May inflation (PCE) falls to 1.2% (3.6% Core) / 3.8% YoY (4.6% Core YoY) | Hacker News Reader

May inflation (PCE) falls to 1.2% (3.6% Core) / 3.8% YoY (4.6% Core YoY)

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43 pointsJumpCrisscross126 comments

Until home prices start falling significantly, I'm not very hopeful about the future. Homes should not be investments, they should be commodities.

Sounds like you’d love deflation

The problem is many people have been priced out of home ownership. Heck, I could not afford to buy the house I live in currently if I were purchasing it today (and my neighborhood is not nearly as insane as many others in my region in terms of inflated home prices).

There’s no need for deflation, at least in the long term. Just home prices that don’t increase relative to inflation.

Because an economy based on restricting housing for imaginary value gains is totally not a local maximum trap you have fallen headfirst into.

Exactly. I keep reading articles about how home prices are "falling" or "plummeting". Yeah right. They are more expensive than ever, especially when you factor in interest rates.

Home prices need to collapse in order for the middle class to be able to afford them.

I keep track of my home sale price estimate on Zillow, not because I think it’s wholly accurate but because it gives me an overall idea of how the market is trending. At the beginning of the year my home value dropped significantly, roughly 10-15% in a matter of months. It’s since completely recovered. Of course this is anecdata, but it seems to jive with what I’m seeing in general.

Similar happened pre 08 housing crash. Give it time.

Job losses have to come first. 2008 had a far greater proportion of loans given to people with tenuous cash flows.

Since then, underwriting was tightened up to stop the strippers taking out 4 mortgages situation, so unless we start seeing large scale layoffs causing people to miss payments and lose their homes, you will not see the defaults that cascade into more defaults and so on.

> Job losses have to come first

Not necessarily. New supply can come online. Or people can decide to wait to buy a home.

Job losses are required to lower home prices only if supply stays fixed and demand is inelastic, i.e. consumers have a compulsion to buy homes irrespective of price.

True, but I do not see that as a realistic possibility based on the already tight markets for the type of labor needed to build homes, especially in the locations that people want homes.

2008 had quick price reductions because people had to sell, and sell quickly, sufficiently increasing supply relative to demand.

I just checked mine and it appears to have gone up by about $30k since I checked on it last year. This doesn't seem like a good thing for most people.

> keep reading articles about how home prices are "falling" or "plummeting". Yeah right

Home prices are heterogenous; they can be stable in one place and falling in another [1].

> are more expensive than ever, especially when you factor in interest rates

Home prices can fall while the cost of a home, i.e., mortgage payment for a new-home purchase, rises. The latter is closer to what PCE tracks [2].

[1] https://www.newyorkfed.org/research/home-price-index

[2] https://www.bea.gov/sites/default/files/methodologies/RIPfac...

yeah but it will never happen again. what happens to all other people that already took 30year loans for their overpriced garbage?

They'll be hurt by it, obviously, but I'd rather take that pain now than condemn the future indefinitely.

Of course that puts me at odds with what is apparently the vast majority of humanity. Fuck you, got mine and all that.

Asset prices (house prices, stocks, etc. ) are not calculated into inflation, nor they should be. Only rents, and costs of maintaining houses are a part general level of prices for goods and services.

So official inflation statistics should not be applicable to people interested in purchasing assets, such as land? I am not understanding the reasoning.

Since most goods and services flow through the largest publicly listed companies, I consider equity market indexes like VTI or VOO to be a better gauge of inflation over the course of decades. It has been my experience that the prices I pay for things like land, daycare, education, healthcare, and even services like electricians/plumbers/other specialized labor follows the increase in equity markets, at least in my high cost of living area.

Also, the government will backstop equity prices by reducing the purchasing power of the currency, so that also tells me equity prices are tracking purchasing power.

OK.

> I am not understanding the reasoning. .... I consider equity market indexes like VTI or VOO to be a better gauge of inflation

Ask yourself: What use would be an inflation measure that takes into account asset valuation?

If one’s goal is to acquire the asset (like land/house), then it seems relevant. Additionally, when one’s government has a goal of increasing equity prices even at the expense of the purchasing power of the currency, it seems like one has to be invested in assets to keep up.

