Pubblicato in: Banche Centrali, Stati Uniti

Inflazione. Un fenomeno complesso. 35 parametri importanti per valutarla. – Bloomberg.

Giuseppe Sandro Mela.

2021-07-29.

Andrà tutto bene 001

Bloomberg ammette che l’inflazione esiste e che sta crescendo, ma secondo il suo punto di vista non c’è proprio nulla da temere. Nulla di nulla.

L’articolo allegato è molto lungo e denso: ne estrarremo solo i punti più significativi, ma il commento verterà l’intero testo.

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«Inflation is here — These 35 metrics tell you how much to worry»

«A year ago, the Covid-19 pandemic crushed prices in many parts of the U.S. economy. As expected, that has created inflation 12 months on as the economy reopens and rebounds»

«No one disputes that inflation has arrived. The question is where it’s heading»

«The most basic fact is that June’s “headline” consumer price index, including everything the government puts in its representative basket of products and services that Americans buy, stands at 5.4%, the highest in 30 years barring one month in the summer of 2008 when oil reached nearly $150 per barrel»

«Those numbers would seem to validate the doomsayers»

«Yet bond markets and economists take the opposite view»

«The bond market’s best estimate of the average inflation rate for the next 10 years»

«The yield curve — the extra yield that investors demand for 10-year bonds rather than 2-year bonds, which generally rises when people expect higher inflation — is now below 1%»

«Inflation is a complex phenomenon that grows from many places. These 35 key measures offer up a more nuanced picture of how markets are positioned»

«Distance from 10-year average, with one standard deviation providing the upper- and lower-end range for a “normal” score»

«Flashing alarmingly bright are the official data, as well as surveys of businesses and consumers»

«Resolution should come in two categories that remain finely balanced: prices and wages»

«the raw industrials index, which includes basic commodities that aren’t in the futures markets, continues to rise and is nearing its historic top from more than a decade ago»

«the pay of low-skilled workers is picking up and employers are complaining that they cannot fill jobs, which could imply wage inflation ahead»

«The Fed’s preferred measure of inflation, the Core PCE deflator, is also at its highest level since 1992»

«But it will still be a relief if next month’s data can show a significant retreat in some of the sectors that were hit by extreme inflation.»

«The crucial measures for monetary policy are the official government measures of inflation, mostly published monthly»

«The Consumer Price Index (CPI) includes everything in the Bureau of Labor Statistics’ basket.»

«The Producer Price Index (PPI) measures prices paid by producers for making goods»

«Core CPI excludes fuel and food prices, which are more variable than most and, to an extent, beyond the reach of monetary policy»

«The Trimmed Mean CPI is another measure of “core” inflation in which the biggest outliers in both directions are excluded»

«Finally, the Personal Consumption Expenditure (PCE) Deflator, which is compiled as part of the calculations for GDP, is the measure most closely watched by the Fed»

«It takes into account an even broader range of prices and is based on surveys of businesses rather than consumers»

«Collecting inflation numbers is a massive statistical endeavor»

«Many claim that the basket of goods in the CPI is biased in some way but this is a tad unfair»

«→→ Housing prices are immensely important and can have knock-on effects on wage demands and other prices ←←»

«College tuition has long inflated far faster than the rest of the economy, so we look at it in isolation»

«Medicinal drugs are a hot-button issue where rising prices would hurt the neediest»

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Si concorda pienamente con Bloomberg che il fenomeno inflattivo sia molto complesso e non esprimibile con un unico parametro, anche se il Producer Price Index (PPI) ed il Consumer Price Index (CPI) siano soddisfacenti per quanti desiderino seguire quanto accade, senza addentrarsi in analisi del sistema economico.

Un aspetto da tener sempre presente è che il CPI dipende strettamente dal paniere di riferimento, che, per esempio, nei pesi occidentali, non tiene conto dei costi legati alla casa, sia di acquisto, sia di affitto, sia di manutenzione ordinaria o straordinaria. Eppure questa voce incide severamente sui bilanci casalinghi. Nei paesi europei, poi, vi compaiono beni da tempo non più acquistati.

A nostro sommesso parere, la pandemia avrebbe influito ben poco sul processo inflattivo, checché ne dicano economisti e media.

