16 ms·

So the year over year CPI increase each month this year (starting from January) was 7.5%, 7.9%, 8.5%, 8.3%, 8.6%, 9.1%, 8.5%. So this value has been jumping aro

So the year over year CPI increase each month this year (starting from January) was 7.5%, 7.9%, 8.5%, 8.3%, 8.6%, 9.1%, 8.5%. So this value has been jumping around a bit as it has been going up. This drop is being taken as good news -- but I worry whether this is really a meaningful drop or whether we are just over interpreting what could be a fundamentally noisy metric?

roflyear 4y ago
Only time will tell, but it is "good news" in the context of wanting to reduce inflation.
Mountain_Skies 4y ago
Could also be demand destruction starting to slow the increases in prices.
- rootusrootus 4y ago
  Seems like EV uptake rate, while still just a fraction of total sales, is probably high enough to contribute to demand destruction. Gas prices have come down pretty fast. I wonder if EV adoption goes fast enough that we'll see a period of time when gas prices just crater for a while. A sweet spot of owning an ICE vehicle, but then gas stations will start to close up and ICEV owners could face the same problem EV owners face now but without the easy ability to refuel at their house.
  - deleted 4y ago
    [deleted]
  - arbor_day 4y ago
    EVs are ~1% of cars and ~5% of new car sales. It seems like we have another 5 years until those scale effects start to really kick in.
    - rootusrootus 4y ago
      I agree, it will take some time for EVs to really take off. And the dynamics are difficult to predict. If even 5% of cars become electric, it will really move the needle on the retail gas pricing, which might slow EV adoption, etc. I expect it might go in waves. Although EVs have such a dramatic running cost advantage that as capital costs and range anxieties are addressed, the adoption rate will probably be supply limited for years.
      - jeromegv 4y ago
        EV growth of the last few years was nothing compared to the increase size of the average car (more SUV and pickup sales in proportion, compared to standard “cars”). So really the EV market is still insignificant and gaz consumption for the average household has gone up, not down.
        scythe 4y ago
        >gaz consumption for the average household has gone up, not down. Historical data shows that overall gas consumption is more strongly linked to the frequency of highway travel than to recent changes in car purchases. See: https://www.statista.com/statistics/188448/total-us-domestic-demand-for-gasoline-since-1990/ https://www.statista.com/statistics/188448/total-us-domestic... There's a drop during the Great Recession, a rapid rise during the recovery, and a roughly flat line during the Trump administration until another crater during the COVID pandemic.
    - bryanlarsen 4y ago
      Price is set at the margin. If demand is 101% of supply, the price goes up. If demand is 99% of supply, the price goes down.
  - pojzon 4y ago
    When ppl talk about EVs overtaking petrol all I can do is shake head. Infrastructure is not there and is not going to be there for EVs for a long time. Its not only gas stations but also power plants, transit cables, personel, supply chains, technology, laws and other. If we make good investments it will take around 50 years in some developed EU countries to reach appropriate infrastructure levels. In less developed countries probably 100+years.
    - tppiotrowski 4y ago
      If you want to replace gas stations with EV charging stations that 'full-up' your car in less than 5 minutes, you're right. But if every parking space just gets 1KW of solar panel ~$500 and sun shines for 10 hours a day, you probably have enough power for the 30 miles of daily commute. A car sits idle for 90% of the day. We can use this time to charge it. It's not the long road trip use case but I think will put a big dent in the resources needed to migrate to EV.
      - kortilla 4y ago
        > ~$500 and sun shines for 10 hours a day I’m not gonna spend 10 hours in an office and definitely not from sunrise to sunset. Also, 10 hours of sunshine in a day is a rarity in most of the US, especially during the winter.
        tppiotrowski 4y ago
        Every parking space will have a 1KW charging panel so anytime you're not using your car it will charge. No need to stay at the office. Go about your day and every time you park your car it'll recharge.
    - rootusrootus 4y ago
      I'm not saying EVs are going to overtake ICEV anytime in the next few years. But a 10% reduction in demand for gasoline would be huge. Not sure I'm feeling as pessimistic on infrastructure. A bunch of the infrastructure for EVs already exists and is wired to every house. Even if we converted 100% of all newly sold vehicles to EV today, the grid build-out required wouldn't be any harder than what we've done in the past.
