U.S. January Consumer Prices Rise 0.1%; Core Rate Up 0.2%

Feb. 23 (Bloomberg) -- Prices paid by U.S. consumers rose less than forecast in January, suggesting companies are having only limited success in passing on higher raw materials costs, a government report showed.

The 0.1 percent rise followed no change in December, the Labor Department said today in Washington. Economists forecast a 0.2 percent rise during the month, according to the median estimate in a Bloomberg News survey. Excluding food and energy, core prices increased 0.2 percent for a fourth month, led by higher costs for tobacco, medical care and automobiles.

Some companies such as airlines keep offering discounts to lure customers amid increased competition and excess capacity in many industries even as rising demand boosts supply costs. Economic growth and the threat that inflation may accelerate suggest Federal Reserve policy makers will keep raising interest rates this year.

``There is still very limited pricing power,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York-based forecasting firm, before the report. ``There is still a lot of spare capacity around the world. Growth around the world isn't so hot that we are ripping into spare capacity at a rapid rate.''

http://quote.bloomberg.com/apps/news?pid=10000006&sid=adM6ZSNIiR6g&refer=home

. . .

They use the same old "data" and the same old "methodology" to "extract" their "results" (if they haven't changed some (or all) of this to make things look better -- and if they don't "fudge"), and then they make a big deal out of comparing it to "expectations" and "historical data". (The same old bullshit becomes "historical data", once you have convinced people that it means anything -- and as you are using it to convince people to accept some new bullshit.)

Meanwhile, inflation rages and the economic infrastructure goes down the toilet. And if people overseas don't continue to support the dollar, we are going straight off of the precipice.

dissections of DOL's inflation numbers. One, I think is here:

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=114&topic_id=11763

Con Job Finger-Pointing
By Dan Spillane, The Liberty Whistle
--“Con Man” is actually “Dark Thief in the Night"

(SEATTLE) 10/13/04 -- Bill Gross’s “Haute Con Job” (Pimco, October 2004) drew quick criticism from Bloomberg’s John Berry and the Fed’s William Poole, according to the latest exchange in Gross’s rebuttal.

Yet, the main—and very financially relevant--point of Bill’s original story seems to have evaded both Berry and Poole. That being, over the long term, an increasing number of hedonic and other adjustments and non-adjustments (such as rent equivalence) have come to change--and in many cases lower--major headline inflation indices since the 1980s. However, during the same period, there is absolutely no evidence that government programs and financial instruments keyed on these inflation indices have factored such changes in. Thus, in practical terms, inflation expectations and fiscal actions related to inflation reports have been based on indices assuming constant measures—but instead, the measures have drifted. In scientific circles, this is heresy--imagine the consequences of changing the definition of a mile or kilometer. Suddenly, cars might be more (or less) fuel-efficient based on a government edict!

So all the talk about “inflation in the 1970s” related to present figures is based largely on non-comparable headline numbers. And in fact, more recently, and to some unknown extent each year, changes in inflation-measuring indices have lead to an unidentified gap between the actual cost of things, and reality. So Gross is right on track.

And speaking of reality, you have to question the application of hedonic measures in practical contexts. Take for example, the measures for personal computers (and as a side note-- Berry’s analysis correctly states the CPI computer weighting is small, but neglects to mention the high negative magnitude). In the case if computers, it is assumed that we are always getting “more bang for the buck” in terms of hardware. Yet, as everyone knows, computer hardware is fully dependent on software. And, as it turns out, new versions of computer software often require more hardware--which largely negates the hedonic price decay used in US CPI calculations. Therefore, if we assume we live in a globally competitive economy, in order to retain a level of relative productivity growth, it is correct to assume the amount spent on computers will not fall by nearly as much as reported in the CPI, if at all. In fact, as the number of software applications grows to cover more tasks, it is likely a more expensive computer will be not only desired, but be needed to handle new tasks. In other words, the notion of hedonics and price decay is a sham—or con job. Indeed, over time, and combined with other factors in the CPI, this heist has slowly and quietly slipped in to the US bond market and social entitlement programs. That is, very much like a thief in the night—who, being unnoticed, keeps coming back for more. Unnoticed…or willfully ignored, by Berry and Poole, as the case might be.
. . .

are just bullshit. -- Layers and layers of bullshit stacked on top of one another. And most people who try look at them in detail get glossy-eyed and give up (but that's sort of the point). And there is typically bullshit in every layer of the bullshit pyramid -- and in between the layers.