Negli ultimi tempi i costi estrattivi sono aumentati vertiginosamente. Un esempio per tutti, il carbone.

Carbone. Dai 46.9$ per tonnellata a settembre agli attuali 148.6$.

I prezzi delle materie prime sono quasi raddoppiati nel volgere di un anno ed i paesi produttori tendono a vendere il loro estratto quasi solamente a paesi amici.

Su questa variabile le banche centrali sono impotenti, e saremmo propensi a considerarla concausa primaria della inflazione. Sempre a nostro sommesso parere, la pandemia ha influito ben poco.

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Inflation Is Here — These 35 Metrics Tell You How Much to Worry

A year ago, the Covid-19 pandemic crushed prices in many parts of the U.S. economy. As expected, that has created inflation 12 months on as the economy reopens and rebounds. Now the market seems to believe that a resurgence of the pandemic will rein in inflation before it grows out of control. No one disputes that inflation has arrived. The question is where it’s heading.

The most basic fact is that June’s “headline” consumer price index, including everything the government puts in its representative basket of products and services that Americans buy, stands at 5.4%, the highest in 30 years barring one month in the summer of 2008 when oil reached nearly $150 per barrel. Exclude food and fuel, always variable, and inflation still comes in at 4.5% — its highest in three decades by far. Even if the most extreme movers both up and down are stripped out, inflation stands at 2.9%, its worst since 1992 (barring a few months of very expensive oil). Those numbers would seem to validate the doomsayers.

Yet bond markets and economists take the opposite view. They see inflation not only coming under control but eventually falling to levels lower than before the pandemic hit. The bond market’s best estimate of the average inflation rate for the next 10 years stands at 2.3%, which is roughly where it’s been for four months even as other numbers have gotten worse. The yield curve — the extra yield that investors demand for 10-year bonds rather than 2-year bonds, which generally rises when people expect higher inflation — is now below 1%. That’s less than its average for the last decade, a period when inflation hasn’t been a problem. Indeed, it’s no higher than it was in February.

Either market players remain confident that the Federal Reserve can keep rising prices under control, or they’re worried the economy won’t keep growing fast enough to push inflation numbers higher. Those concerns are definitely increasing as the delta variant shows its ability to slow economic reopening.

Our dashboard of indicators aims to add clarity to this debate. Inflation is a complex phenomenon that grows from many places. These 35 key measures offer up a more nuanced picture of how markets are positioned, what the official data say and what consumers and businesses are discounting. Numbers are current as of Monday, July 19 and will be updated weekly.

                         Authers’ Indicators

*Distance from 10-year average, with one standard deviation providing the upper- and lower-end range for a “normal” score. A Z-score equal to 0 represents an average value.

Flashing alarmingly bright are the official data, as well as surveys of businesses and consumers. The latest survey by the National Federation of Independent Business, of prices paid by small companies, is at a level it last reached all the way back in the first quarter of 1981. Yet showing no concern at all are market indicators and Bloomberg’s surveys of expert economists’ predictions. Both are below their averages for the last decade.

Resolution should come in two categories that remain finely balanced: prices and wages. These factors drove inflation higher in the 1970s and could do so again. Prices of futures for oil, agriculture and metals have all given up ground after rising very sharply from last year’s lows. But the raw industrials index, which includes basic commodities that aren’t in the futures markets, continues to rise and is nearing its historic top from more than a decade ago.

Meanwhile, although wage growth remains well within its recent ranges, the pay of low-skilled workers is picking up and employers are complaining that they cannot fill jobs, which could imply wage inflation ahead. The decisive factor could be if a new pandemic-related downturn weakens demand, as well as the hand of labor, again. That would be bad news, but at least it would avert an extended bout of inflation.

                         Official Measures Are Still Rising

June’s inflation data delivered a third nasty shock in succession. The Fed’s preferred measure of inflation, the Core PCE deflator, is also at its highest level since 1992. Meanwhile, headline inflation (including fuel and food) is at 5% for the first time since the oil price spike of 2008. Producer price inflation is also high. These are sudden moves and the more muted rise in the “trimmed mean” measure, which excludes goods that have suffered the most extreme changes in price, suggests that it is indeed mainly a transitory effect from the pandemic. But it will still be a relief if next month’s data can show a significant retreat in some of the sectors that were hit by extreme inflation.