spywaregorilla 4y ago
Is it really a noisy metric? I think not. It's just that this year has been very tumultuous from a supply side. I would wager these are fairly precise measurements of real effects (ignoring the basket of goods issue). I'm not an expert.
- bombcar 4y ago
  Almost by definition any "year over year" metric that is taken monthly will be at least somewhat noisy. And if you think about it, reducing "inflation" to a single number will always disguise some things - gas prices adjust multiple times a day if necessary but things like leases only get renegotiated once a year or even longer.
iflint 4y ago
Be careful using the YoY number, you need to factor in the base effect. (i.e. the change in YoY number each month factors in the new month of data but also the month 13 months ago that is no longer included) MoM is a cleaner way to look at things in volatile times like these.
- jader201 4y ago
  This should be higher. I realized when monitoring COVID data that rolling numbers like this can be heavily impacted by the number that’s rolling off. Take, for example, a 7-day COVID case count of 100. The next day this drops to 90. That’s great, right? Well, if yesterday’s 7-day values were all 100, and today’s are 100, 100, 100, 100, 100, 100, 30, then yes, that’s great! But if yesterday’s 7-day values were 700, 0, 0, 0, 0, 0, 0, and today’s are 0, 0, 0, 0, 0, 0, 630, then that’s potentially very bad (depending on other context). This is obviously a hyperbole, but it shows that looking at and comparing rolling numbers can be tricky, and you need to look at other context to get the full picture.
randomdata 4y ago
Corn seems to be a good leading indicator here[1]. Cash bids were $4 in 2019, $5 in 2020, $6 in 2021, $7 at the start of 2022, $9 when the war in Ukraine broke out, down to $8 in June, and now at $7.50 where it has remained stable at since the beginning of July. Which suggests that things are indeed slowing. [1] Which likely ends up being a proxy for oil, but as a farmer I watch food commodities much more closely.
- maerF0x0 4y ago
  How much corn are you getting for $9?
  - h2odragon 4y ago
    1 bushel
  - deleted 4y ago
    [deleted]
  - pc86 4y ago
    The same amount you were getting for $4 three years ago.
    - lotsofpulp 4y ago
      Is it the same quality?
      - missedthecue 4y ago
        Yes
      - randomdata 4y ago
        Yes, these are commodity prices.
  - trillic 4y ago
    1 bushel, approximately 56 pounds.
jliptzin 4y ago
Avg gasoline prices are down 20% in 2 months. Is that noise? https://ycharts.com/indicators/us_gas_price https://ycharts.com/indicators/us_gas_price
- hajile 4y ago
  That's an artifact of dumping 30% of the strategic oil reserves into the market to drive down prices. Maybe the prices stay low, but with Europe warning of fuel shortages this winter, I can't see that happening.
  - jcranmer 4y ago
    The prospective fuel shortages in Europe are mostly to do with natural gas, not oil and oil derivatives, no?
    - smaryjerry 4y ago
      This is correct. Many are conflating oil and natural gas. Both have increased significantly, but natural gas has increased the most.
    - failTide 4y ago
      If Europe ends up with a massive shortage of natural gas for heating, would that significantly increase the demand for heating oil?
      - jcranmer 4y ago
        I suspect most houses don't have the capability to switch between different modes of heating: if you have a gas furnace, you're not going to be burning heating oil in it instead. I believe the plan in case of shortage is to reduce the amount of natural gas flowing to power plants, and to make do with whatever alternatives for electricity are readily available (which is probably coal, although maybe nuclear decommissioning will be staved off).
      - oezi 4y ago
D_Alex 4y ago
I suspect a noticeable part of the drop was a decrease in ocean freight rates. Down about 30% from peak, but still about 3 times higher than 2 years ago. I'd expect them to drop by another 30-50% over the next year, that should help a bit.
BurningFrog 4y ago
I don't think anyone serious is taking this as anything more than mildly encouraging.
- koboll 4y ago
  Since the baseline fear level was "inflation will keep going up and the Fed will keep raising rates, sending us deeper into a recession in the process", this seems extremely encouraging. If inflation has peaked and is starting to fall, we will get out of this much less painfully than prior recessions.
  - sanderjd 4y ago
    It is unlikely that there is a recession currently. We added like 500k jobs in the most recent report.
    - s1artibartfast 4y ago
