CPI Rips Higher to 8.5 Percent From a Year Ago, the Most Since 1981

April 12, 2022

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3:01 pm

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52 comments

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Economics

*Consumer Price Index data from BLS chart by Mish*

Year-Over-Year CPI Details

The all items index continued to accelerate, rising 8.5 percent for the 12 months ending March, the largest 12-month increase since the period ending December 1981.
The all items less food and energy index rose 6.5 percent, the largest 12-month change since the period ending August 1982.
The energy index rose 32.0 percent over the last year
The food index increased 8.8 percent, the largest 12-month increase since the period ending May 1981.
Rent increased 4.4% and Owners’ Equivalent Rent OER rose 4.5%

OER is the mythical price one would pay to rent one’s own house from oneself, unfurnished and without utilities.

OER is the single largest component in the CP with a weight of 24.04%. Rent has a weight of 7.34%. Given that both are continually understated vs other measures of rent, the CPI is up more than stated.

I do not chart energy prices because at 32.0%. it skews the scale of everything else.

CPI Month-Over-Month

Month-Over-Month Details

The gasoline index rose 18.3 percent in March and accounted for over half of the all items monthly increase; other energy component indexes also increased.
The food index rose 1.0 percent and the food at home index rose 1.5 percent.
The index for all items less food and energy rose 0.3 percent in March following a 0.5-percent increase the prior month.
A broad set of other indexes also contributed to to the increase, including those for airline fares, household furnishings and operations, medical care, and motor vehicle insurance.

Four Measures of Inflation

PCE stands for Personal Consumption Expenditures. That data is from the BEA and lags the CPI reporting by a number of weeks.

Data Dependent Fed

The allegedly “data dependent” Fed ignored raging inflation for well over a year, even by their own pathetic measures that ignore housing and stock market bubbles.

Hello Fed, Inflation Expectations Are Unglued, No Longer Well Anchored

Given the Fed is a firm believer in inflation expectations let’s check in on a New York Fed survey of consumer expectations.

For details and discussion, please see Hello Fed, Inflation Expectations Are Unglued, No Longer Well Anchored

This post originated on MishTalk.Com.

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52 Comments

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Dr_Novaxx

2 years ago

Yeah what a shocker. Fed dumps billion$$ of free money into the economy and, viola! Paying people to do nothing results in nothing but higher prices (from de-valued dollar$). Unfortunately this is only the First Act of this horror flick.

Curious-Cat

2 years ago

Transitory. Can’t last forever.

Naphtali

2 years ago

On the conspiracy front- does inflation aid a government which is hopelessly in debt through debt deflation?

Carl_R

2 years ago

Reply to Naphtali

In the short run, maybe, but only so long as they can keep real interest rates negative. In the longer term, it will hurt them tremendously. If inflation stays at 8.5%, the 30 year bond will need to go to 9%, at which the interest payments alone will consume much of the budget, and everything else will have to be cut.

Captain Ahab

2 years ago

Reply to Carl_R

The problem is “keep real interest rates negative.” To have this situation essentially requires irrational actors buying and selling. If inflation rates stays with high probability at 8.5% for 30 years, and the real risk free rate rate is that of real GNP growth, say 2%, bond yields should be 10.5%. That’s the static model.

Next up, what happens to the Federal deficit when interest rates on new issues at 10.5%? The government has a problem paying for its wasteful spending, so taxes increase. The previous issues are locked in–the holders are bankrupt, but so what (pension funds etc). To see the effect: what happens to investors who bought 30 yr bonds last year with a yield LOCKED IN at say 1.5%?

They are wiped out.

Should a risk premium be added to T-bombs? Personally, I would not touch them at this point.

Lisa_Hooker

2 years ago

Reply to Captain Ahab

To be honest, no, they are not wiped out. However, they must hold the bonds to maturity with only 1.5% yield. Do not assume that all bonds must be sold into the market. Many simply roll off.

Felix_Mish

2 years ago

How much will taxes be “inflating”?

Carl_R

2 years ago

Reply to Felix_Mish

Taxes have built in inflation. As inflation rages, people get raises, and that slow pushes them into higher tax brackets, and makes the deductions worth less.

JeffD

2 years ago

Now, the Fed is only 8.25% behind inflation vs 7.75% before this report. Progress.