House prices are correlated to rent, because the higher rent you can get, the more the house is worth as an investment. So in theory they're not included... but in practice yeah.

With this logic we should also exclude prices of cars, computers because that’s also an asset that you can just rent rather than own.

Houses used to be included few decades ago in inflation calculation - this sounds more like trying to hide how much price increases.

Similar things happen in taxation. In EU in many countries you have Brutto salaries that includes employee contribution for healthcare, but most people don’t know that employer on top of that pays also another half.

So when people calculate their after tax salary they thing that only 35% is tax when in real life it’s 45%. Include VAT, duty tax, excise and easily you pay 60% taxes.

If politicians would make this clear with just one single 60% tax most people would be furious and go to street - that’s why they are using this salami strategy.

The cost of housing (the consumed service/utility) is still included in CPI calculations.

The cost of houses (the durable structure sitting on land) is not.

https://news.ycombinator.com/item?id=36534866

> cars, computers because that’s also an asset that you can just rent rather than own.

Those are not investment assets. They deprecate towards zero.

The CPI is not supposed to include investments, and owning a house has aspects of both investment and consumption.

Until 1983, the CPI included housing costs, but it was changed because it screws up what is measured. The current method is better. The current measure takes into account owners’ equivalent rent. It's based on the trend of costs to rent a home, not to buy one.

Houses shouldn’t be investment. Anything could be investment. We had many bubbles in the past like tulip. It’s just tulip are not essential to live. You can imagine having idea to make cars also an investment and buying all available cars as investment. Normally market will try to make up the demand and build more cars but with houses it’s more complicated because you wanna live where is infrastructure - and that takes decades to build.

From recent examples when Covid started everyone was “investing” in hand sanitizers, masks, gloves - it was crazy expensive and so short in supplies that even pharmacies couldn’t get it from wholesellers - scalpers instead where making a killing .

But you cannot just ramp up house production that fast.

You can't really prevent something from being an investment.

Which isn't to say I disagree with you, policy should favor direct housing affordability over things like price appreciation and subsidizing ownership.

I wonder if there's a sensible way to limit how much leverage Fanny and Freddie will back, maybe by shortening the maximum allowed term of mortgages as interest rates fall below some specified point. Not sure you can do that in a way that avoids a cliff though.

Here's a fun thought experiment - ask yourself what happens if the Fed drops interest rates to -1000%, and home prices & equities go basically to infinity...

Anyone who owned equities or houses before the interest rate move is set for life, anyone who didn't lost basically all of their savings.

It's interesting how many people try to explain away this with Fed-speak and pretend it doesn't matter.

That would change only nominal valuation, not real values.

Nobody becomes richer or poorer when nominal value of currency changes.

btw. Central banks interest rate can go negative only little until it becomes cheaper to hold money assets or transfer them to other assets. Nobody holds cash if interest rate is -5%. This is why deflationary spiral can't be countered with just going below zero.

Doesn't the value of $1 go to infinity also? What's the value of the thought experiment?

Rents and owner-equivalent-rent are included in CPI calculations as the cost of shelter.

https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an....

As I wrote. That is an attempt to capture the cost of renting, not buying a house.

That's not true. Inflation measures for homeowners don't take into account maintenance, they use what the fair-market rent of your house would be.

My mother is a part-time real estate agent (mostly for friends and family type work). She's got one house on the market now and having a hard time selling. If they don't get an offer in the next week or two, they'll be lowering the asking price.

Just one datapoint/anecdote, but it's a far cry from the last few years in my experience.

That seems much more reasonable than the status quo of houses being purchased for 10-30% above asking price, in cash, before an open house happens, sans inspection.

It's been frustrating seeing a few friends try to buy a home in the past couple years, but basically get steamrolled at every turn because they aren't willing to drop all their income on a home purchase sight-unseen.

My zip code average selling price is above 100% list price still...

Initial listing prices are arbitrary though, chosen to provoke the buying response the seller thinks will be best.