      It depends on what you think the word recession conveys. If you think it is a decrease in the real gross domestic production and purchasing power of Americans, we are clearly already there. If you think it is the slope employment for some reason, then no.
      - sanderjd 4y ago
        I tend to think the NBER definition is a good one: "a significant decline in economic activity that is spread across the economy and that lasts more than a few months"[0]. It is not at all clear that we are already there. The reason employment matters is that it is difficult for businesses to hire if there is a widespread and durable decline in economic activity. [0]: https://www.nber.org/business-cycle-dating-procedure-frequently-asked-questions https://www.nber.org/business-cycle-dating-procedure-frequen...
        s1artibartfast 4y ago
        I think that is a terrible definition. What is "economic activity" ? There was an awful lot of activity on the Titanic when it was sinking. In the same vein, more people working, but making less, and producing less is not a growing economy
kqr 4y ago
This is what statistical process control charts were invented to tell us: https://static.loop54.com/XmR.html?baseline=7.5,7.9,8.5,8.3,8.6,9.1&values=8.5 https://static.loop54.com/XmR.html?baseline=7.5,7.9,8.5,8.3,... Nope, last number is well within the limits set by the variation of the previous numbers. Depending on how sensitive you feel like being to false alarms, I wouldn't even say there's been a clear trend this year. If you detrend it by successive differences we see that the slope is very close to zero compared to variation: https://static.loop54.com/XmR.html?baseline=0.4,0.6,-0.2,0.3,0.5&values=-0.6 https://static.loop54.com/XmR.html?baseline=0.4,0.6,-0.2,0.3... However, the last number is close to a control limit, so if this continues next month we may have a signal!
- TaylorPhebillo 4y ago
  I'm not familiar with this, does this method require that each value is measured independently of the others? Because in that case, you'd want to use monthly inflation rates, rather than monthly estimates of inflation relative to 12 months prior, right?
  - kqr 4y ago
    Ideally, yes. I read too quickly and assumed that these were annualised monthly measurements. However -- the technique might work anyway: the signal would be smaller, but so should the variation. Yes, one decreases as the square root and the other does not, but over just 12 months that might not make a big difference. Only backtesting or a more thorough theoretical investigation can tell! Edit: actually it doesn't have to be very thorough at all, it's a factor of 3. Probably important!
- prionassembly 4y ago
  Deming statistics are a cargo cult. Try running some (Monte Carlo style) simulations; I did these many moons ago and they don't work at all.
  - kqr 4y ago
    I assure you Deming knew what he was doing, and my statistics knowledge is not limited to cargo culting the more popular SPC tools. However, they are useful for teaching the general public about accounting for the internal variation of data from the same population. That said, as I've admitted in a more constructive parent comment, this tool was misapplied here due to my misreading of the GGP.
stall84 4y ago
It's not a drop though .. If you read, it's saying the gasoline index (alone) dropped nearly 8% which resulted in a net-null even though ALL of the other indexes continued to inflate... This isn't great.. And on top of it look at the number 1 comment here.. People are making concerted efforts to reign-in spending .. Which is excellent financial discipline.. but it's potentially very dangerous for this type of economy if everyone stops spending into this 'easing'
- sanderjd 4y ago
  This is why core CPI exists, to remove volatile components. It was above headline, but also slowing.
- doubleunplussed 4y ago
  The reduction in spending is exactly what the fed wants in order to curtail inflation, it's a feature not a bug.
norwalkbear 4y ago
Idealogical capture has invaded the expert class. Getting straight answers without spin is basically impossible now. You have to start tracking things yourself to see real world effects. I highly recommend just looking at energy since it's an input cost into nearly everything
vikingerik 4y ago
And remember that year-over-year metrics depend on the baseline of the previous year. The first half of 2021 was still artificially low for economic activity with pandemic-suppressed demand for many things. At least some of the 2022 numbers are only an artifact of being compared to that low baseline. And the apparent drop in the second half of 2022 is an artifact of comparing to the second half of 2021 when demand got mostly back to normal.
drak0n1c 4y ago
Prices were already going up before July 2021, so this is not necessarily that positive (the amount of price increase is relative to an already heightened baseline).

