Iran and Saudi Arabia, BFF

[Starlight]

OK I understand now.

It does trigger me that the US media always insists on reporting annualized stats. It's really really misleading to the public IMO. Why report something that happened the previous year as if it happened in the last month!?

The US media does it with GDP too (slightly differently, they multiply up whatever period they are reporting the GDP change in to be the length of a year, which is a different again to what they do to the inflation numbers. They're thus not even consistent with the ways they are reporting the different figures.)

In my country the media just reports the (quarterly) raw inflation numbers and (quarterly) raw GDP numbers which is a lot less deceptive. (The govt only issues them quarterly here rather than monthly like the US. But monthly is fine, they just need to be the raw numbers, not weirdly annualized numbers that use a different method of annualization for different stats!)

[Gondwanaland]

Indeed, your post is correct. The price rises have occurred, and those have not gone away.

But Rogue's claims that this means inflation continues to occur at the high January to February rates are very wrong. He seems to have a similar problem to Gond in not understanding that "the rate of inflation" does not mean "the rate of change of inflation". If inflation drops to zero, the prices stop going up. They do not continue to go up at 8% like he claimed.

Except it has continued to occur because that 5 percent has not magically disappeared.

You're essentially trying to argue that a car's velocity is 0 because no acceleration has happened in the last 10 minutes.

[Diogenes]

Except it has continued to occur because that 5 percent has not magically disappeared.

You're essentially trying to argue that a car's velocity is 0 because no acceleration has happened in the last 10 minutes.

Starlight has something of a point. If the car has no additional acceleration, then there is no change in velocity in regard to a specific timeframe. Star though seems to think humans compare things month to month when a year is a very psychologically reinforced period of time in the least as exemplified by birthdays, calendars, or other annual cycles.

[Gondwanaland]

Starlight has something of a point. If the car has no additional acceleration, then there is no change in velocity in regard to a specific timeframe. Star though seems to think humans compare things month to month when a year is a very psychologically reinforced period of time in the least as exemplified by birthdays, calendars, or other annual cycles.

No change in velocity, certainly. But the velocity is not zero.

[Starlight]

You're essentially trying to argue that a car's velocity is 0 because no acceleration has happened in the last 10 minutes.

No, I'm saying the car's velocity has dropped to 0. You're misunderstanding the velocity as acceleration and getting yourself confused because of it. You are one step too far down the rates of change.

Prices = distance, in this analogy
"Inflation", or "rate of inflation" or "inflation rate" = change in prices = velocity in this analogy
Acceleration in the analogy would be the rate of change of inflation, but that is not a metric that is generally used by anyone much, so is not relevant.

If inflation is 0%, prices don't change. So if the month-on-month inflation in July is zero, prices didn't change during the month of July.
If inflation is 6% over a year, then prices have gone up by 6% in the course of that year.

If, in the month of June 2022, inflation had been 9% over the previous 12 month period, then prices would be 9% higher compared to what they were 12 months earlier. If in the next month, there is zero inflation during that month, then prices do not change any further. In that month of zero further inflation of prices, the "inflation over the previous 12 month period" will be some new percentage which you can calculate, but that is not an indication that inflation is still happening, because it's just a report of inflation that already happened months ago and the prices are not currently changing.

[Starlight]

Starlight has something of a point. If the car has no additional acceleration, then there is no change in velocity in regard to a specific timeframe. Star though seems to think humans compare things month to month when a year is a very psychologically reinforced period of time in the least as exemplified by birthdays, calendars, or other annual cycles.

If the media stuck to reporting yearly periods at the end of each year, that would be fine.

But the US media likes to report a new number every month, which okay, I can live with, if you report the new month's figures each month. But they don't. They report yearly figures every month. And that confuses people greatly, as can be seen in this thread. Sparko thought a 12-month inflation rate of 6.4% in January and 6.0% in February meant prices had gone up 6.4% in January and then 6.0% in February (which indeed would be huge inflation). Gond and Rogue both seem to be just plain stuck and can't get their heads around it.

