Inflation Expectations in July (and June)

Michigan is down in July, while business unit costs are up slightly.

Figure 1: Year-on-year actual CPI inflation (bold black), and expected inflation from University of Michigan (red), NY Fed (light green), Survey of Professional Forecasters (blue +), Coibion-Gorodnichenko SoFIE mean (sky blue squares), and unit cost growth rate (chartreuse), all in %. Source: BLS, U.Michigan via FRED, NY Fed, Philadelphia FedAtlanta FedCleveland Fed, and author’s calculations.

37 thoughts on “Inflation Expectations in July (and June)

  1. pgl

    The MAGA moronic liars over at Faux News must have noticed that CPI has only increased by 1.3% during the first half of 2024 as they are all freaking out that we have massive PPI inflation. Yes, it has increased by 2.2% over the past 6 months:

    Producer Price Index by Commodity: All Commodities
    https://fred.stlouisfed.org/series/PPIACO

    Oh wait, PPI fell during the latter part of 2023. Overall increase during the last 12 months? Less than 1%. Odd that Faux News never mentions that!

    1. Ivan

      With hundreds of economic metrics and an unending variation on time scales used to look at each – there will always be some cherry-picked parameter that can be used to fool the fools – especially if they actually appreciate being fooled. SAD.

  2. joseph

    Something to note is that while the Fed has held nominal interest rates flat over the last year, inflation has decreased significantly. If nominal rates are flat and the inflation rate goes down, then real interest rates are increasing.

    Real rates going up means that the Fed is still further tightening monetary policy right now. They need to reverse this quickly.

    1. pgl

      https://fred.stlouisfed.org/series/DFII5
      Market Yield on U.S. Treasury Securities at 5-Year Constant Maturity, Quoted on an Investment Basis, Inflation-Indexed

      The 5-year TIPS used to be negative 1.8%. It is now positive 2%. That is quite the swing.

      My understanding is that a lot of economists put r-star near 1% or 1.5% so if real rates are above r-star then monetary policy is too tight.

  3. pgl

    Different topic but the Global North/South debate has been a big issue for a long time:

    Unequal exchange of labour in the world economy
    https://www.nature.com/articles/s41467-024-49687-y
    Researchers have argued that wealthy nations rely on a large net appropriation of labour and resources from the rest of the world through unequal exchange in international trade and global commodity chains. Here we assess this empirically by measuring flows of embodied labour in the world economy from 1995–2021, accounting for skill levels, sectors and wages. We find that, in 2021, the economies of the global North net-appropriated 826 billion hours of embodied labour from the global South, across all skill levels and sectors. The wage value of this net-appropriated labour was equivalent to €16.9 trillion in Northern prices, accounting for skill level. This appropriation roughly doubles the labour that is available for Northern consumption but drains the South of productive capacity that could be used instead for local human needs and development. Unequal exchange is understood to be driven in part by systematic wage inequalities. We find Southern wages are 87–95% lower than Northern wages for work of equal skill. While Southern workers contribute 90% of the labour that powers the world economy, they receive only 21% of global income.

    1. Macroduck

      This is a recasting of what we all know: wages in less-developed countries are lower than in developed countries. A quick check of links for the authors shows an anthropologist, an environmental economist and a “no answer”. It’s published in something other than an economics journal, perhaps because the story-telling element pretends to something new, when the substance is entirely conventional.

      Not that this isn’t an interesting way of reciting the facts, just that it is not revelatory. “Poor countries are poor” is not news.

      “Poor countries export to rich countries” is also not new. To cast exports as exploitation rather than as an opportunity to earn foreign currency and to encourage unbound investment ignores a great deal of economic information – and is not new.

      Poverty is a problem in much of the world. Reducing poverty is an admirable goal. I’m not sure this kind of rhetorical jiggery-pokery does much to solve the problem.

  4. pgl

    Did NBC News become a subsidiary of the Trump campaign. I just read a very misleading report claiming INFLATION is making child care unaffordable. Fortunately Kevin Drum read the NBC News trash and provided a few actual facts:

    Childcare in America: The real story
    https://jabberwocking.com/childcare-in-america-the-real-story/

    Inflation has nothing to do with this. The cost of childcare has grown less than overall CPI and less than average wages.
    It’s not “American families.” It’s families with kids under 13 who use childcare. This is something on the order of 5-10% of all American families.
    The median family income in 2022 was $93,000. This makes childcare about 10% of the median income, not one-fifth.

    His post continues but you get the idea.

    1. baffling

      inflation has nothing to do with it, is not incorrect (almost). but childcare takes up way too much of family income. particularly quality childcare. it is very expensive. and most families that need childcare are not at the median income level. they are just starting out, so much lower. in big cities, to get quality child care for under $1000 a month is very difficult. one of the biggest social problems in America today is our abysmal efforts to provide quality child care so kids are safe and learning, while parents are working and productive. we have really failed in this area, to our detriment. not only is child care costly, but even finding quality child care is extremely difficult. more should be done on this front. and more can be done on this front.