roflyear 4y ago

Only time will tell, but it is "good news" in the context of wanting to reduce inflation.

Mountain_Skies 4y ago

Could also be demand destruction starting to slow the increases in prices.

rootusrootus 4y ago
Seems like EV uptake rate, while still just a fraction of total sales, is probably high enough to contribute to demand destruction. Gas prices have come down pretty fast. I wonder if EV adoption goes fast enough that we'll see a period of time when gas prices just crater for a while. A sweet spot of owning an ICE vehicle, but then gas stations will start to close up and ICEV owners could face the same problem EV owners face now but without the easy ability to refuel at their house.
- deleted 4y ago
  [deleted]
- arbor_day 4y ago
  EVs are ~1% of cars and ~5% of new car sales. It seems like we have another 5 years until those scale effects start to really kick in.
  - rootusrootus 4y ago
    I agree, it will take some time for EVs to really take off. And the dynamics are difficult to predict. If even 5% of cars become electric, it will really move the needle on the retail gas pricing, which might slow EV adoption, etc. I expect it might go in waves. Although EVs have such a dramatic running cost advantage that as capital costs and range anxieties are addressed, the adoption rate will probably be supply limited for years.
    - jeromegv 4y ago
      EV growth of the last few years was nothing compared to the increase size of the average car (more SUV and pickup sales in proportion, compared to standard “cars”). So really the EV market is still insignificant and gaz consumption for the average household has gone up, not down.
      - scythe 4y ago
        >gaz consumption for the average household has gone up, not down. Historical data shows that overall gas consumption is more strongly linked to the frequency of highway travel than to recent changes in car purchases. See: https://www.statista.com/statistics/188448/total-us-domestic-demand-for-gasoline-since-1990/ https://www.statista.com/statistics/188448/total-us-domestic... There's a drop during the Great Recession, a rapid rise during the recovery, and a roughly flat line during the Trump administration until another crater during the COVID pandemic.
  - bryanlarsen 4y ago
    Price is set at the margin. If demand is 101% of supply, the price goes up. If demand is 99% of supply, the price goes down.
- pojzon 4y ago
  When ppl talk about EVs overtaking petrol all I can do is shake head. Infrastructure is not there and is not going to be there for EVs for a long time. Its not only gas stations but also power plants, transit cables, personel, supply chains, technology, laws and other. If we make good investments it will take around 50 years in some developed EU countries to reach appropriate infrastructure levels. In less developed countries probably 100+years.
  - tppiotrowski 4y ago
    If you want to replace gas stations with EV charging stations that 'full-up' your car in less than 5 minutes, you're right. But if every parking space just gets 1KW of solar panel ~$500 and sun shines for 10 hours a day, you probably have enough power for the 30 miles of daily commute. A car sits idle for 90% of the day. We can use this time to charge it. It's not the long road trip use case but I think will put a big dent in the resources needed to migrate to EV.
    - kortilla 4y ago
      > ~$500 and sun shines for 10 hours a day I’m not gonna spend 10 hours in an office and definitely not from sunrise to sunset. Also, 10 hours of sunshine in a day is a rarity in most of the US, especially during the winter.
      - tppiotrowski 4y ago
        Every parking space will have a 1KW charging panel so anytime you're not using your car it will charge. No need to stay at the office. Go about your day and every time you park your car it'll recharge.
  - rootusrootus 4y ago
    I'm not saying EVs are going to overtake ICEV anytime in the next few years. But a 10% reduction in demand for gasoline would be huge. Not sure I'm feeling as pessimistic on infrastructure. A bunch of the infrastructure for EVs already exists and is wired to every house. Even if we converted 100% of all newly sold vehicles to EV today, the grid build-out required wouldn't be any harder than what we've done in the past.

