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AvidFan

A Clue From America As To Where Measured Inflation Is Heading...

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Found this today:

http://republicanuu.blogspot.com/

Hussman Funds - Weekly Market Comment: August 21, 2006 - Data Dependent: "Despite the market's reaction, the hope that inflation is slowing is hardly supported by the data. The 'great news' on the CPI wasn't even outside the bounds of rounding error, while the PPI figures were actually of significant concern. Sure, the prices of some volatile items like eggs and fish fell steeply, but the improvement in the PPI for 'finished goods' was overshadowed by continued pressure in the PPI for 'intermediate goods.' Here's the picture

that concerns me.

(see attachment)

Over the past year, consumer price inflation has clocked in at 4.15%. Producer price inflation (finished goods) has been a similar 4.12%. But if you look at intermediate goods, we're currently at an inflation rate of 8.83%. That's the most abrupt widening in the spread between intermediate and finished goods since the 1973-74 oil crisis. Moreover, if we look at points in history when prices for intermediate goods have outpaced prices for finished goods over a 6-month period, we've also seen, on average, an acceleration in the PPI finished goods inflation rate over the following 6 months."

This surely confirms all the insider stories and anecdotal evidence given on this forum, namely that retailers, whether they be energy suppliers or manufacturers, are stomaching their rising input costs for the sake of competitiveness in a failing market place. As the text says, if the ratio of intermediate inflation to finished goods inflation exceeds 1 for 6 months or more, there's a corresponding 6 month jump in finished goods inflation that follows.

Anyone care to guess where the RPI and CPI are going in this country? Can they really continue to fake these stats if this is the true state of the economy?

ppi.gif

post-2575-1156193089_thumb.jpg

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Fast approaching therefore is a metal test as to whether this whole "inflation targeting" premise by the Fed and BoE is really going to be stuck to.

Will they crash house prices or will they let CPI get out of control ? My guess is that, sadly, they'll probably allow CPI well above target for a long while and turn a part-blind eye to inflation by not raising interest rates high enough.

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Avidfan

Excellent post. Posts like this are worth more than rhetoric as this is an area that is going to worry the FED.

Companies that were cash rich will subsidise factory gate prices in the short term to keep competitive , however there is a time limit to this and I think we have reached it.

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Fast approaching therefore is a metal test as to whether this whole "inflation targeting" premise by the Fed and BoE is really going to be stuck to.

Will they crash house prices or will they let CPI get out of control ? My guess is that, sadly, they'll probably allow CPI well above target for a long while and turn a part-blind eye to inflation by not raising interest rates high enough.

Worse than not raising enough though is the fact that I've seen a couple of mentions from the USA of analysts that expect the Fed to reduce IR's in early 2007!

AFP

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Fast approaching therefore is a metal test as to whether this whole "inflation targeting" premise by the Fed and BoE is really going to be stuck to.

Will they crash house prices or will they let CPI get out of control ? My guess is that, sadly, they'll probably allow CPI well above target for a long while and turn a part-blind eye to inflation by not raising interest rates high enough.

I really don't think this will happen, it will cause too much turmoil in the financial markets and will completely zap all of Gordons economic stability promises' . If,for example, Gordon were to announce a target of 3%, and not 2%- we would instantly see a sudden exit of overseas and hedge fund investment and a drastic drop in the GBP currency.

So what options does GB have in order to get thru rising unemployment, rising inflation, global instability and falling house prices - It seems he is using immigration as he tool of choice. Too much immigration and we have unemployment and social unrest, too little and we have recession/falling house prices. He has to hit the bullseye with this one.

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AvidFan,

Good find. Confirms alot of what we have been saying on here for awhile. Inflation is putting in an upward trend and I think it will accelerate. There are a number of stories in the press indicating that many household are seeing much higher the 2.4% inflation. That higher inflation will spread right across economy, a process that I think is already starting.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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