Is inflation just over the horizon in time for Christmas?

[zzzz]

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.

 

[william the wie]

Inflation is already here. Carter style inflation.

 

[pinqy]

Inflation is already here. Carter style inflation.

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.

 

[Paulie]

Inflation is already here. Carter style inflation.

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.

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

Go figure.

 

[antagon]

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.

 

[Toro]

No.

But it may be coming in a few years.

 

[Revere]

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.

 

[Toro]

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.

 

[antagon]

We're not seeing enough shocks that would bring about 70's style inflation yet.

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

Go figure.

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.

 

[pinqy]

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.

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).

 

[Neubarth]

The potential for massive deflation is here.

 

[loosecannon]

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.

You are speaking about resource scarcity? What time frame are you suggesting?

 

[william the wie]

Went to the grocery store twice yesterday inflation is here.

 

[pinqy]

Went to the grocery store twice yesterday inflation is here.

But not on average for everything is all urban areas.

 

[antagon]

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.

You are speaking about resource scarcity? What time frame are you suggesting?

yeah, resource scarcity. next year, if.

 

[loosecannon]

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.

You are speaking about resource scarcity? What time frame are you suggesting?

yeah, resource scarcity. next year, if.

got any "rare" earth minerals? I do.

 

[uscitizen]

Damned speculators driving up the commodity costs again.

 

[loosecannon]

Damned speculators driving up the commodity costs again.

I bought before anything happened, dumb luck. I doubt my metals will amount to much, but.....who knows? If the Chinese refuse to provide we could all be in a world of hurt and i have the medicine!

 

[Zander]

Still, almost all Commodity prices are lower now than they were in June of 2008.
Commodity Prices
we are seeing a bounce almost identical to the bounce in equity prices. Deflation doesn't just deflate all at once...it takes time.

 

[antagon]

You are speaking about resource scarcity? What time frame are you suggesting?

yeah, resource scarcity. next year, if.

got any "rare" earth minerals? I do.

nah. you know i dont %#@& wit dat #$%*.

how is that packed up? do you buy yttrium futures or are they huddled together as a single commodity? ...or do you have chunks of this shit laying around?