      1. Anonymous

        A “nice” day camp in not so classy but cool Andover Ma is $1000.00 or so per week per child.

        Good thing ammunition sales are up!

        1. baffling

          that price is not caused by inflation. but one problem is that a party who supposedly is concerned about “family values” wants nothing to do with controlling those costs for the average family. child care is not within the domain of “family values” as a political concern.

      2. F

        This is indeed a huge problem, especially in high cost of living areas, and has been for well over a decade. The good news is that it’s not a problem of inflation. The bad news is that it’s a fundamental problem of business model. The trilemma is that you can’t pay child care workers a living wage, and keep the child:worker ratio low, and keep it affordable. Very much the same thing applies to elder care too. Government subsidies may help, but that’s a heavy lift in an American system that hates its taxes.

        1. baffling

          this is correct. but to exclude child and elder care from “family values” seems to be pretty hypocritical, don’t you think. we may not like those taxes, but for some matters, they are required. unless you want us to return to the stay at home mom era. but that will result in a drop in economic activity.

  5. pgl

    Harris for White Dudes had a Zoom call. Elon Musk decided that this was cause to start suspending X accounts. Yea Musk is a Trump toadie.

    1. pgl

      I understand this call had 190 thousand viewers. Musk in the meantime is running deep fake ads smearing Kamala Harris. Musk’s behavior is so repugnant that the Governor of California is calling for legal actions against Musk. I’m not sure what authority the governor has but it would be a delight to see Musk locked up with a buffed transgender cell mate.

  6. pgl

    The right wing hacks at the Competitive Enterprise Institute released their annual update of the Ten Commandments 7 months ago and some how MAGA moron Bruce Hall has not touted its trash as gospel yet?

    https://cei.org/publication/executive-summary-ten-thousand-commandments-2023/

    ‘The cost of government extends well beyond what Washington taxes. Federal regulations add another $1.939 trillion to Americans’ annual burden.’

    OK enough of their “blame Biden” BS. Let me simply note that their estimate for this bozo statistics for 2020 (when Trump was still in the White House) was $1.9 trillion. Huh, in either inflation adjusted terms or as a percent of GDP, this fake metric has declined since Biden became President.

    BTW in case you are wondering, Stephen Moore has worked for these clowns and they are tied to Project 2025. MAGA!

    1. baffling

      once again, thank you president biden, for competent leadership. knowing when to hand off the baton is critical to winning the race. trump is too old to be running for office. don’t listen, just read the word salad from his campaign speeches. there is not a coherent thought that comes out of the man’s mouth. he is a con man, so he can talk smoothly, but the substances of those talks is complete garbage. why do the folks in the trump campaign continue to cover up for the obvious decline in his mental capacities? a vote for trump will be a vote for vance, because i don’t think trump’s mind can last another 4 years, as it is already failing him.

  7. Macroduck

    Big financial news out of Europe – a renewed effort to creat a single market in finance is underway. There appears to be some bad economic thinking going on, whether just in this article or in the entire enterprise, I can’t tell:

    https://www.politico.eu/article/europe-10-trillion-euro-gamble-saving-investment-economy/

    The article amounts to a sort of kitchen-sink effort to explain why this is a good idea.

    The argument offered in the first few paragraphs is that 10 trillion euros in bank accounts rather than in equities amount to a lack of investment capital. That is, of course, nonsense. Savings are savings. S=I, somewhere. So that premise simply wrong.

    Two rather different arguments are then made. Officials at two European stock exchanges are quoted saying “something must be done.” Of course, turning bank accounts into stocks butters their bread nicely. This is an argument for one form of finance over others, not that investment capital is lacking. We are next offered what seems to me the only serious argument in the entire article – a unified Eurozone financial market would lower transaction costs and allow money to flow more easily from higher-saving economies to lower-saving economies. Probably true. The idea that investment flowing to the U.S. from Europe will stay home if a single financial market is completed isn’t supported, just tossed out.

    Sprinkled throughout the article is a recognition that increasing financial risk is part of the plan. More equity exposure. More securitization. More venture capital. Not sure the citizenry sees this as a good idea.

    More venture capital? Is the existence of financial borders really what’s limiting venture capital? Or stock investment, for that matter? Many Continental Europeans I’ve known take a dim view of equities – gambling rather than investment. They don’t want to own shares. A greater share of business credit comes from banks than from bond markets in Europe than in the U.S. – as much a matter of business culture as markets.