RonJ

2 years ago

“The allegedly “data dependent” Fed ignored raging inflation for well over a year”

They depended on the the inflation data being transitory

FlyNavy1

2 years ago

But, but Putin, Trump, the Tooth Fairy.

– Jen Psaki

Captain Ahab

2 years ago

I admire those readers who toss out inflation predictions without any serious discussion of either/both demand or supply factors. Frankly, I see nothing from the FED or Democrats to suggest they have any control of the economy.

Once started, inflation is like a virus, infecting all in its path.

Tony Bennett

2 years ago

Reply to Captain Ahab

“without any serious discussion of either/both demand or supply factors.”

…

Well, for months I’ve pointed out business inventory builds (invariably above consensus) + negative real earnings.

Hard recession on deck (at the plate?) which will take care of inflation concerns.

Deflation will be watch word soon enough.

Captain Ahab

2 years ago

Reply to Tony Bennett

I agree generally, and I follow/respect your comments, btw.

Months ago I was saying ‘orders’ were likely highly overstated after Covid–a combination of money hoarding stimulating increased demand in the short term, ‘normal’ pent-up demand, inventory draw-down, wanting a safety factor after supply reductions because of Covid issues etc. I anticipated problems by February/March. Toss in accelerator/multiplier effects, and the result is an amplified business cycle.

The FAR FAR bigger problem is irrationality. Specifically, negative real rates for a prolonged period. Add in control mechanisms that are incompetent (aka FED, government) using economic theories that are ‘idiotic’ and predictability becomes next to impossible. That is, we no longer have a risk-return framework. We have true uncertainty. Probability no longer works.

As Mish so often says: Buy Gold.

Zardoz

2 years ago

Reply to Captain Ahab

Are you saying the fed and democrats should be in control of the economy, or that the republicans should?

Captain Ahab

2 years ago

Reply to Zardoz

If only we had a free-market economy… with just enough rules to restrict bad players.

Bam_Man

2 years ago

In May of 1981 (the last time inflation was this high) the effective Fed Funds Rate was 18.50% and a 3-month CD earned 18.25%.

Today the Effective Fed Funds Rate is 0.33% and a 3-month CD earns an APY of 0.25%.

“Toto, I’ve a feeling we’re not in Kansas anymore.”

Captain Ahab

2 years ago

Reply to Bam_Man

EXACTLY! IMHO, what this means is irrational behavior controls the markets. If you look for Black Swans, irrational behavior is a true outlier. We have no idea of the impact.

StukiMoi

2 years ago

Reply to Bam_Man

20% used to be a rate bandied about by central bank supporters, back when being one could still be admitted to in respectable company.

Back then, the understanding was that a central bank, could add something positive, by preventing casualties arising from purely temporary (supposedly) “liquidity” crunches. As opposed to “solvency” ones, for which bankruptcy was never questioned as the only viable solution.

But in order to make it very unlikely that other people’s money weren’t being wasted on papering over what was really solvency issues, The Fed should only lend against VERY GOOD collateral, and at VERY HIGH rates.

Of course all that, like all else of once-was-value, went out the door with the systemic idiotification of society which is always required in order to entrench mediocre ruling classes in their positions of unearned privilege. Such that The Fed has, by now, simply become an arbitrary redistribution channel, engaged solely in robbing productive people for the benefit of protected leeches., and serving no other purpose whatseover.

FlyNavy1

2 years ago

Reply to Bam_Man

The CPI once included housing prices. I remember the good old days…

KidHorn

2 years ago

Will cut into non-essential spending. Looking more and more like a recession coming up.

StukiMoi

2 years ago

Reply to KidHorn

Third world sharecroppers robbed of all they ever owned, haven’t really engaged in much “non-essential” spending, for quite some time now.

Indeed, one of the foundations of financialized kleptocracy, is to effectively transfer all non-essential anything: To the select and privileged few belonging to the Fed’s protective classes. Mainly government (90%, at least, of whose spending is entirely non-essential), and privileged dilettantes living off of direct Fed welfare. With everyone else having everything above the bare minimum calories confiscated, in order to pay for keeping those two groups in their customary, entirely unearned, splendor.

Ay meaningful reduction in “non-essential spending,” would hence have to come from government, and from the Fed Welfare Queen classes. Meaning, tighter borrowing constraints/meaningfully higher real rates for the former. And significantly less redistribution their way, in the form of “asset price” supports, for the latter.