If I think a house will sell for 100 units of value and I list it for 80 and sell for 100, it went for 125% of asking. If I list it for 125 and sell for 100, it went for 80% of listing. Nothing changed about the health or frothiness of the market; the only difference was my listing price strategy.

In my hometown prices doubled in the last few years. If someone still wanna sell at peak prices or offer just 10% discount from peak thats no wonder hard to sale in current environment where harder to get credit, people lost job or inflation reduced their money power.

cf sibling's comment: You need to factor-in credit's price. I've been looking for a flat near Paris for 2 years, and sure the prices are lowering. But still, the cost (either total cost, or percentage of my salary) for me increased.

My mental model of housing in my area is that I have the n-th salary in that area, so I get the n-th best flat. The pricing will then be exactly what I can afford (which is legally 35% of my salary here). What changes is who gets how much, 3 years ago it would go at 95% to the previous owner, nowadays it's 70%.

Around here people are still waiving inspections! I think it is less insane than it was but the supply hasn't really changed.

It's hard to respond to that datapoint since we have no idea what the asking price is or how reasonable it was. The entire rest of the block has sold in 2023 and it's at the same price point? Twice that price point? Twice the price of 2021?

Yes, real estate is extremely individualized. This is someone who's been buying and selling houses in the same market (which is South Texas) for well over 20 years now and has seen the ups and downs, and is currently seeing the first down after a few years of craziness.

That wasn't my point. I was saying "moving the asking price" is a useless metric without knowing anything about it.

I can list a random suburban property for 100MM USD, and will have to drop the asking price by over 99%. The horrors! But it tells you nothing about the market.

Do you think an experienced real estate agent (who only gets paid via commission when they actually sell the house) would price a house several thousand percent above a rational asking price? If anything, selling agents are incentivized to lower prices and up their volume; a change of a few tens of thousands of dollars might affect the home owners bottom line a lot, but the selling agent only loses 3% of that amount.

Obviously I choose an extreme example. But yes, I think a professional real estate agent (especially a part time friends and family agent) could misprice a house and need to lower the asking price. Or that the homeowner could insist on a higher price. Apparently, one of those is exactly what happened! That doesn't tell me anything about the housing market.

Isn't it also possible that the local housing market is softening and that a price that would have been competitive 3 or 6 months ago is now considered too high?

That's also possible. My point is that it's impossible to know anything. "The house wasn't selling, so we painted it" could be a story about how the trendy colors on the outside have shifted if it's a recent remodel done by someone who flips houses successfully, or a testament to the bad taste of the previous owner if it was hot pink. Especially since the realtor cannot just price it at whatever they want. Indeed, the homeowner has to agree, and may need to be shown that their price is too aggressive by sitting on the market for a month.

My point is that without more context, e.g. how realistic that price would have been 3 months ago, it's not a meaningful statement.

Another datapoint: I listed my house 3 weeks ago and had 8 offers within 3 days, the highest being 10% above asking. Currently waiting on the appraisal but it seems likely that it will eventually sell for nearly double what I bought it for in 2017.

> Homes should not be investments, they should be commodities.

Tell politiciants to stop regulating the building market

Politicians are elected by people, who own homes as their primary asset.

Why is why voting will not solve the problem

I think at this point that would be catastrophic, the average persons most valuable asset usually is their home (for better or for worse). A all encompassing reversal would economically cataclysmic.

I would think we need better incentives for new market entrants (first time home buyers) and penalties for n-private home owners who rent out.

The only thing people use that valuable asset is to then sell it and buy a bigger house. If all houses go down in value then that bigger house is also cheaper now.

I never understood this mantra of why house prices _NEED_ to go up. They don't, the only people that benefit are investors and landlords, not people who actually want to live somewhere.

> The only thing people use that valuable asset is to then sell it and buy a bigger house.

No? They sell that valuable asset and move into a smaller house, netting them a huge chunk of cash and rent-free living. Its called "downsizing".

This enables retirement for people who otherwise would not be able to.

This also works if all houses are 50% cheaper... you pay 50% less to buy it, sell it for 50% less, buy a cheaper house at 50% less, and since you paid less for the initial buy, you have money leftover still.

But if you don't own a house now, you're basically fucked with the current housing prices.