    I’m not saying an EU-wide financial market is a bad thing. The Politico piece is just so bad, in the kind of “we used talking points and press releases” kind of way, that I’m suspicious. This looks like it could be an effort toward financialization for the sake of financializatiion – which is to say, for the sake of financial-sector profits. A neo-liberal wet dream.

    Happy to hear a well-considered case for the project, if anybody has one.

    1. baffling

      europe seems to be too diverse, politically, for further financial integration. the financial crisis and the greek debt crisis show that the continent is not ready for what is required of a homogenized financial system. they can probably improve some of their efficiency. but nobody in europe wants to accept the negative consequences for financial integration-they only want the benefits. i kind of like that europe offers a different funding model from the usa. worldwide, that diversification of funds is probably helpful.

  8. Macroduck

    I have suggested previously that Trump Media may be a conduit for corrupt business practices – giving various investors and officers an opportunity to divert borrowed funds to themselves while leaving creditors holding the bag. I admit, I could be mistaken.

    What are the odds Trump Media is really a conduit for corrupt political activity, instead?:

    https://talkingpointsmemo.com/news/trump-media-quietly-enters-deal-with-a-republican-donor-who-could-benefit-from-a-second-trump-administration

    Trump Media is doing business with a major Republican donor through a shell corporation. This particular donor is mostly in the oil business, not the on-line tech business, but there he is, doing business with Trump Media.

    I should point out that these two forms of corruption aren’t mutually exclusive. Trump Media down 4.5% today, to the lowest price since late June.

    1. pgl

      an obscure entity called JedTec LLC. Based in a North Louisiana village, the company has virtually no public footprint and no website, and it is unknown to streaming technology experts. Interviews and public records reveal that the man behind JedTec is Louisiana energy magnate James E. Davison. A major Republican donor, he is known for his immense influence in state and federal government, including personal friendships with past presidents, and for using his wealth to benefit people in politics. The acquisition will put Trump’s company in a business relationship with someone with numerous interests before the federal government. Davison, for example, owns a major stake in Genesis Energy, a large oil pipeline and mining firm. A trade group representing Genesis and other publicly traded pipeline firms previously lobbied the Trump administration and lawmakers for a tax break and on environmental issues.

      The story continues but you get the idea.

  9. pgl

    Project 2025 director steps down amid backlash from Trump
    https://www.cnn.com/2024/07/30/politics/project-2025-paul-dans/index.html

    The director of Project 2025, the conservative blueprint for a potential second Donald Trump term, has stepped down amid intense criticism including from the former president. Paul Dans, a former top adviser in Trump’s administration, steered Project 2025 as it carved a leading role in shaping discourse around what conservatives dreamed they could accomplish if Republicans won back the White House. While a source with knowledge of the planning said Project 2025 would be effectively ending its policy operations, others familiar with the matter noted that it was always the plan to move on to the next phase now – and efforts to build a conservative personnel apparatus would continue. Project 2025’s plans to radically reshape the federal government and American life, spelled out in detail in an exhaustive 900-page playbook, provided ample fodder for Democrats to warn against Trump’s return to power. In recent months, Trump has lashed out against Project 2025, calling some of its ideas “absolutely ridiculous and abysmal.” He strained to distance himself from the work, claiming he had “no idea who is behind it.” Top Trump adviser Chris LaCivita recently referred to Project 2025 as “a pain the a**” for the Trump campaign.

    A pain in fatso large rear end? Oh come on – Dans gave his all for this wannabe dictator but a little exposure to their real plans and the Orange Fatso runs the bus over him. But Donald – I guess you don’t get. We already know your game. So deny all you want – big lard a** chicken.

    1. baffling

      this is the problem with providing some details of your plans in print. now you need to defend them. talking in vague terms is much better, politically, for trump.

  10. James

    Menzie – one of the few Biden/Harris vs Trump comparisons that gets the “economic story” right IMO – not only are people currently better off under Biden/Harris the investments in a transition to renewable energy/electrification, public infrastructure and multi-year investments in semiconductor manufacturing and R&D, rural broadband, and STEM education and training sets us up for future growth. https://washingtonmonthly.com/2024/07/29/harris-has-the-facts-to-refute-trumps-lies-about-the-economy/
    One fact: “Under Trump, real GDP grew at an average rate of 1.5 percent annually, the slowest average growth rate for any president since World War II. Compare that to the growth under Biden and Harris, when the economy expanded at an average annual rate of 3.4 percent, or nearly three times greater than Trump.”
    But, but…the pandemic – scream the Trumpers – to me, Trump does not get a mulligan for his failed corrupt response to the pandemic – in fact, these red state governors need to be held accountable for failing to following simple healthcare rules leading to more than 200,000 needless excess deaths among their constituents: https://jamanetwork.com/journals/jama-health-forum/fullarticle/2821581
    For example: “the excess death rate in Massachusetts was less than one-fifth that of Mississippi (115 vs 590 per 100 000).”
    The pandemic response performance of these red state governors was criminal IMO –
    Of course these red state governors get a pass by their voters because their healthcare systems are already dismal – “The poor performance of Southern states was modestly mitigated when examining excess death ratios because of their high prepandemic death rates”
    Hold my beer – say the healthcare statisticians – just wait till we get a few years data among women in these states with bans on access to reproductive health care. – these anti-science red states will be going back to 1880’s levels of women dying during child births.

