by Mish

Crude Weekly Chart

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Crude Monthly Chart

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Inflation Hawks Worried

Crude closed at $39.44 for the week ending March 12, 2016.

Even with the steep decline in recent days, using a price of $48.00 as a reference, crude is up 21.7%  from a year ago.

This is the “welcome” price inflation that ECB president Mario Draghi sees when he brags about defeating deflation.

In the US, inflation hawks are worried.

Crude Percent Change From Year Ago

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Crude prices are up 75.96% from a year ago, but that may dip to the negative column by September.

CPI All Items

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Assuming the prices of crude will stay near $48.00…

  • Year-over-year CPI All Items would likely show little movement in April, May, and September.
  • Year-over-year CPI All Items would be high in June, July, and August.
  • Year-over-year CPI All Items would be low or negative in November, December, and January of 2018.

If the Fed continues to hike, my expectation is oil prices decline.

What If Discussion

Those “what if” estimates do not factor in Trump’s economic policy, Border Adjustment Taxes (BAT), or tariffs.

Finally, the CPI does not properly factor in health care costs or housing.

In general, my view is that if actual home prices decline, the CPI will be overstated; and if home prices continue to rise, the CPI will be understated.

For a discussion of home prices and the CPI, please see Dissecting the Fed-Sponsored Housing Bubble; HPI-CPI Revisited; Real Housing Prices; Price Inflation Higher than Fed Admits.

Also see Barry Ritholtz Asks “Why Has Inflation Remained Low for So Long?” Mish Asks “Is Inflation Low?”

The Fed’s Asymmetric Policy of dealing with bubbles has made a big mess of things.

Mike “Mish” Shedlock

Weekly Economic Potpourri November 29, 2008

Every week there are a numerous headlines that are worthy of mentioning but I simply run out of time. Here are a few headline news reports of interest from the past week.

Oil Back Below $50: End of Inflationary Jump?

Crude oil is back below $50 and production is up. Hedge funds are reducing positions. Is this the end of an inflationary jump?

Curious September Energy Decline in CPI, With Crude and Gas Futures Rising

The BLS says the energy index declined 0.5 percent in September, but the price of crude rose. Overall the CPI rose 0.1%.

Crude Dives to $30, a Whopping $20 Below Cost of Production

Crude futures opened down a massive 31% today. Prices have recovered a bit, but price is well below cost of production.

PPI Declines First Time Since August 2016

Producer prices unexpectedly declined in December. Trade services fell a steep 0.6 percent.

CPI Jumps Most Since February 2013 on Energy: Did Gasoline Prices Really Rise 7.8% in January?

The BLS reports the CPI Increased 0.6 Percent in January. That’s the largest increase since February of 2013. As with the PPI, much of the jump is oil related.

CPI Weak, Prices of Autos, Lodging Away From Home

Drop: Econoday Cheers Rising Medical and Apparel Prices. The CPI rose 0.1% in July vs an Econoday consensus estimate of 0.2%.

US Manufacturing PMI Declines First Time Since September 2009

According to the Markit Flash Manufacturing PMI survey, manufacturing activity in the US declined for the first time since September 2009.

Trust in Mainstream Media Dips to Record Low: Here’s Why

A Gallup poll shows trust in mainstream media fell to a record low 32%. Trust has been on the decline since 1972. On November 30, Armstrong Economics reported Gallup Poll: Trust in Mainstream Media Falls to 32%.