Two Seemingly Opposite Ends Of The Inflation Debate Come Together

It’s worth taking a look at a couple of extremes and putting each into a wider context of inflation/deflation. As you no doubt surmise, only one is receiving much mainstream attention. The other continues to be overshadowed by…anything else.

To begin with, the US Bureau of Labor Statistics reported yesterday that US import prices were up on annual basis for the first time in some time. Rising in January 2021 by 0.9% year-over-year, this was actually the fastest increase in almost three and a half years; another one of these “highest in years” comparisons.

Not only that, just looking at the index especially clear acceleration the past two months (December and January), it does seem to be indicative of all that price overheating everyone’s been talking about.

Given enough time, has Jay’s flood finally started to come in? After all, import prices are linked to the dollar’s exchange value and global conditions, therefore if the long-predicted dollar crash is showing up it’s going to be costing Americans even more destructive inflation pain.

Hardly alone, appearing to corroborate the overheating alarm the BLS reported earlier in the week that producer prices have accelerated, too, also during these past few months. Like import prices, the PPI is up on annual basis and at the quickest pace in 26 months.

Here come the seventies!

However, being higher than at any time during 2019-20 isn’t quite the comparison it’s made out to be. In fact, while produce and import prices are rebounding with commodity prices, in particular, that supply squeeze hasn’t really had all that much impact beyond turning several years of minuses into small pluses.

Yes, small.

Context matters:

And if this is the start of something big in the inflationary direction, why hasn’t it been so much bigger?

The reason in all likelihood is over at the opposing side where things continue to be actually huge. Inflation is talked about like it’s some massive monster already rearing its ugly head, while deflationary forces continue be, in reality as opposed to conjecture, truly mind-boggling.

The labor market is still imperiled; the Department of Labor reported yesterday on yet another rise in weekly jobless claims filings. Revising the tally from two weeks ago substantially higher, last week’s total beat it anyway at a truly monstrous 863,000. As a reminder, there had never been a single week so much as 700,000 before last year.

As of the latest data, this makes 48 straight weeks at substantially greater than all prior record levels.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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