Inflation: A Report That Consumers Will Enjoy - John Rothe | Portfolio Manager, Quant, Tech Geek, And Sometime Superhero To My Kids

Inflation: A Report That Consumers Will Enjoy


This past year inflation has been steadily rising, leading me to wonder if the word “stagflation” would soon be a term on the tip of everyone’s tongue.

Stagflation as defined by Investopedia:

A condition of slow economic growth and relatively high unemployment — a time of stagnation — accompanied by a rise in prices, or inflation.

My concern was that the Fed’s QE1 and QE2 programs were making commodities rise, leading to higher food and energy prices. Higher food and energy costs will, in turn, cause the already slow consumer-based economy in the US to slow down even further.

If the economy continues to slow, then we may have a QE3 that continues the cycle of higher food and energy prices. A vicious cycle to say the least.

However, earlier today the Bureau of Labor Statistics reported:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in September on a seasonally adjusted basis … The index for all items less food and energy increased 0.1 percent in September, its smallest increase since March.

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.3% annualized rate) in September. The 16% trimmed-mean Consumer Price Index increased 0.2% (2.5% annualized rate) during the month.

Over the last 12 months, the median CPI rose 2.1%, the trimmed-mean CPI rose 2.5%, the CPI rose 3.9%, and the CPI less food and energy rose 2.0%

These two reports are showing a slowdown in the rising inflation rate, something that consumers will be happy about. Lower food and energy costs at home will (hopefully) translate into a strong holiday shopping season this year…


chart source: Calculated Risk 

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