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Um...inflation is still over 3%. That's using bogus government computed CPI. Well in excess of the 2% target. Since the fed moved to an average inflation targe

Um...inflation is still over 3%. That's using bogus government computed CPI. Well in excess of the 2% target. Since the fed moved to an average inflation target, shouldn't the fed be targeting sub-2%?

object-a 3y ago
The article is reporting that wholesale prices (measured by the PPI) have declined 0.5% Y/Y. It might take a while to affect CPI, but that would strongly suggest that inflation has reached a turning point.
- uoaei 3y ago
  Wholesale prices are not consumer prices.
  - object-a 3y ago
    No, but they affect consumer prices.
    - uoaei 3y ago
      Only in the sense that they set a floor, but not that they set a ceiling. Thus, very limited utility in the context of understanding consumer prices.
      - object-a 3y ago
        It's true, but a large gap between consumer and producer prices is hard to maintain over the long run. It is true that there are other factors which can drive inflation and rising consumer prices. However, if the recent bout of inflation was caused by supply chain issues, or by food + energy costs rising, then a decline in producer prices would probably slow consumer price inflation.
        uoaei 3y ago
        [flagged]
        object-a 3y ago
        It is not "simping" to point out that factor prices have an impact on consumer prices. And while some companies do have (too much) pricing power, I wouldn't categorize it as unilateral and unchecked
        dang 3y ago
        > your motivation to simp Crossing into personal attack, as you did here, will get your account banned—especially when the account has a long history of breaking the site guidelines. We've had to ask you about this many times: https://news.ycombinator.com/item?id=36748588 https://news.ycombinator.com/item?id=36748588 (July 2023) https://news.ycombinator.com/item?id=36748560 https://news.ycombinator.com/item?id=36748560 (July 2023) https://news.ycombinator.com/item?id=28611505 https://news.ycombinator.com/item?id=28611505 (Sept 2021) https://news.ycombinator.com/item?id=23648230 https://news.ycombinator.com/item?id=23648230 (June 2020) https://news.ycombinator.com/item?id=22263907 https://news.ycombinator.com/item?id=22263907 (Feb 2020) I don't want to ban you! But we really need you to stick to the rules, so if you'd please review https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and do that from now on, that would be good.
- hncensorship69 3y ago
  Perhaps. A turning point is not the same as "over" though.
  - object-a 3y ago
    Inflation will probably never be "over", since stable inflation is generally positive for growth and employment. The Fed's target isn't for 0%, its around 2% y/y
- tea-coffee 3y ago
  I believe CPI is unchanged in October. I did not take a close look at the CPI numbers, but I believe the steady index is in part due to energy falling. But rents and food are increased. Not an economist, so I'm not sure how much to read into that.
  - object-a 3y ago
    PPI is a leading indicator for CPI, since it represents what producers are paying. A falling PPI would (probably) indicate lower CPI inflation in future releases.
    - dragonwriter 3y ago
      > PPI is a leading indicator for CPI, since it represents what producers are paying. A falling PPI would (probably) indicate lower CPI inflation in future releases. PPI and CPI historically are loosely correlated, but show no clear lead-follow relationship. PPI seems to swing harder, but not first. https://www.fisherinvestments.com/en-us/insights/market-commentary/charts-of-the-day-ppi-doesnt-lead-cpi https://www.fisherinvestments.com/en-us/insights/market-comm...
- dragonwriter 3y ago
  No, it wouldn't, because PPI rate of change isn't a leading indicator of CPI rate of change, and, anyhow, PPI inflation has recently been unusually elevated compared to CPI inflation, so if it indicates anything (doubtful) its a more normal relationship between CPI inflation and PPI inflation, not what direction CPI inflation is heading.
  - object-a 3y ago
    CPI includes a lot of stuff that's not in PPI (including shelter and rent), so it would depend on what the components or drivers of inflation are in the CPI. If owner equivalent rent is moving lower (which it was in October), and if prior inflation was caused by supply chain tightness or higher input costs, than a lower PPI could indicate that supply chain tightness has eased, and goods inflation will head lower or stabilize. It's also worth noting that CPI moves slower than PPI because rents make a pretty big percentage of CPI, and rents move slower than PPI due to how the BLS measures them. It is _a_ leading indicator, but not the _sole_ leading indicator.
    - dragonwriter 3y ago
      That's all nice abstract theory about why PPI should, in a particular model of how the world might work, be a leading indicator of CPI, but we have a history of CPI and PPI data and the fact is, PPI isn't a leading indicator of CPI. They tend to be correlated, but not in a lead-follow relationship.
      - object-a 3y ago
        I will grant that the PPI and CPI are not in a clear lead-follow relationship, for composition reasons that I mentioned above and that are covered in the article you posted. However, the PPI can still be a leading indicator of the direction that consumer prices are moving. Here's a recent article from the Federal Reserve on this question: > However, we also see a considerable positive correlation between lagged values of monthly PPI inflation and the current month's inflation. In particular, the correlations between current monthly PCE inflation and previous months' PPI inflation up to seven months back are all greater than 0.3. This is our first clue that PPI inflation contains information for future changes in the PCE price index. https://www.richmondfed.org/publications/research/economic_brief/2022/eb_22-38 https://www.richmondfed.org/publications/research/economic_b...

