Is inflation just over the horizon in time for Christmas?

Discussion in 'Economy' started by zzzz, Oct 15, 2010.

  1. zzzz
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    zzzz Just a regular American

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    Cotton prices have reached a 140 year high (Cotton Climbs to 140-Year High - WSJ.com) due to inclement weather in China and Pakistan (ranked 1st and 4th as producers of cotton) and the demand for Cotton in China’s burgeoning economy. Raw material costs account for 25 to 50% of the total cost of garments. So higher cotton prices will result in higher prices for clothes and along with fast rising prices in sugar, orange juice and coffee inflation cannot be far behind.
    Tire prices have risen 40% in the last 18 months as explained in another thread today.
    Corn prices have risen and are at or near a three year high. Corn is the feed for the animals we slaughter for meat and used in other foods too. Part of the increase in corn prices is the demand of the ethanol plants. This week the EPA just gave the ok to increase ethanol in gasoline for recent car models from 2007 to 15% ethanol. This is a 50% increase and increases the demand for more corn.
    All of this is happening in a stagnant economy. I makes me wonder what happens when the economy ever gets going. Will we have the double digit inflation of the Carter years? Even if it does not get that bad it appears inflation is coming in the next few months. A lot of producers are eating the cost increase for right now but with the Christmas season only a month away, now may be the time to buy those Christmas presents.
     
  2. william the wie
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    william the wie Gold Member

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    Inflation is already here. Carter style inflation.
     
  3. pinqy
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    pinqy Gold Member

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    CPI-U unadjusted 12 month change Sep 09 -Sep 10: 1.1%
    CPI-W unadjusted 12 month change Sep 09 -Sep 10: 1.4%
    PPI Finished goods unadjusted 12 month change Sep 09 -Sep 10: 4%
    PPI Intermediate goods unadjusted 12 month change Sep 09 -Sep 10: 5.6%
    PPI Crude materials unadjusted 12 month change Sep 09 -Sep 10: 20.3%
    Imports, all commodoties unadjusted 12 month change Sep 09 -Sep 10: 3.5%
    Exports, all commodoties unadjusted 12 month change Sep 09 -Sep 10: 5%

    So, we're seenig some high inflation in the PPI, but it hasn't affected the CPI yet. Companies are probably hurting with the higher prices, but can't pass it on to the consumer yet. So while I expect to see inflation, I don't expect to see it until consumer spending starts to go up more, which won't happen until Employment goes up. We're not seeing enough shocks that would bring about 70's style inflation yet.
     
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  4. Paulie
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    Paulie Platinum Member

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    Yet, people are still questioning gold's continued move upwards.

    Go figure.
     
  5. antagon
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    antagon The Man

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    i'm with pinqy on this. weak demand will create a pinch and that i suspect will hit low-margin productive economies the hardest. the resolution will likely come by way of investment in supply where shortages exist, rather than a sharp whack of inflation at the CPI.
     
  6. Toro
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    Toro Diamond Member

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    No.

    But it may be coming in a few years.
     
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  7. Revere
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    Revere BANNED

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    The Fed has said it is going to use inflation to, it thinks, jumpstart the economy, because none of its other feckless efforts are working.
     
    Last edited: Oct 19, 2010
  8. Toro
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    Toro Diamond Member

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    Re ppi & CPI

    profit margins are very high. There is a lot of capacity for companies to absorb increases in input costs without increasing prices.
     
  9. antagon
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    antagon The Man

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    appreciation of gold isn't really inflation. it's just appreciation of gold. so far, the more meaningful indices of inflation are falling with (or despite the) the dollar, not rising against it.
     
  10. pinqy
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    pinqy Gold Member

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    And in the current situation, they can control wages a lot easier than capital costs..the Employment Cost Index isn't going up much (0.5% from March to June 2010).
     

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