> also works if all houses are 50% cheaper... you pay 50% less to buy it, sell it for 50% less, buy a cheaper house at 50% less

If you’ve paid off your mortgage.

But the cash you get out is also decreased by 50%.

Instead of selling at 400k and buying at 200k, netting 200k, you sell at 200k and buy at 100k, netting 100k.

Obviously housing prices need to come down in the long term. But OP has a point - we need to account for the fact that doing so will destroy any sort of wealth the current middle class has managed to build.

Policy makers often need to consider whether something is a 'net good' or 'net bad'. I would find it hard to believe that the current run-up of housing is a 'net good' in anything other than the extremely short term.

There are always anecdotes and dreamed up scenarios that enter the argument, and while those are interesting on a personal level, shouldn't really be the basis of policy.

Sure, and I said as much in my comment. Housing prices need to fall. But policy makers concerned with the "net good" would make a bare minimum effort to account for the millions of people they would harm with their policy.

Something like allowing people to deduct their home's depreciation on their taxes would go a long way in actually getting policy support and passed.

Try to allow for a little nuance sometimes.

Yes, but initial buying price is lower too, so since you've bought at eg. 200k instead of 400k, you have 200k left over that you didn't spend on buying the first house, so in the end, you're 300k up. (if you saved that money of course, if not, that's your problem).

You're missing the point: people who currently own a house get fucked. An entire generation or two of people will be locked out of retirement if housing prices significantly fall.

This needs to be accounted for. A majority of Americans own a home, so you're not going to get meaningful change in this area if it hurts most people.

> This also works if all houses are 50% cheaper...

Not for people who already bought houses it doesn’t.

> But if you don't own a house now, you're basically fucked with the current housing prices.

No, if you do own a house now, you are fucked with a 50% drop in value, and 65.9% of American households do. (OTOH, if you are currently a renter, you aren’t “fucked” if you keep renting.)

If you own it, you still have a place to live, and you'll probably need a place to live until you die, so on paper, you have less, but a house is not really a liquid asset.

On the other hand, if you want to buy instead of rent, you're currently basically fucked.

Housing should not be an investment.

> If you own it, you still have a place to live, and you'll probably need a place to live until you die

If you bought it recently, you'll probably be massively underwater (and, since your plan isn't just a one-time cut to let people on the ride, but also attacking the dynamics driving value increases) permanently so, and fucked if you ever need to move, or to get other credit.

If you are close to selling and downsizing, and its your main asset as it almost invariably is, your life savings was just deliberately cut in half.

> Housing should not be an investment.

Maybe in some idealized vision; in the real world that exists right now it is, and its heavily relied on by the middle to top, by income, end of the proletariat and maybe the bottom end of the petit bourgeoisie, which as targets for class warfare go is a pretty odd choice. And trying to attack this (regardless of arguable steady-state merits) while handwaving the transition issues is simply that—class warfare against that group.

Exactly, I never said it was a good thing that housing is an investment, only that that is the current state of affairs, and to alter that would have ramifications that would cause huge problems. Best thing we can do is stabilize what we currently have and figure a way forward that doesn't worsen the problem, but we cannot go back.

Many people have mortgages on their home, being underwater on a mortgage (i.e. the LTV spikes because you are now borrowing more than the home is worth) would set off a bank/debt crisis, that is what I meant by catastrophic.

I also get annoyed with the requirement of 'solidarity' in pumping housing prices up.

However, in case you want to understand one motivation of the mentality, consider that people not only roll equity into another house. Many (questionably) use their homes increased value as collateral to borrow money to prop up their lifestyle. Those who leverage their home equity this way can be in deep trouble if housing values go down in a significant way. The bank could call the loan (forcing early repayment, or sale of the home if they cannot).

But what value does that asset (as an asset) for normal people (=with one home) actually have?

For "investors".. sure.. buy 50 houses, treat them as investments, with limited new construction, the price goes up higher than inflation, you can rent them out, etc.