                         Why these indicators?

The crucial measures for monetary policy are the official government measures of inflation, mostly published monthly. The Consumer Price Index (CPI) includes everything in the Bureau of Labor Statistics’ basket. The Producer Price Index (PPI) measures prices paid by producers for making goods. Core CPI excludes fuel and food prices, which are more variable than most and, to an extent, beyond the reach of monetary policy. The Trimmed Mean CPI is another measure of “core” inflation in which the biggest outliers in both directions are excluded, with the average taken of the rest; this can compensate for the fact that prices in many products are “lumpy” and can in practice only be raised once or twice a year. Finally, the Personal Consumption Expenditure (PCE) Deflator, which is compiled as part of the calculations for GDP, is the measure most closely watched by the Fed. It takes into account an even broader range of prices and is based on surveys of businesses rather than consumers.

                         Sanity Returns to Some Sectors

There is deepening concern over shelter inflation, the single biggest component of the CPI index, which is now up to 2.3% and will likely rise further as higher house prices pull up rents in their wake. This will be particularly closely watched. But the most extreme transitory effects of the pandemic are otherwise beginning to ease. Car rental prices, for example, are now “only” 88% higher than they were 12 months ago, having previously topped 100%. Several sectors which suffered a deflationary blow from the pandemic are still not seeing prices recover. Recreation inflation is still negative. And — heaven be praised — college-tuition inflation remains close to its lowest since records began in 1979, although it did tick up slightly in June. It is still just about possible to sustain an optimistic narrative that the pandemic caused extraordinary inflation in some pockets of the economy but might have brought sanity to others where prices had grown prohibitive.

                         Why these indicators?

Collecting inflation numbers is a massive statistical endeavor. Many claim that the basket of goods in the CPI is biased in some way but this is a tad unfair, as the Bureau of Labor Statistics provides a breakdown of inflation for all the categories it follows. Housing prices are immensely important and can have knock-on effects on wage demands and other prices. College tuition has long inflated far faster than the rest of the economy, so we look at it in isolation. Two sectors (car rentals and recreation) were hard-hit by the pandemic and can be expected to enjoy sharp-but-transitory rebounds. Medicinal drugs are a hot-button issue where rising prices would hurt the neediest.

                         The Bond Market Is No Longer Worried

The bond market, where traders make their most precise predictions of inflation, has been in flux all year. Four months ago, 5-year breakevens topped 2.75%, virtually matching their high during the 2008 oil price spike. Since then they have dropped below 2.4%, although the latest data returned them to 2.6% — higher than they were at any point between 2010 and 2020. Meanwhile, expectations for the years from 2026 to 2031 have fallen to 2.16%, suggesting confidence that the Fed will be able to rein in inflation over the next five years. The heat map is based on the 20-day moving average of the breakevens, to avoid being too affected by day-to-day movements, which have been violent in the last few weeks. Nobody is positioned for the Fed to lose control of inflation anytime soon, nor for Germany or Japan to snap out of their disinflationary malaise.

Why these indicators?

Every day the market is revising its working estimates of inflation and the bond market gives us precise estimates, through the gap between yields on fixed and inflation-linked bonds. Central banks watch breakevens very closely, as they are driven by experts with real money at stake. In the U.S., we follow projections for average inflation over the next five years and (through the 5-year/5-year breakeven) the five years after that. The wider the gap between 2-year and 10-year bond yields (known as the yield curve), the higher inflation is expected to be. Finally, deflationary psychology has ravaged Germany for years and Japan for decades; we look at expectations for them over the next 10 years.

                         Businesses Still Sounding the Alarm

These numbers offer perhaps the greatest support for the case that inflation is a near and present danger. All are way above their ranges for the last decade. The small business survey shows inflation expectations at their highest in four decades, while the Institute for Supply Management numbers are at post-2008 highs and still rising in the latest number produced at the beginning of July — although the survey for the services sector did show a slight decline. Consumer expectations have also risen very sharply, to their highest since the commodity price spike before the financial crisis, with the latest Conference Board survey reaching a fresh high for this cycle. This could be transitory but, if so, the numbers need to come down soon.