    1. Ithaqua

      Even if you ignore the pandemic, GDP growth under Trump was less than 2.5%… about the same as the last few Obama years, nothing special.

  11. baffling

    “But, but…the pandemic – scream the Trumpers – to me, Trump does not get a mulligan for his failed corrupt response to the pandemic”
    directly to a point i made in an earlier post.
    “For example: “the excess death rate in Massachusetts was less than one-fifth that of Mississippi (115 vs 590 per 100 000).”
    dead voters cannot hold you accountable. and their surviving family members were certainly not going to blame trump for their deaths. so we get places like mississippi and arkansas that continue to die off while supporting trump. and he is laughing at them the entire time. when was the last time you saw trump spend time mingling in those states? he despises “those” people.

    1. James

      Dear Baffling – it has been baffling to me – why are red areas willing to accept crappy healthcare and economic policies from their political leaders? https://www.scientificamerican.com/article/people-in-republican-counties-have-higher-death-rates-than-those-in-democratic-counties/
      Reading the book – White Rural Rage by Thomas Schaller and op-ed columnist Paul Waldman – it seems to be that their Republican political leaders want to keep their constituents – lonely, isolated, divided, and afraid.
      Funny to me that these rural red areas do better when a Dem is in the White House – https://abcnews.go.com/Business/red-state-economies-surging-biden/story?id=107222293

      1. baffling

        it is all about anger and rage. if you can make a connection with somebody that is tied to anger and rage, they will buy into the rest of the crap you sell. I used to wonder how an educated Germany could fall for a fascist like hitler. and then I saw what happened with trump and the United States. both of those fascists took advantage of anger and rage. with hitler it was the jews. with trump, it seems to be immigrants. but both groups are blamed for the perceived failures of the people. and once you agree with trump (or hitler) on an issue, they have you hooked. what is so surprising is how easy these guys seem to make it look.

  12. pgl

    Trump is talking to a group of black journalists. Well talking is not quite the right word. More like insulting them at every turn and of course lying about everything. One thing Trump kept repeating is that inflation right now is horrible and the worst in the last hundred years. I would love to see a blog post on this one. Of course we know Trump got this “factiod” from Bruce Hall.

    1. pgl

      Going back over this melt down from the truly mentally deranged Donald Trump, his reference to how inflation now is worse than it was 58 years ago means 1966. But wait inflation never got that high and retreated rather quickly. The same can be said about the last few years. But Trump was out of control. Maybe this moron should check the inflation from 1969 to 1982.

      But wait – Trump then said inflation now was worse than it has been in the century. I guess Trump forgot about 1946 and 1947. It’s like Trump is relying on people as stupid as Steve Koptis for his lessons in economic history.

    2. baffling

      according to trump, Harris just turned black a few years ago. prior to that, she was Indian. trump claims she ignored her black heritage. which seems funny, since she attended Howard university decades ago.

      and for those who criticized the nabj, faceplant. great leading question. got right to the point. trump is in trouble. his ability to bully people to get his way is diminishing. public engagements outside of controlled rallies are going to be difficult. this is why he wants to bail on the debates. his performance is going to be abysmal, especially against somebody like Harris the prosecutor. why is trump afraid to debate?

      1. pgl

        Someone should ask her Alpha Kappa Alpha sisters whether Kamala Harris was considered black or not when she attended Howard University.

      2. pgl

        Kevin Drum covered this aspect of Trump’s appearance noting Harris attended Howard University. Now Kevin has a right wing troll names Rick Jones who fires back:

        ‘And that makes her black? I don’t know how she has self-identified throughout her life, but Howard University, while “historically black” is not, and I suspect has not been exclusively black so simply attending Howard University does not make one black.’

        Well only 70% of its students may be black this little Ricky should be reminded that Harris is a proud member of Alpha Kappa Alpha. This Trumpian racism is motivated not only her sorority sisters to campaign for but also a lot of black men too. To which I say to MAGA racists – BRING IT ON!

        1. baffling

          so trump has now decided that in order to be minority, you must bend the knee and ask permission. he may grant you that option, if he sees fit. once again, trying to make others subordinate and subservient to him. almost sounds like the slave master requiring his slaves to ask for permission.

          and old white guy has the nerve to determine whether a minority is permitted to identify their ancestry-or not. trump is a piece of work. this is beyond weird.

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