And once any bullshit has been accepted, then it gets built into larger and large pyramids of bullshit, until it finally takes over. -- And once enough parasites have started making a living off of it, it is also certain to become "gospel".

The really sad part is that this problem extends way beyond phony numbers coming from the government -- it extends into almost every facet of life to some degree.

But turning "eyes" this grim on the world around one must be done very carefully. If one looks for bullshit, then you will find it everywhere. And once you have realized this, life can look fairly hopeless.

It's one giant shitpot out there.

Because here in NY, the cost of almost everything is up a lot. Gas, Natural gas, food,especially dairy products, are way up. And of course our contributions to our benefits packages, our prescription co-pays, everything except for us, clothes, which I always buy at year end close outs for the following year. Where do these people take their surveys?????

But I do know that in a lot of these measures, "inflation" or whatever they are measuring includes a lot of products most of us probably don't use a whole lot. Like note they mentioned airlines. If the price of airlines is rock bottom, it will drag down the number. But I never fly, so to the extent that it does, it is meaningless to me as an indicator to the immediate effect on my life.

They should really couple this number with a "as far as normal people are concerned" number. Granted the price of airline tickets can impact the price of stuff I buy. But that's in the future. The immediate impact to me and a whole lot of other people is not measured accurately by these numbers.

they don't include: insurance, health care, property taxes and more. The stuff YOU PAY for each month that has gone up quite a bit.

What world do they live in?

friggin loaf of bread almost 4 bucks

http://quote.bloomberg.com/apps/news?pid=10000006&sid=a9kJSMd7lHFM&refer=home

. . .

Inflation may accelerate more this month, in part because of a 6.5 percent increase in crude oil prices in February and slower productivity growth, said economists including Gramley, an adviser at Stanford Washington Research Group in Washington.

``Enjoy the 0.1 we got,'' said Brian Jones, an economist at CitiGroup Global Markets in New York, in an interview. ``The good news that we got this morning, we are going to lose it next month.''

. . .

Inflation takes some time (typically) to work it's way throughout the "system". And this "delay" can be considerable.

But there can be some point -- or points -- where inflation can "explode", or at least begin to grow at a rate that is higher than the previous growth rates might indicate (and that maybe even works its way into phony government numbers). (Having these sorts of "critical" or "threshold" points is a common enough thing in many phenomena.) One of the factors in this is people's perceptions, that of both investors and consumers. When both of these groups come to believe that inflation is a major problem -- and react in the predictable (herd-like) fashion -- then this can have pronounced (and generally undesirable) effects. In the worst case, it can even create something like a "death spiral".

A big piece of the equation, however, lies with currency and credit. Devaluation of the currency is inflationary when much of the "demand" is for foreign goods (in the "inflated" currency, as these will cost more -- and American goods will only become cheaper for those who are paying in -- and earning -- the other currency). And although interest rate increases are used as a measure to curb inflation, these are inflationary, making credit more expensive. (The use of credit is practically ubiquitous.) (I seem to remember Mr Krugman writing something to the effect that he was not sure of the wisdom of increasing interest rates as a way to deal with our problems now -- but I could be remembering incorrectly. If he did write this, then this statement would be well worth taking note of.)

And if buyers do not purchase one's debt securities, it can become necessary to increase rates proportionally to perceived risk (which has little enough to do with real risk). If this perceived risk is great, then this can have significant consequences.

The goods news is that while some crazies would like to see the dollar go into the toilet, it is in the interests of some foreign nations (and individuals) to keep the dollar from tanking... for the moment at least. And many foreign nations would not be happy to see American interest rates go up (much), as this creates pressure for them to do likewise. But they also have other worries and at some point these other worries might outweigh their determination to prevent our collapse -- and all the consequences of this for them.

However, we have extremists in power, so it is always possible that they will go for broke -- and this in a way that is beyond anything that other forces can do to prevent disaster.

The situation might prove interesting -- if you were watching from somewhere isolated from the consequences.

And the fed can be expected to blame anything but themselves (and those that they are toadies for) for any increase in inflation. It's pretty much all spin now.