spywaregorilla 4y ago

Is it really a noisy metric? I think not. It's just that this year has been very tumultuous from a supply side. I would wager these are fairly precise measurements of real effects (ignoring the basket of goods issue). I'm not an expert.

bombcar 4y ago
Almost by definition any "year over year" metric that is taken monthly will be at least somewhat noisy. And if you think about it, reducing "inflation" to a single number will always disguise some things - gas prices adjust multiple times a day if necessary but things like leases only get renegotiated once a year or even longer.

iflint 4y ago

Be careful using the YoY number, you need to factor in the base effect. (i.e. the change in YoY number each month factors in the new month of data but also the month 13 months ago that is no longer included) MoM is a cleaner way to look at things in volatile times like these.

jader201 4y ago
This should be higher. I realized when monitoring COVID data that rolling numbers like this can be heavily impacted by the number that’s rolling off. Take, for example, a 7-day COVID case count of 100. The next day this drops to 90. That’s great, right? Well, if yesterday’s 7-day values were all 100, and today’s are 100, 100, 100, 100, 100, 100, 30, then yes, that’s great! But if yesterday’s 7-day values were 700, 0, 0, 0, 0, 0, 0, and today’s are 0, 0, 0, 0, 0, 0, 630, then that’s potentially very bad (depending on other context). This is obviously a hyperbole, but it shows that looking at and comparing rolling numbers can be tricky, and you need to look at other context to get the full picture.

randomdata 4y ago

Corn seems to be a good leading indicator here[1]. Cash bids were $4 in 2019, $5 in 2020, $6 in 2021, $7 at the start of 2022, $9 when the war in Ukraine broke out, down to $8 in June, and now at $7.50 where it has remained stable at since the beginning of July. Which suggests that things are indeed slowing. [1] Which likely ends up being a proxy for oil, but as a farmer I watch food commodities much more closely.

maerF0x0 4y ago
How much corn are you getting for $9?
- h2odragon 4y ago
  1 bushel
- deleted 4y ago
  [deleted]
- pc86 4y ago
  The same amount you were getting for $4 three years ago.
  - lotsofpulp 4y ago
    Is it the same quality?
    - missedthecue 4y ago
      Yes
    - randomdata 4y ago
      Yes, these are commodity prices.
- trillic 4y ago
  1 bushel, approximately 56 pounds.

jliptzin 4y ago

Avg gasoline prices are down 20% in 2 months. Is that noise? https://ycharts.com/indicators/us_gas_price https://ycharts.com/indicators/us_gas_price

hajile 4y ago
That's an artifact of dumping 30% of the strategic oil reserves into the market to drive down prices. Maybe the prices stay low, but with Europe warning of fuel shortages this winter, I can't see that happening.
- jcranmer 4y ago
  The prospective fuel shortages in Europe are mostly to do with natural gas, not oil and oil derivatives, no?
  - smaryjerry 4y ago
    This is correct. Many are conflating oil and natural gas. Both have increased significantly, but natural gas has increased the most.
  - failTide 4y ago
    If Europe ends up with a massive shortage of natural gas for heating, would that significantly increase the demand for heating oil?
    - jcranmer 4y ago
      I suspect most houses don't have the capability to switch between different modes of heating: if you have a gas furnace, you're not going to be burning heating oil in it instead. I believe the plan in case of shortage is to reduce the amount of natural gas flowing to power plants, and to make do with whatever alternatives for electricity are readily available (which is probably coal, although maybe nuclear decommissioning will be staved off).
    - oezi 4y ago

D_Alex 4y ago

I suspect a noticeable part of the drop was a decrease in ocean freight rates. Down about 30% from peak, but still about 3 times higher than 2 years ago. I'd expect them to drop by another 30-50% over the next year, that should help a bit.