And the US media does the same thing with GDP, but then, just to confuse things further, uses a different way of annualizing GDP to what they do inflation, by reporting the GDP growth in that quarter multiplied by 4 to annualize it. IMO, that's still pretty bad, but it's a better maths method to be using that their way of annualizing the inflation numbers - if they used the same method on the inflation numbers and just reported the Month-on-month inflation multiplied by 12 as that month's annualized inflation, then there would be fewer misunderstandings. They report a trailing average on inflation, but not GDP, and then report in annualized numbers, but report it quarterly or monthly. Apparently they can't pick a period or method and stick with it.

[Sparko]

It does trigger me that the US media always insists on reporting annualized stats. It's really really misleading to the public IMO. Why report something that happened the previous year as if it happened in the last month!?

The US media does it with GDP too (slightly differently, they multiply up whatever period they are reporting the GDP change in to be the length of a year, which is a different again to what they do to the inflation numbers. They're thus not even consistent with the ways they are reporting the different figures.)

In my country the media just reports the (quarterly) raw inflation numbers and (quarterly) raw GDP numbers which is a lot less deceptive. (The govt only issues them quarterly here rather than monthly like the US. But monthly is fine, they just need to be the raw numbers, not weirdly annualized numbers that use a different method of annualization for different stats!)

You are correct about the way inflation figures are calculated over the last 12 months, but that doesn't mean inflation is over. Even looking back over the month on month figures over the last year, there were many months that had similar figures to the last two months. Those small numbers like .4 per month add up. We still are not out of the woods. Your claim that the inflation rate is zero is incorrect.


monthly inflation chart.jpg

[rogue06]

Indeed, your post is correct. The price rises have occurred, and those have not gone away.

But Rogue's claims that this means inflation continues to occur at the high January to February rates are very wrong. He seems to have a similar problem to Gond in not understanding that "the rate of inflation" does not mean "the rate of change of inflation". If inflation drops to zero, the prices stop going up. They do not continue to go up at 8% like he claimed.

That's what happens when you're simultaneously arguing with your credit card company on the phone while posting (after nearly 40 minutes of denying what I was saying they finally admitted I was right all along at which point I nearly lost it. I don't take kindly to being lying to. My response wasn't my finest hour). My point is that inflation continues and hasn't gone away in spite of silly claims that inflation was reduced to zero.

[Diogenes]

If the media stuck to reporting yearly periods at the end of each year, that would be fine.

But the US media likes to report a new number every month, which okay, I can live with, if you report the new month's figures each month. But they don't. They report yearly figures every month. And that confuses people greatly, as can be seen in this thread. Sparko thought a 12-month inflation rate of 6.4% in January and 6.0% in February meant prices had gone up 6.4% in January and then 6.0% in February (which indeed would be huge inflation). Gond and Rogue both seem to be just plain stuck and can't get their heads around it.

I agree it can be confusing, but there's no problem with a rolling year over year as rolling year over year includes the current month over month. Consumer sentiment doesn't reset at the end of each month so month over month reporting doesn't comport with consumer sentiment. It's great to minimize prior inflation but prior inflation is still expressed in current prices.

And the US media does the same thing with GDP, but then, just to confuse things further, uses a different way of annualizing GDP to what they do inflation, by reporting the GDP growth in that quarter multiplied by 4 to annualize it. IMO, that's still pretty bad, but it's a better maths method to be using that their way of annualizing the inflation numbers - if they used the same method on the inflation numbers and just reported the Month-on-month inflation multiplied by 12 as that month's annualized inflation, then there would be fewer misunderstandings. They report a trailing average on inflation, but not GDP, and then report in annualized numbers, but report it quarterly or monthly. Apparently they can't pick a period or method and stick with it.

GDP doesn't impact consumer sentiment as inflation does nor does it really impact the consumer at all really. It's mainly just statistician's statistic in that it's statistic merely for the sake of a statistic as is usually used as a comparison of economic output or comparison to debt. GDP is essentially just an economic fiscal year. Inflation, on the other hand, is a moving average of a price index.

[Starlight]

You are correct about the way inflation figures are calculated over the last 12 months, but that doesn't mean inflation is over.

Well inflation is never over in the sense that the US Fed typically always aims to keep it around 2% per annum, a number they copied from New Zealand (sorry about that, the US has a history of taking questionable economic ideas from New Zealand, see also the Phillips Curve). Under Trump, the Fed successfully kept inflation hovering around 2% per annum pretty closely. (Which is good if you think 2% is the correct amount of inflation, and bad if you think it isn't)

Biden's problem was that inflation shot up into the 6-9% per annum range. The Fed and the public were both unhappy about this, regarding it as inflation being "too high".