Both may happen. Eventually they will. But you can bet the thieves at the Fed will be fighting both, tooth and nail. All the way up to, almost or perhaps even entirely literally, burning sharecroppers and cottonpickers alive. All in order to save The Fed’s favored “system” of leeches, from having their personal “economy” cool off even a fractional degree.

Tony Bennett

2 years ago

Reply to StukiMoi

“Ay meaningful reduction in “non-essential spending,” would hence have to come from government, and from the Fed Welfare Queen classes.”

…

Don’t ignore credit. If you give the masses (in any shape or form … no matter how usurious) they max it. Credit is/will tighten. Leading to vicious cycle as lenders absorb losses.

StukiMoi

2 years ago

Reply to Tony Bennett

Even all that credit has over time, as the redistribution has picked up pace, been used more and more simply to afford “rent”, various “mandates” and other supposed essentials.

The Caribbean, being primarily a tourist destination, hence place of “non-essential” spending, makes this very apparent: Only the “luxury” resorts are now thriving (well, were, pre covid…). And for that ultimate non-essential outlay which many used to buy on “credit”, a pleasureboat: Nowadays, every single marina is busy ripping out 5 regular bays, in order to make room for one “yacht” sized one. All while the minimum wagers working there, are the ones most dependent on “consumer” credit.

In San Francisco as well: “Young” people end up “funding” higher rent payments by putting food and other stuff on revolving credit. Then spending every waking hour worrying about something as trivial and long-since-solved as that nonsense. Instead of using their comparatively well paid Silicon Valley brain for something more worth vile and productive. All for no other reason than to keep useless leeches, who produce nothing, in always unearned splendor.

Captain Ahab

2 years ago

Reply to StukiMoi

Those marinas ripping out ‘docks’ are Safe Harbor owned/franchised. If the cost of capital goes up to 10%, as it should, the marinas will be sold for pennies on the dollar.

StukiMoi

2 years ago

Reply to Captain Ahab

Sold for pennies on the dollar, then converted to a single dock. Where the US Oligarch for whose benefit the US government stole a Russian Oligarch’s boat, can store what is just his latest in a never-ending line of loot….. Stealing, and self righteously justifying doing so, is all “we” are competent to do anymore, after all.

Not sure who nominally “owns” every harbor from Abu Dhabi to Antigua, but the reason they are all being “upgraded”, is specifically that the middle/upper-middle class people who used to be able to put a 27 to 42 foot boat on credit if boating was their priority, are no longer able to do so. No matter how loudly the leechocrats insist that “making credit available” to them (newspeak for making infinite credit available to banksters, who then “may” make some of it available to someone else at what will always be nothing but usurious rates since the banksters’ credit cost is a hard zero or less), somehow makes them better off.

Now, all that credit, is instead being spent on paying, pretty much always entirely unearned, rent. To some deadweight leech on nothing but Fed welfare. Who instead needs a dock for “his” 90 footer.

Lisa_Hooker

2 years ago

Reply to StukiMoi

15th century: Henry VI (Part 2) — “The first thing we do, let’s kill all the lawyers”

dmartin

2 years ago

Anybody else thinking we just hit peak inflation?

Tony Bennett

2 years ago

Reply to dmartin

Yes.

I can hear Scottie in the engine room ….

link to cdn.quotesgram.com

Zardoz

2 years ago

Reply to Tony Bennett

Dammit Scotty! We need those Phasers on line now!

Christoball

2 years ago

Reply to Tony Bennett

I’m a Doctor Jim, Not an economist.

Karlmarx

2 years ago

Reply to dmartin

Not yet – likely to continue to worsen for the next few months as food shortages, fertilizer shortages, energy shortages, staffing shortages, transportation shortages, working chinese people shortages, etc. continue to take their toll.

Supply and Demand – economics really does not get much more complex than that.

Mish

2 years ago

Reply to dmartin

Carl_R

2 years ago

Reply to Mish

Me as well. I was expecting 9.0, so “only” 8.5% is a sign that the rate of increase is slowing. I think we will muddle along in the 8-8.5% range for six months or so.

KidHorn

2 years ago

Reply to dmartin

IMO, we’re at or near the top for inflation rate. But, I can see prices continuing to rise for a year or so. Just at a slower rate.