For normal people? Price going up or down doesn't help them, because they still need a place to live. Can't rent it out, since they need a place to live. Can't really sell it, because then they have to pay monthly for the same thing, sometimes even more than before. Sure, some pensioners without kids might sell their house, ove into a rental for their last few years, and spend the difference on cocaine.. but that's not really a game changer for anyone.

The only problem are the banks, where lower prices mean a shitstorm of revaluating, recalculating morgages, refinancing etc. But for someone with a paid off house, that they live in, if the "global" price of housing goes up or down 50%, it wouldn't matter that much.

The biggest value for a single home owner is that their relative cost compared to rent goes down every year because of inflation. It's the regular person's largest hedge against inflation.

Well sure, because they own that house. If housing prices went down 50%, and they still owned that house and still didn't have to pay rent, they'd be in the same situation as before.

You're talking about a paid off situation which happens to few people until the end.

What you mentioned prices what you're really talking about is inflation. Inflation is great for anyone with a large leveraged asset with a fixed payment rate. As long as inflation continues to go up, even slowly, the person with a 30 fixed mortgage wins every year.

A concrete example is that my mortgage is 10 years old. When I bought it was a little tight each month and now I don't even think about it. The house next door rents for 2.5x what I pay.

In a deflationary situation (possibly even depression) which you're describing, the fixed rate person loses. Rents will drop, salaries will go down, etc... Everyone loses, but those holding leveraged assets will lose the most.

Everyone worries about falling home prices devastating the average retirement plan, but if you don't sell your home when you retire all that high valuation is going to do is add to your property tax expenses. And if the people nearing retirement with high value houses are all planning on selling their homes to downsize, well I think that is going to cause a lot of chaos and pain in the market anyway.

Make homes cheap and cheerful again and provide anti-poverty support for people that show losses in their home asset.

Penalizing landlords doesn't solve the problem that there are M people who want homes, N homes in places with decent job markets, and M > N.

Better transportation, more efficient use of scarce land, and more home building is needed. Converting rentals to non-rentals won't add a meaningful number of homes to the market.

Home prices (and thus rents) can be controlled with simple supply, independently of the Fed's changes to interest rates. If you're interested in lower house prices, join (or start) a local YIMBY-type advocacy org.

I'd like to see areas with chronic shortages implement vacancy taxes. A rental unit that sits empty for 3 months starts getting taxed at 20% of the fair market rent for the unit every month, and that percentage goes up 20% every month up to 100% after 7 months.

You can do it, but it doesn't matter. Places that have been struggling with high prices for a long time (Vancouver or Toronto for example) have tried various flavours of vacant homes tax, foreign buyers tax etc and it didn't make a difference.

Do you have any evidence that home and rent prices can be controlled by simple supply, as opposed to new stock being purchased by large landlords and investors?

The real rate is 0.86% according to the Fed, which is historically cheap. In other words, if people get a mortgage loan at 6% and inflation is running at 4%, they’re not paying that much.

If inflation drops, and the Fed lowers interest rates to follow suit, they’ll refinance, so the only real risk at the moment would be that the Fed squeezes by raising the real rate.

That washes out speculators and put pressure on home sellers.

Money is still relatively cheap.

https://fred.stlouisfed.org/series/REAINTRATREARAT10Y

Why are you looking at percentages? Percents don't matter... What matters is, how many monthly/yearly median wages does it take to buy a house now, compared to 30 years ago?

Because the calculation that governs the ability to make the monthly payments is heavily influenced by the interest rate on the mortgage. House prices are set by the marginal buyer and the marginal buyer is taking a mortgage.

But the mortgage is highly influenced by the price of realestate.

I live in a country where ~20 years ago an apartment could cost below 100k eur, and now is being sold at 300k+ eur. Yes, the percentages influence how much mortgage you can afford, but the fact that instead of borrowing ~70k, you now need ~250k influences it a lot more.

(and no, the paychecks didn't go up not nearly as much)

The mortgage payment has a linear relationship with mortgage amount and an exponential relationship with the mortgage rate.

Of course, but is there currently an almost-global (at least in the developed world) problem with high interest rates, or that the base prices are way above what a median person can afford?

Is the area of a room governed by its length or its width?

Houses in seller’s markets are bid up based on affordability by competing buyers. This is governed by incomes of those buyers and interest rates.

