After too many months of inflation data telling anyone with a barely functioning cerebral cortex that significant price inflation was at hand, this month seems to have jarred the denialists into a very belated recognition of reality.
As the delightful chart porn above shows, the costs of materials for food, energy and finished goods is up significantly.
"Prices paid to U.S. producers rose
more than twice as much as forecast in January, pushed up by
higher fuel, food and drug costs, signaling inflation may keep
accelerating even as growth slows.
The 1 percent increase followed a 0.3 percent drop in
December, the Labor Department said in Washington. The median
forecast in a Bloomberg News survey of economists was for a 0.4
percent gain. Excluding food and energy, so-called core
wholesale prices climbed 0.4 percent, the most in almost a year."
Here’s the money quote from BLS:
"From January 2007 to January 2008, the index for finished goods moved up 7.4 percent. Over the same period, prices for finished energy goods climbed 22.6 percent, the index for finished consumer foods rose 8.3 percent, and prices for finished goods other than foods and energy advanced 2.3 percent. For the 12 months ended January 2008, the index for intermediate goods increased 8.8 percent, and prices for crude goods jumped 31.3 percent."
Jeebus! Finished energy products, +22.6%! Finshed consumer goods, +8.3%
Lag this . . .
Producer Price Indexes – January 2008
Producer Prices in U.S. Increase More Than Forecast
Bloomberg, Feb. 26 2008
That’s gonna leave a mark: Data through December 2007 for the Case-Shiller Home Price Index shows broad based declines in the prices of existing
single family homes across the United States. This marks 2007 as a full
year of declining home prices.
As the chart above shows, annual returns of the national home price indices declined -8.9% versus the 4th quarter of 2006. This is the largest decline in
the series’ 20-year history. Comparatively, during the 1990-91 housing recession, the
annual rate bottomed at -2.8%.
“We reached a somber year-end for the housing market in 2007,” says Robert J. Shiller, Professor at Yale University and Chief Economist at MacroMarkets LLC. “Home prices across the nation and in most metro areas are significantly lower than where they were a year ago. Wherever you look things look bleak, with 17 of the 20 metro areas reporting annual declines and the remaining three reporting flat or moderate growth rates. Looking closely at these negative returns, you will see that 14 of the metro areas are also reporting record lows and eight are in double digit decline. The monthly data paint a similar picture, with all metro areas now reporting at least four consecutive negative monthly returns.”
Damn that Shiller! He’s way too negative. All these professorial types, with their confounded data and confusing logic — they are so pessimistic! When are these academics gonna start being more balanced?
Existing Home Sales "Slipped" 23.4%
Monday, February 25, 2008 | 10:41 AM
Year End Numbers Mark Widespread Declines
S&P/Case-Shiller Home Price Indices, February 26, 2008
Home Depot Profit Drops on U.S. Housing Slowdown
Bloomberg, Feb. 26 2008
While I am running around this morn, we have a guest post from naked capitialism, on all of those well meaning, non-meddling, only interested in return maximization Sovereign Wealth Funds:
The Sham of Sovereign Wealth Fund Negotiations
The Wall Street Journal reports today in "U.S. Pushes Sovereign Funds To Open to Outside Scrutiny," that the US Treasury Department talking to two large sovereign wealth funds, Singapore’s Temasek and the Abu Dhabi Investment Authority, as the first steps in a process to ""draft rules to oversee the behavior of such funds, without discouraging them from investing."
Let’s see if I get this straight. The US is running a chronic current account deficit, which means we are dependent on the kindness of foreigners to maintain our lifestyle. In other words, we have to run a capital account surplus, which is tantamount to having other countries buy our real or financial assets. And while the fall in the dollar has reduced our current account deficit somewhat, it’s still at a high level. Ergo, we need our money fix.
Brad Setser, who monitors the international capital data closely, has been reporting for some time that the private demand overseas for US assets has fallen considerably. The key buyers now are foreign governments. And those governments, who used to be content to buy low-returning Treasury bonds, are now looking to diversify their holdings and earn higher returns. Enter the sovereign wealth funds.
What is comical about this whole idea is the idea that we have any say in this matter. Of course, the US can nix individual deals, as we did to Dubai Port World’s purchase of UK P&O Ports. Dubai Ports had to divest five US port operations; the UK imposed no such requirement. Similarly, the US blocked Chinese oil company CNOOC’s bid for Unocal blocked, which ruffled quite a few feathers.
But we’ve already let foreign banks make substantial investments into our troubled financial sector, which one can argue gives them strategic leverage. Yes, these are minority stakes, the investors don’t hold any board seats. Nevertheless, as eminence grise Felix Rohatyn pointed out, “You don’t need to appoint two directors to a board to have influence when you own 10 percent of the company.”