Lisa_Hooker

2 years ago

Reply to dmartin

This is America!

I believe that America can do much better than a measly sub-10% inflation rate.

Americans do growth! Bigger is better!

Tony Bennett

2 years ago

real wages getting hammered.

REAL EARNINGS – MARCH 2022

All employees

Real average hourly earnings for all employees decreased 0.8 percent from February to March,
seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from an
increase of 0.4 percent in average hourly earnings combined with an increase of 1.2 percent in the
Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings decreased 1.1 percent over the month due to the change in real average
hourly earnings combined with a decrease of 0.3 percent in the average workweek.

Real average hourly earnings decreased 2.7 percent, seasonally adjusted, from March 2021 to March
2022. The change in real average hourly earnings combined with a decrease of 0.9 percent in the
average workweek resulted in a 3.6-percent decrease in real average weekly earnings over this period.

Year over year real weekly earnings:

September … -0.8%

October … -1.6%

November … -1.9%

December … -2.3%

January … -2.7%

February … -1.9%

March … -3.6%

Business Man

2 years ago

History may not exactly repeat, but it sure does rhyme.

America is in a malaise, and we have a leader who inspires no one, with polling in the tank. People are restless, the culture war continues to flame up and gas prices and inflation are once again a daily topic, with records being broken. The communists and socialists continue their decades-long fight, while conservatives have mostly decided that now is the time to fight for America’s survival. A Republican presidential candidate waits in the wings after putting in a very strong gubernatorial record of freedom, small government and representing everyday people in a very large state.

Am I talking about the late 1970’s or the early 2020’s?

Casual_Observer2020

2 years ago

Reply to Business Man

It is only a certain kind of freedom and only if you fit into an increasingly small box the Republican governor likes. That isn’t freedom. It is fascism. The same kind we see in Russia.

KidHorn

2 years ago

Reply to Casual_Observer2020

You don’t see the democrats are far more fascists than the republicans? Which party is trying to censor the other? Trying to cancel those who tell the truth? Want to ignore the constitution? Label their opponents as our biggest threat to democracy? Wanted to overturn the filibuster and pack the supreme court?

Zardoz

2 years ago

Reply to KidHorn

Here you are, on a public forum read by tens of thousands, complaining about being censored.Mockery is not censorship. People ignoring you because they think you’re stuffed top full with wild blueberry muffins is not censorship. Your premise is broken and dumb.

KidHorn

2 years ago

Reply to Zardoz

Oh brother. Because I can post on a forum with maybe 100 viewers, that proves censorship doesn’t exist. The left doesn’t care about this forum. They care about twitter. Where the left is freaking out because Musk might put a stop to their censorship.

Captain Ahab

2 years ago

Reply to Zardoz

IMHO, Mr. KidHorn is a contributor whose comments are well worth reading. That you do not see censorship speaks to a closed mind. BTW, censorship exists on BOTH sides; however, it dominates on the left because of the sheer magnitude of biased sources, not by the greatest ideas.

Now, that said, we have a unique situation where Freedom of Speech (for example) pertains primarily to the public/government sector. For example, no one has the right to come onto my private property and presume they have the right to speak. The result (Facebook, twitter, CNN, MSNBC, NBC PBS NPR, ABC, Google…) all have every biased staff and reporting. Their censorship is primarily by OMISSION. I could base this on their coverage of the Hunter Biden laptop, however there are any number of examples.

Business Man

2 years ago

Reply to Casual_Observer2020

Wow, “fascism.” When the Left changes the common meaning of words I know they/you have lost.

But I’ll bite. What is this fascism you speak of? I’m going to take a wild guess here that every example you cite will be one where you are upset that government has curtailed its own power or of other powerful institutions against citizens, much to the chagrin of Leftists, who want that very power to be used expressly for the advancement of their ideologies over others.

Casual_Observer2020

2 years ago

Reply to Business Man

It isn’t a question of one ideology over another. It is a question of personal liberty and freedom. Passing or using laws to restrict what people do, say or think is the stuff of fascists. Both parties are doing this on issues of their choice and this is exactly the problem. To say that somehow one governor has a strong gubernatorial record on freedom is lying. It isn’t the kind of freedom where all citizens much less residents are free.

Business Man

2 years ago

Reply to Casual_Observer2020

Again, I’m looking for examples. You are citing generalities, which means nothing.