You see this reflected in the month-on-month figures, when they were fairly consistently 0.7 or above, and once even hit 1.3 in a single month.

In July 2022 that all changed. There had just been the record 1.3 month, and suddenly there was a month of 0.0! Inflation had suddenly stopped completely in that month. No price changes (on average) in July 2022.

But was this inflation suddenly coming to a halt or was it just a semi-random month-to-month fluctuation? Well in August 2022 the number was 0.1. Again, an incredibly near-zero number compared to the 0.7-1.3 range that had characterized the high-inflation months. And the near-zero numbers kept rolling in. 0.1 in November, -0.1 in December 2022. Clearly that 0.0 in July hadn't been a random fluctuation, but rather something fundamental had changed in the economy in July. Inflation had moved from a high rate (6-9% per annum) to some much much lower rate, somewhere much closer to zero or the 2% that the Fed likes to declare as 'normal'. There are still the occasional few months that are 0.4 or 0.5, and indeed if we were to get 12 of those in a row in the annual inflation would be ~5-6% which is moderate (a bit higher than the Fed likes, but lower than the 6-9% that we were previously seeing). But we don't seem to be getting 12 months of 0.4-0.5 in a row, as such months keep being interrupted with a -0.1 or a 0.1.

So we can conclude:
1) there was a major change in the economy in July 2022, in which inflation shifted from the "high" rate of 6-9% per annum it had been at, to a much lower rate. July 2022, where inflation was 0, was part of a trend in the months that followed it, a trend that was quite different to the months that had preceded it.
2) In the 8 months from July 2022 to the present, the annualized inflation rate has been 2.7%. So what happened was a sudden economic shift in July 2022 away from a 6-9% per annum inflation level and to a 2-3% per annum inflation level.
3) 2-3% is close enough to the Fed's 2% target that they shouldn't worry. Fed action on interest rates to try to lower inflation further is ill-advised IMO.

Those small numbers like .4 per month add up. We still are not out of the woods.

If more and more months at 0.4 start rolling in in the future, and fewer and fewer months at -0.1 to 0.1 roll in, then yes that would mean inflation is going back up a bit (but not into the 6-9% per annum range that was viewed as a serious problem). Currently though, since July 2022, the average per annum inflation has been 2.7% which is fine and is close enough to the Fed's 2% target as to make no difference. Whether the Fed should have a 2% target in the first place, is rather a different matter.

Your claim that the inflation rate is zero is incorrect.

It was zero in July 2022, when I made that claim. I turned out to be correct that it represented a major change in the economy where months after it consistently departed from the 6-9% per annum inflation we had previously seen.

[Sparko]

Well inflation is never over in the sense that the US Fed typically always aims to keep it around 2% per annum, a number they copied from New Zealand (sorry about that, the US has a history of taking questionable economic ideas from New Zealand, see also the Phillips Curve). Under Trump, the Fed successfully kept inflation hovering around 2% per annum pretty closely. (Which is good if you think 2% is the correct amount of inflation, and bad if you think it isn't)

Biden's problem was that inflation shot up into the 6-9% per annum range. The Fed and the public were both unhappy about this, regarding it as inflation being "too high".

You see this reflected in the month-on-month figures, when they were fairly consistently 0.7 or above, and once even hit 1.3 in a single month.

In July 2022 that all changed. There had just been the record 1.3 month, and suddenly there was a month of 0.0! Inflation had suddenly stopped completely in that month. No price changes (on average) in July 2022.

But was this inflation suddenly coming to a halt or was it just a semi-random month-to-month fluctuation? Well in August 2022 the number was 0.1. Again, an incredibly near-zero number compared to the 0.7-1.3 range that had characterized the high-inflation months. And the near-zero numbers kept rolling in. 0.1 in November, -0.1 in December 2022. Clearly that 0.0 in July hadn't been a random fluctuation, but rather something fundamental had changed in the economy in July. Inflation had moved from a high rate (6-9% per annum) to some much much lower rate, somewhere much closer to zero or the 2% that the Fed likes to declare as 'normal'. There are still the occasional few months that are 0.4 or 0.5, and indeed if we were to get 12 of those in a row in the annual inflation would be ~5-6% which is moderate (a bit higher than the Fed likes, but lower than the 6-9% that we were previously seeing). But we don't seem to be getting 12 months of 0.4-0.5 in a row, as such months keep being interrupted with a -0.1 or a 0.1.