> if people get a mortgage loan at 6% and inflation is running at 4%

Incomes increased 4.8% annualised; “the national average 30-year fixed mortgage APR is 7.19%” [1], making the real rate 2.4%.

[1] https://www.bankrate.com/mortgages/mortgage-rates/

I like it. Rage, rage, rage against the system.

Perhaps give it some thought about what would happen if housing prices nationally dropped 20-30%.

We would be back to the house prices of (checks notes) 2021?

Haha this was my first thought too

>Perhaps give it some thought about what would happen if housing prices nationally dropped 20-30%.

My best friend might finally be able to buy a place?

Or it would trigger a giant recession where your friend loses their job and can’t afford anything, housing or otherwise.

I’m fully onboard with the idea that we need to find a way of decoupling housing from investment, but sudden cliff edge events are usually bad for everyone. We need de-escalation, not a crash.

Realistically, a large short-term drop in home prices is only happening because there is giant recession with high job losses and/or wage drops.

Supply improvements could produce a slow real decline, but not a sudden, widespread one in any realistic scenario.

> but sudden cliff edge events are usually bad for everyone

Rich and/or connected people have a tendency to look pretty good coming out the other side... All the more reason to not like such events.

I don't see a downside. The only people who would are those who bought in the last couple of years, but that's true whenever a bubble bursts.

You'll potentially have a lot of people planning on retiring not being able to retire, for one.

You'll have people who are forced to hold onto their homes because they will be underwater.

Only people who bought in the last few years would be affected, so it shouldn't affect anyone's retirement.

And why do I care if people are forced to stay in their homes for a decade as opposed to flipping them for massive profits?

Do you own a home?

Real Estate prices are notoriously sticky. People can't afford to sell if the house goes under water, so they'll keep the listing at the original price up at the original price even if it realistically isn't going to sell.

Do you think we should increase housing supply?

If you think we should increase housing supply, allow people to build cheaper housing and relax building codes.

As it stands, home builders will extract all possible value from building a house and take it for themselves, building homes exactly as expensive as the current ones in the market.

There's no incentive to lower the price.

I completely agree. Now we just need to convince every current homeowner of this.

PCE Deflator came in .1% below expectations (4.6% YoY vs predicted 4.7% YoY)

Private sector wage growth is 5.8% YoY.

I can't see the Fed going another meeting without a rate hike with these numbers, especially the latter going up.

What kind of metrics push prices to start falling? Just thinking as a service oriented business (say a salon or restaurant), why would I ever want to lower my prices if customers keep showing up?

Seems like there is a really long tail for prices to return to pre-COVID levels, if ever.

> if customers keep showing up?

Presumably this is the qualifier that answers the question? That's a fairly large "if".

You don't need prices to fall for inflation to slow (that's deflation). You need the rate that prices are rising to decrease

Specifically, the commonly cited "accelerating inflation" refers to the third derivative of price with respect to time. Interestingly, more physicists seem to understand this than economists: https://www.coppolacomment.com/2021/05/calculus-for-economis...

Are many prices really falling, other than some very specific goods that had supply issues? I thought the slow regression towards low inflation was just most prices stabilizing at a new (much higher) level?

Inflation is still happening, it is just that based on this report the rate of price increases is less than it was last month and year over year.

> thinking as a service oriented business (say a salon or restaurant), why would I ever want to lower my prices

“Prices for goods decreased 0.1 percent and prices for services increased 0.3 percent” in May.

An increase in supply and/or a decrease in demand can cause prices to fall. However, falling inflation does not mean falling prices. If inflation is falling but still positive, then prices are still increasing, on average.

You're right that a business wouldn't lower prices if customers keep showing up. The basic causes of prices falling amount to two: increased supply, and decreased demand.

On the supply end, if competitors enter a given market and take some of your customers, you might lower prices to lure them back. And if people just can't afford (or otherwise don't want) to go to your salon/restaurant as often, then you might lower prices to lure them back.

As far as the current environment, we've got student loan payments restarting in a couple months after a three-year hiatus. A good number of folks who had some disposable income are going to have less. That'll impact the demand end of the equation. Won't necessarily cause deflation, but will at least lower inflation.

