CPI

Is the inflation rate peaking?

With stories of food riots in third world countries and $4 a gallon gasoline by this summer, inflation certainly seems to be rampaging. Whether this continues or not is not just of concern to market watchers. Aside from the incredible pain food inflation in particular puts on the poor worldwide, domestically US workers are never going to get raises to match inflation rates much in excess of 3%. So, the more necessities like food and gasoline go up in price, the less Americans have to spend on other things, like mortgage payments, health care premiums, or educating their children, let alone retirement savings. In short, the worse inflation stays, the more severe our recession will be.
I addressed this issue previously in a post entitled Why Inflation isn't the problem in which I said:

A note on today's CPI

You probably heard that the "headline" (i.e., including food and energy) CPI number today was +.03. You may have scratched your head, wondering what planet these guys are on.
Well, they were on the "seasonally adjusted" planet. Generally speaking, inflation runs hotter in the first part of the year, and cools down dramatically towards the end of the year.

So, for the best year over year comparisons, turn to the non-seasonally adjusted CPI number. And that number today was +.09. Much closer to our actual experience, no?

And yet, as the below table (from the Bureau of Labor Statistics) shows, inflation so far this year is running on the non-seasonally adjusted basis, at exactly the same clip as last year: +1.7 for the first quarter. Here's the table:

Jan 07 0.3
0.5
0.9
0.6
0.6
0.2
0.0
-0.2
0.3
0.2
0.6
-0.1
Jan 08 0.5
0.3
0.9

The year over year numbers for the last 6 months including today look like this:

Oct 07 3.5

Retail Sales Fall Sharply in December & February

Submitted by on

Retail sales fall sharply in December and February; price-adjusted sales now down sharply in 4 of the last 5 months as recession deepens

Today’s Census report of nominal retail sales receipts for February also revises down sharply their earlier estimate for nominal sales in December and January. Price-adjusted retail sales have now fallen sharply in four of the past five months and even nominal receipts are back to the lowest levels since last August.

Retail Sales fall behind CPI

This surely eliminates any remaining credibility for those debt industry salesmen and politicians who still deny a recession is underway.

Price adjusted retail sales down Feb. '08

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