If you are referring to the recent Florida Parental Rights in Education Bill, this does nothing to restrict anyone’s personal liberties or freedom.

It does, however, prevent government employees from going rogue and educating other people’s children in a clandestine and ridiculously age-inappropriate way over parent’s objections. That is the case of the government reigning in Progressive government employees (not citizens on their own time) who use the government to impose their ideology on others and their children. THIS is fascism, because if the Leftists had their way, the parents would have no rights or “personal liberties and freedom” to prevent it.

If the teachers want to picket out front and talk about sex with themselves out front, they can do that 24/7. No one is restricting them. But as paid civil “servants” they have to follow the job that the government defines. It is not a free-for-all to indoctrinate little kids into their lifestyle choices.

But perhaps you were thinking of something else? We really don’t know, do we?

Casual_Observer2020

2 years ago

Reply to Business Man

I actually wasn’t even referring to the law you mention, which is totally legal and I as a parent have no issue with. The fact that you think people can be indoctrinated into being gay or straight (as if it is a political choice) presents serious issues by itself and has no basis in science. Kids and adults don’t magically wake up one day and “decide” to be gay. Not teaching this to anyone just perpetuates the ignorance.

Business Man

2 years ago

Reply to Casual_Observer2020

It’s sexuality. Allow a kindergartner to stay innocent for a while, will you?

And yes, I do believe indoctrination exists. The human mind, especially an impressionable very young one, is capable of being persuaded to believe just about anything. “Gender confusion” is something that these groomers are playing to with these kids.

Otherwise, what explains the astronomical increase in LBGT numbers in the past few years? There was a survey of Gen Z done recently and almost 40% of them identified within this strait. From 3% or less before, that’s mind boggling.

But I suppose all of our genetics changed overnight, as you say. No basis in science — right.

StukiMoi

2 years ago

Reply to Business Man

Has there ever, as in literally ever, been such a thing as a Republican President presiding over a small government?

Isn’t that the party which got its start massively growing government in order to invade Ukraine (or whatever it was they were invading that time…) and has only presided over bigger and bigger government, and more and more invasions, ever since?

They did somehow manage to bring back Ron Paul from the Libertarians. But then, in yet another of an endless succession of displays of just how hopelessly indoctrinated and stupid they have now become, they then managed to NOT nominate him for President. Instead going with some ever-more-government, war mongering waste-of-space.

Business Man

2 years ago

Reply to StukiMoi

Ok, left field. My comment had nothing to do with big or small government, or warmongering. Perhaps you were answering someone else’s comment.

I do agree with you in liking Ron Paul. I like him a lot. I also like Rand Paul.

But you seem a little dated in the “war mongering” bit. That might go all the way back to W, but that was 20 years ago, man. Trump was the last GOP president, and he started zero wars and was actually ending one of them.

Interestingly, the Democrats take control and now we have conflagrations all over, most notably Ukraine, which is an out and out war. And the Democrats have only been going at it for a year.

The “populist” GOP does not have a war footing or a saber rattler positioning. The Establishment GOP might, but the Democrats accuse the party of having been taken over by the populists. You can’t have it both ways.

Casual_Observer2020

2 years ago

Reply to StukiMoi

The era of small government never existed. Actually the last time the federal government did layoffs en masse was 1994 after Clinton and the Democrats lost the House and Senate when Clinton declared the era of big government was over. Both parties went on to more and bigger government even after blip.

StukiMoi

2 years ago

Reply to Casual_Observer2020

Both Washington and Jefferson presided over Federal budgets which weren’t outrageously overgrown.

Ditto standing armies which weren’t armed all that much better than those whose servants they were supposed to be.

Ditto pages of made-up, arbitrary “laws.” And “taxes.” And mandates. And, and, and…….

I suppose budgets of millions of dollars, is never “small” in any absolute sense. But if Biden’s Federal government would just make do with whatever budgets Jefferson’s did; at least I wouldn’t complain so loudly about Government being quite so obviously too big anymore.

So, let’s do that: Never vote for anyone who insist on taking more money from Americans, nor interfere any more in the lives of Americans, than Jefferson’s government did. If nothing else, that would at least be a very good start…

CPI Rips Higher to 8.5 Percent From a Year Ago, the Most Since 1981

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