                         Why these indicators?

If consumers expect higher prices in the surveys conducted by the University of Michigan and the Conference Board, this will be reflected in higher demand now and in higher wage demands, both of which will tend to press inflation upwards. The National Federation of Independent Business survey of the proportion of small-business executives bracing for higher prices and the Institute for Supply Management supply managers’ survey of the prices that larger businesses say they are paying have both proved to be great leading indicators in the past. In all cases, these numbers can prove to be self-fulfilling prophecies, which is why they are monitored so closely.

                         No Clear Picture From Commodity Prices

Rising commodity prices represent exactly the kind of inflation that can attack living standards. But, given the economic collapse a year ago and the rush by speculators to get a leveraged play on the rebound, they don’t give firm evidence of inflation that is more than transitory. Metals prices are about 6% below their May peak, while energy prices have also dropped by about 6% as the OPEC+ cartel tries to sort out its problems; it’s not at all clear the latter are locked into an inflationary expansion. One increasingly ominous warning sign comes from the Commodities Research Board raw industrials index, which covers basic commodities that aren’t in the futures market. In theory, these prices should be driven by supply-and-demand dynamics in the real world, not by ebbs and flows of emotion in the markets. The index has gained more than 50% in a year and is nearing an all-time high.

                         Why these indicators?

Inflation shows up first in the price of raw materials and futures markets capture those changes by the second. Bloomberg futures indexes for industrial metals, agricultural commodities and energy thus provide a good real-time indicator of inflationary pressures. Earlier this year, lumber futures were gripped by a huge price spike; this has now reversed as sawmills increased production, but needed to be monitored as lumber was central to early arguments that inflation was returning. The Commodities Research Board’s RIND index covers raw materials such as burlap, tallow and lard that are not tied to futures. If the futures indexes are being driven by speculation rather than genuine inflationary pressure, you would expect to see this index lagging them; the reverse is the case at present.

                         Low-Skilled Wages Are Picking Up

Wage inflation is a crucial driver of inflation and, from the official data, it appears to be under control despite a number of factors that would normally drive salaries and wages upwards. Most measures of wage inflation are running below their average for the last five years, with the Atlanta Fed putting overall wage growth at 3.2%. Yet, job vacancies are at an all-time record, while small businesses complain that they have never found it harder to recruit workers. This suggests a problem with skill mismatches coming out of the recession. At the same time, while average hourly earnings have been quite variable over the last few months, the latest number shows them increasing at the fastest rate since 2009. The ongoing wage tracker kept by the Atlanta Fed shows that wage inflation for low-skilled workers has reached 3.6%, close to its highest since the global financial crisis. The National Federation of Independent Business finds the highest proportion of its members raising pay since they started asking the question in 1984.

Why these indicators?

Higher wages raise costs for companies, which they want to pass on to customers. They also put more money in the pockets of consumers. Although often much to be desired, wage inflation is thus a direct driver of price inflation. Average hourly earnings can be affected by composition — they rose early during the pandemic, for instance, because layoffs disproportionately hit the low-paid — so we include both weekly and hourly figures. The Atlanta Fed produces a handy “nowcast” survey of wage trends for both high- and low-skilled workers, while the National Federation of Independent Business survey tracks how many small businesses are raising rather than cutting pay. This figure hit a record high just before the pandemic and has nearly returned to the same level.

                         Economists More Worried About Deflation

Broadly, the consensus is that the Fed, like other central banks, will get what it wants. The Fed is forecasting Core PCE (personal consumption expenditure) of 3% for this year but expects it to decline to 2% in 2023; in other words, it will be transitory. The experts are less anxious for now and think it will reach 2.5% this year and decline in the two following years — more or less perfect for the Fed, which is prepared to let inflation “run hot.” German inflation, after a bobble this year, is expected to fall back to 1.7% in 2023; there’s no sign of a new reflationary cycle there or in Japan, or even China. Whatever markets say, the experts are still more worried about deflation.

Why these indicators?

The forecasts by economic experts greatly impact government planning and policy, and also affect decisions by companies. Bloomberg’s survey offers as good an estimate as we’re going to get of “received expert wisdom” and also shows the spread of opinion into the future.