in August. This meeting will be their best chance at a 100bps blow...

 

[over9k]

Walmart was slaughtered too.

As I've posted about a zillion times, once a *thing* is bought, you all too often don't need to buy another one for quite some time. One of the few exceptions to this is tech, hence microchips/semiconductors being a much better long term play.

I haven't bought any SOXL yet though (yet).

 

[waterbottle]

Walmart was slaughtered too.

As I've posted about a zillion times, once a *thing* is bought, you all too often don't need to buy another one for quite some time. One of the few exceptions to this is tech, hence microchips/semiconductors being a much better long term play.

I haven't bought any SOXL yet though (yet).

Consumption is the driving force behind the US economy though.

I'm not seeing the chips play. Sure, they're in demand, but fabrications are going to take years to establish. The CHIPs won't address the imbalance overnight.

 

[over9k]

Consumption is the driving force behind the US economy though.

I'm not seeing the chips play. Sure, they're in demand, but fabrications are going to take years to establish. The CHIPs won't address the imbalance overnight.

Precisely, so in the meantime, there's a shortage


On-topic: Microsoft reported excellent earnings after the close. Tech's run as a result.

 

[waterbottle]

Precisely, so in the meantime, there's a shortage


On-topic: Microsoft reported excellent earnings after the close. Tech's run as a result.

I'm pretty sure both MSFT and GOOG were an earnings miss....

This is just unpredictable market sorcery

 

[mullokintyre]

Inflation in OZ to 6.1 Percent.
And little liklihood it will drop any time soon.
So, do we get25, 50, 75 or 100 BPS from the RBA??
Mick

 

[waterbottle]

Inflation in OZ to 6.1 Percent.
And little liklihood it will drop any time soon.
So, do we get25, 50, 75 or 100 BPS from the RBA??
Mick

Depends on what the Fed does. Central banks are synchronising. Even Phil Lowe now admits that they should be hitting inflation harder.
Canada had a surprise 100bps, and so did the ECB @ 50bps.

 

[divs4ever]

0.5% ( or the less likely 0.40% ) in my opinion

this is about economic destruction and the Central Banks are pretending they are useful ( instead of the architects of this mess )