BurningFrog 4y ago

I don't think anyone serious is taking this as anything more than mildly encouraging.

koboll 4y ago
Since the baseline fear level was "inflation will keep going up and the Fed will keep raising rates, sending us deeper into a recession in the process", this seems extremely encouraging. If inflation has peaked and is starting to fall, we will get out of this much less painfully than prior recessions.
- sanderjd 4y ago
  It is unlikely that there is a recession currently. We added like 500k jobs in the most recent report.
  - s1artibartfast 4y ago
    It depends on what you think the word recession conveys. If you think it is a decrease in the real gross domestic production and purchasing power of Americans, we are clearly already there. If you think it is the slope employment for some reason, then no.
    - sanderjd 4y ago
      I tend to think the NBER definition is a good one: "a significant decline in economic activity that is spread across the economy and that lasts more than a few months"[0]. It is not at all clear that we are already there. The reason employment matters is that it is difficult for businesses to hire if there is a widespread and durable decline in economic activity. [0]: https://www.nber.org/business-cycle-dating-procedure-frequently-asked-questions https://www.nber.org/business-cycle-dating-procedure-frequen...
      - s1artibartfast 4y ago
        I think that is a terrible definition. What is "economic activity" ? There was an awful lot of activity on the Titanic when it was sinking. In the same vein, more people working, but making less, and producing less is not a growing economy

kqr 4y ago

This is what statistical process control charts were invented to tell us: https://static.loop54.com/XmR.html?baseline=7.5,7.9,8.5,8.3,8.6,9.1&values=8.5 https://static.loop54.com/XmR.html?baseline=7.5,7.9,8.5,8.3,... Nope, last number is well within the limits set by the variation of the previous numbers. Depending on how sensitive you feel like being to false alarms, I wouldn't even say there's been a clear trend this year. If you detrend it by successive differences we see that the slope is very close to zero compared to variation: https://static.loop54.com/XmR.html?baseline=0.4,0.6,-0.2,0.3,0.5&values=-0.6 https://static.loop54.com/XmR.html?baseline=0.4,0.6,-0.2,0.3... However, the last number is close to a control limit, so if this continues next month we may have a signal!

TaylorPhebillo 4y ago
I'm not familiar with this, does this method require that each value is measured independently of the others? Because in that case, you'd want to use monthly inflation rates, rather than monthly estimates of inflation relative to 12 months prior, right?
- kqr 4y ago
  Ideally, yes. I read too quickly and assumed that these were annualised monthly measurements. However -- the technique might work anyway: the signal would be smaller, but so should the variation. Yes, one decreases as the square root and the other does not, but over just 12 months that might not make a big difference. Only backtesting or a more thorough theoretical investigation can tell! Edit: actually it doesn't have to be very thorough at all, it's a factor of 3. Probably important!
prionassembly 4y ago
Deming statistics are a cargo cult. Try running some (Monte Carlo style) simulations; I did these many moons ago and they don't work at all.
- kqr 4y ago
  I assure you Deming knew what he was doing, and my statistics knowledge is not limited to cargo culting the more popular SPC tools. However, they are useful for teaching the general public about accounting for the internal variation of data from the same population. That said, as I've admitted in a more constructive parent comment, this tool was misapplied here due to my misreading of the GGP.

stall84 4y ago

It's not a drop though .. If you read, it's saying the gasoline index (alone) dropped nearly 8% which resulted in a net-null even though ALL of the other indexes continued to inflate... This isn't great.. And on top of it look at the number 1 comment here.. People are making concerted efforts to reign-in spending .. Which is excellent financial discipline.. but it's potentially very dangerous for this type of economy if everyone stops spending into this 'easing'

sanderjd 4y ago
This is why core CPI exists, to remove volatile components. It was above headline, but also slowing.
doubleunplussed 4y ago
The reduction in spending is exactly what the fed wants in order to curtail inflation, it's a feature not a bug.

norwalkbear 4y ago

Idealogical capture has invaded the expert class. Getting straight answers without spin is basically impossible now. You have to start tracking things yourself to see real world effects. I highly recommend just looking at energy since it's an input cost into nearly everything

vikingerik 4y ago

And remember that year-over-year metrics depend on the baseline of the previous year. The first half of 2021 was still artificially low for economic activity with pandemic-suppressed demand for many things. At least some of the 2022 numbers are only an artifact of being compared to that low baseline. And the apparent drop in the second half of 2022 is an artifact of comparing to the second half of 2021 when demand got mostly back to normal.

drak0n1c 4y ago

Prices were already going up before July 2021, so this is not necessarily that positive (the amount of price increase is relative to an already heightened baseline).