Prices aren't going to return to pre-covid levels unless you see a sustained period of deflation. Central Banks have a mandate to keep inflation around 2% while keeping employment as high as possible.

The target is (and has been for many decades) 2% inflation, not 20% defaltion.

Prices are much stickier for some products than others. There's a big difference between a lot of commodities being sold wholesale (oil or steel or whatever), products sold to consumers (cars or oreos), and services (especially ones with a personal touch or relationship like you mentioned).

I think it would take a lot of deflation for most salons to lower prices versus just delay future increases, but prices regularly fluctuate up and down at the grocery store or used car lot.

It'd take a very rare situation for a salon to lower their sticker price, but there are lots of ways to lower effective prices without lowering the sticker price -- sales, bundles, promotions etc. Inflation is calculated using baskets based on prices actually paid rather than sticker prices, so it mostly captures the effects of sales etc.

And that's exactly what consumer staples companies like Proctor & Gamble, Kimberly Clark...figured out. "Why would I never want to lower my prices if people always need toilet paper"

> why would I ever want to lower my prices if customers keep showing up?

I've noticed that restaurants that severely raised prices have gone from a significant wait time to being almost empty while those that raised them a more reasonable amount have gotten closer to packed. So I'm not sure I really agree with your assumption that customers are price insensitive.

Besides, it's pretty short sighted to talk about "still showing up". If you want to maximize profit, you need to guess at how many would show up with lower prices.

You don't need prices to fall. You can look at month to month inflation or month over month. Eventually May to May will be small b/c the shock happened and that level become the new normal, but the ongoing rate went back down. Inflation can be very low and never have prices return to pre-COVID. You would need negative inflation, and likely a recession, for that to happen.

Inflation in the US as of 2023 is more like a choose-your-own-adventure than anything else. Depending on the channel or URL you tune into you and others just like you can extrapolate out corporate greed, federal reserve policy, federal government policy, tax cuts, tax hikes, covid restrictions caused it, covid restrictions actually helped, PPE loans, biden, trump, xi, putin, zelensky.

Ideally you would only reference NBER economic reports, however those come out years after the fact.

Don’t forget aging demographics increasing demand while reducing supply of able bodies, with the added bonus of driving unemployment down

It really is a Rorschach isn’t it? :)

You missed Biden.

> Inflation in the US as of 2023 is more like a choose-your-own-adventure than anything else. Depending on the channel or URL you tune into you and others just like you can extrapolate out […]

Almost like modern economies are complicated with many feedback loops and a lot of interconnectedness between different factors that interact in possibly non-linear ways.

Or you can just buy gold. /s

That's my point. It's complicated and measured in ways that the actual inflation numbers you hear from major media outlets are basically useless for gauging inflation and only seem to be used to further agendas.

That's what the sub-components are for. StatCan just released numbers for Canada and you can what is driving things up and down:

* https://pbs.twimg.com/media/Fzoi9AUagAAzW_G?format=png&name=...

* https://twitter.com/trevortombe/status/1673688862886080512

"You can then ask why is X or Y doing what it is?"

The Core 3.6% / 4.6% YoY values are the ones the Fed actually watches.

Their target is 2%.

I hear people say: We need a wealth tax!

I say: We already do, and it’s averaged out to 4.2% over the last 5 years. Saved $30K in 2018 to maybe get married and buy a house? It’s less than $24K now before even considering housing affordability. You paid a $6K wealth tax without realizing it.

A wealth tax is a tax on total wealth, usually kicking in at a certain (high) minimum level; you can’t dodge a wealth tax by, as most wealthy people do, keeping your wealth in forms other than currency or dollar-denominated assets.

Inflation is not, and does not even loosely approximate, a wealth tax.

I would argue that inflation is a wealth tax; it just doesn’t tax the wealth you want it to.

> I would argue that inflation is a wealth tax; it just doesn’t tax the wealth you want it to.

Its a “wealth tax” that is neither a tax nor targeting wealth thebway people talking about a wealth tax intend, so only in the sense of ludicrous equivocation.

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