So we can conclude:
1) there was a major change in the economy in July 2022, in which inflation shifted from the "high" rate of 6-9% per annum it had been at, to a much lower rate. July 2022, where inflation was 0, was part of a trend in the months that followed it, a trend that was quite different to the months that had preceded it.
2) In the 8 months from July 2022 to the present, the annualized inflation rate has been 2.7%. So what happened was a sudden economic shift in July 2022 away from a 6-9% per annum inflation level and to a 2-3% per annum inflation level.
3) 2-3% is close enough to the Fed's 2% target that they shouldn't worry. Fed action on interest rates to try to lower inflation further is ill-advised IMO.

If more and more months at 0.4 start rolling in in the future, and fewer and fewer months at -0.1 to 0.1 roll in, then yes that would mean inflation is going back up a bit (but not into the 6-9% per annum range that was viewed as a serious problem). Currently though, since July 2022, the average per annum inflation has been 2.7% which is fine and is close enough to the Fed's 2% target as to make no difference. Whether the Fed should have a 2% target in the first place, is rather a different matter.

It was zero in July 2022, when I made that claim. I turned out to be correct that it represented a major change in the economy where months after it consistently departed from the 6-9% per annum inflation we had previously seen.

Your error seems to be that you think if we have a month with low inflation it means it is over. As you can see from your own claim, even though July had zero inflation, it definitely went up again in the following months. On average it is still higher now than it was in the past before Biden took office. And yes, I will admit that part of that inflation was a result of Trump's policies because of COVID in 2020 (unemployment relief, the "stimulus" checks and paycheck protection program, spending money while people were sent home and businesses were shutdown). But Biden took that to a whole new level, and he definitely made things worse, and they continue to be bad.

[rogue06]

Your error seems to be that you think if we have a month with low inflation it means it is over. As you can see from your own claim, even though July had zero inflation, it definitely went up again in the following months. On average it is still higher now than it was in the past before Biden took office. And yes, I will admit that part of that inflation was a result of Trump's policies because of COVID in 2020 (unemployment relief, the "stimulus" checks and paycheck protection program, spending money while people were sent home and businesses were shutdown). But Biden took that to a whole new level, and he definitely made things worse, and they continue to be bad.

If they hadn't kept spending trillions of dollars that didn't even exist, the inflation at the end of Covid would have almost certainly been rather minor and short-lived -- even with Trump's spending.

[Sparko]

If they hadn't kept spending trillions of dollars that didn't even exist, the inflation at the end of Covid would have almost certainly been rather minor and short-lived -- even with Trump's spending.

The democrats spending money like crazy while calling it "inflation reduction" is certainly part of it. Along with the Green New Deal sort of nonsense. But even things like stopping new oil drilling permits and closing down pipelines, and just making the markets so volatile also contribute to making and keeping inflation high. People have no idea what Biden and the democrats will do next and that uncertainty is reflected in the economy and stock markets. Having a demented codger in charge of the country does not give Americans a warm cozy feeling.

[Starlight]

P.S. Let's say when I say "around 4" in July for 12-monthly inflation in the month ending June 2023 that my prediction is the 3.0 - 5.0 range.

For a super-bonus prize, I'll say it will be 3.6 in June 2023.

12-monthly inflation was 4.0% for the month ending May 2023. With one month to go, gotta say my prediction is looking pretty bang-on at this stage.

[Diogenes]

12-monthly inflation was 4.0% for the month ending May 2023. With one month to go, gotta say my prediction is looking pretty bang-on at this stage.

Given the recent OPEC cuts, the 3.6% energy fall that created the overall decrease will likely be erased, especially now that the summer vacation season is here.

Of course, given that inflation rose constantly for 12-18 months (and not to mention the interest rate increases), eventually people will spend less because they can't afford what they once could thus inflation will cool.