There’s No Inflation (wink)


Yahoo Finance reporting that wholesale prices rose more than expected in March:

Yahoo Finance

It goes on to say that if you strip out volatile food and energy, then prices didn’t rise too much – and that businesses were reluctant to pass on costs to consumers.

A couple of data points to take from this:

1. It continues to amaze me that those who measure inflation reduce the influence of “volatile items” such as “food and energy” when computing inflation. You would think that when they do this, or when they underweight health care costs or insurance premiums in the figures, that people don’t often pay for these items. It would be great for us if we needed to buy a laptop once per month as technology prices fall over time – but we don’t  -we do buy food and energy weekly though.

2. the article mentions that businesses are reluctant to pass price increases to the consumer. I would take 2 points off the top from this – one, this will likely cause profit margins to fall at companies and therefore a drop in stock prices, and/or, businesses won’t be able to afford this much longer and we will see price increases passed on to the consumer – which means we will be hit with higher prices soon.

There is much more to this analysis, but bottom line, believing in government inflation stats could cost you a lot of money, one way or the other.