object-a 3y ago

The article is reporting that wholesale prices (measured by the PPI) have declined 0.5% Y/Y. It might take a while to affect CPI, but that would strongly suggest that inflation has reached a turning point.

uoaei 3y ago
Wholesale prices are not consumer prices.
- object-a 3y ago
  No, but they affect consumer prices.
  - uoaei 3y ago
    Only in the sense that they set a floor, but not that they set a ceiling. Thus, very limited utility in the context of understanding consumer prices.
    - object-a 3y ago
      It's true, but a large gap between consumer and producer prices is hard to maintain over the long run. It is true that there are other factors which can drive inflation and rising consumer prices. However, if the recent bout of inflation was caused by supply chain issues, or by food + energy costs rising, then a decline in producer prices would probably slow consumer price inflation.
      - uoaei 3y ago
        [flagged]
        object-a 3y ago
        It is not "simping" to point out that factor prices have an impact on consumer prices. And while some companies do have (too much) pricing power, I wouldn't categorize it as unilateral and unchecked
        dang 3y ago
        > your motivation to simp Crossing into personal attack, as you did here, will get your account banned—especially when the account has a long history of breaking the site guidelines. We've had to ask you about this many times: https://news.ycombinator.com/item?id=36748588 https://news.ycombinator.com/item?id=36748588 (July 2023) https://news.ycombinator.com/item?id=36748560 https://news.ycombinator.com/item?id=36748560 (July 2023) https://news.ycombinator.com/item?id=28611505 https://news.ycombinator.com/item?id=28611505 (Sept 2021) https://news.ycombinator.com/item?id=23648230 https://news.ycombinator.com/item?id=23648230 (June 2020) https://news.ycombinator.com/item?id=22263907 https://news.ycombinator.com/item?id=22263907 (Feb 2020) I don't want to ban you! But we really need you to stick to the rules, so if you'd please review https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and do that from now on, that would be good.
hncensorship69 3y ago
Perhaps. A turning point is not the same as "over" though.
- object-a 3y ago
  Inflation will probably never be "over", since stable inflation is generally positive for growth and employment. The Fed's target isn't for 0%, its around 2% y/y
tea-coffee 3y ago
I believe CPI is unchanged in October. I did not take a close look at the CPI numbers, but I believe the steady index is in part due to energy falling. But rents and food are increased. Not an economist, so I'm not sure how much to read into that.
- object-a 3y ago
  PPI is a leading indicator for CPI, since it represents what producers are paying. A falling PPI would (probably) indicate lower CPI inflation in future releases.
  - dragonwriter 3y ago
    > PPI is a leading indicator for CPI, since it represents what producers are paying. A falling PPI would (probably) indicate lower CPI inflation in future releases. PPI and CPI historically are loosely correlated, but show no clear lead-follow relationship. PPI seems to swing harder, but not first. https://www.fisherinvestments.com/en-us/insights/market-commentary/charts-of-the-day-ppi-doesnt-lead-cpi https://www.fisherinvestments.com/en-us/insights/market-comm...
dragonwriter 3y ago
No, it wouldn't, because PPI rate of change isn't a leading indicator of CPI rate of change, and, anyhow, PPI inflation has recently been unusually elevated compared to CPI inflation, so if it indicates anything (doubtful) its a more normal relationship between CPI inflation and PPI inflation, not what direction CPI inflation is heading.
- object-a 3y ago
  CPI includes a lot of stuff that's not in PPI (including shelter and rent), so it would depend on what the components or drivers of inflation are in the CPI. If owner equivalent rent is moving lower (which it was in October), and if prior inflation was caused by supply chain tightness or higher input costs, than a lower PPI could indicate that supply chain tightness has eased, and goods inflation will head lower or stabilize. It's also worth noting that CPI moves slower than PPI because rents make a pretty big percentage of CPI, and rents move slower than PPI due to how the BLS measures them. It is _a_ leading indicator, but not the _sole_ leading indicator.
  - dragonwriter 3y ago
    That's all nice abstract theory about why PPI should, in a particular model of how the world might work, be a leading indicator of CPI, but we have a history of CPI and PPI data and the fact is, PPI isn't a leading indicator of CPI. They tend to be correlated, but not in a lead-follow relationship.
    - object-a 3y ago
      I will grant that the PPI and CPI are not in a clear lead-follow relationship, for composition reasons that I mentioned above and that are covered in the article you posted. However, the PPI can still be a leading indicator of the direction that consumer prices are moving. Here's a recent article from the Federal Reserve on this question: > However, we also see a considerable positive correlation between lagged values of monthly PPI inflation and the current month's inflation. In particular, the correlations between current monthly PCE inflation and previous months' PPI inflation up to seven months back are all greater than 0.3. This is our first clue that PPI inflation contains information for future changes in the PCE price index. https://www.richmondfed.org/publications/research/economic_brief/2022/eb_22-38 https://www.richmondfed.org/publications/research/economic_b...