ECRI: Monthly Future Inflation Gauge Readings

[HenryTo]

ECRI's future inflation gauge now at a five-year high. Courtesy of MplsBear at wallstreetbear.com:
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U.S. inflation pressures rose in Aug - report
Fri Sep 2, 2005 09:39 AM ET

NEW YORK, Sept 2 (Reuters) - Higher interest rates and input prices, an increase in loan activity and stronger job growth all pushed U.S. inflation higher in August, a report said on Friday.

However, the rising inflation pressure was partly offset by supplier delivery times, the Economic Cycle Research Institute said.

ECRI's Future Inflation Gauge, which is designed to anticipate cyclical swings in the rate of inflation, rose to 121.1 in August from a upwardly revised 119.7 in July, the research group said.

The index's annualized growth rate, which smooths out monthly fluctuations, climbed to 4.1 percent from an upwardly revised 2.3 percent.

"The U.S. future inflation gauge is now at a five-year high, suggesting that cyclical inflation pressures in the U.S. are intensifying," said Lakshman Achuthan, managing director for the ECRI.

[HenryTo]

A pause in inflationary pressures last month - but the upward cyclical pressures continue to build:
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US inflation pressures fall 1st time in 11 mo-ECRI
Fri Mar 5, 2010 8:12pm IST

NEW YORK, March 5 (Reuters) - A monthly measure of U.S. inflation pressures dipped in February after rising for 10 straight months, but upward cyclical trends in prices still hold, a research group said on Friday.

The Economic Cycle Research Institute's U.S. Future Inflation Gauge (USFIG), designed to anticipate cyclical swings in the rate of inflation, slipped to 101.4 in February from 102.1 in January, which was revised slightly higher from an original 102.0.

While the gauge's January dip follows 10 months of consecutive growth in the index, ECRI Managing Director Lakshman Achuthan said the group maintains its forecast that prices will continue to move steadily upward.

"Despite its first downtick in 11 months, the USFIG remains in a cyclical uptrend, with underlying inflation pressures continuing to trend upward," said Achuthan.

The December USFIG annualized growth rate, which smooths out monthly fluctuations, also fell, to 31.3 percent from 38.0 percent in January, which was revised up from 37.8 percent.

[HenryTo]

FYI - U.S. inflationary pressues continue to build, according to the ECRI.

U.S. Inflation Pressures Begin to Mount
Reuters
February 05, 2010

(Reuters) - A monthly gauge of U.S. inflation pressures rose for the tenth straight month in January, indicating a steady rise in prices in the coming months, a research group said on Friday.

The Economic Cycle Research Institute's U.S. Future Inflation Gauge (USFIG), designed to anticipate cyclical swings in the rate of inflation, rose to 102.0 in January from 99.0 in December, which was revised up from an initial reading of 98.2.

"With the USFIG now advancing for ten straight months, underlying inflation pressures are in a sustained cyclical upswing, promising higher inflation in the coming months," said Lakshman Achuthan, managing director at ECRI.

The January USFIG annualized growth rate, which smooths out monthly fluctuations, climbed to 37.6 percent from 33.8 percent, which was revised higher from an original 31.8 percent.

[HenryTo]

FYI. Inflationary pressures building (confirmed by TIPS) but it's still difficult to see where it's going to come from, given so much overcapacity in both manufacturing and the labor market. The country to watch is still China - as excessive spending/borrowing there may cause commodities to rise further at least for the rest of this quarter.

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U.S. Inflation Pressures Begin to Mount in DecemberReuters
January 08, 2010

(Reuters) - A monthly gauge of U.S. inflation pressures rose for the ninth straight month in December, indicating a steady rise in prices in the coming months, a research group said on Friday.

The Economic Cycle Research Institute's U.S. Future Inflation Gauge (USFIG), designed to anticipate cyclical swings in the rate of inflation, rose to 98.2 in December from 95.6 in November, which was revised slightly lower from 95.7.

It was the ninth consecutive month the index has risen. "Thus, underlying inflation pressures are building steadily, pointing to higher inflation in the months ahead," said Lakshman Achuthan, managing director at ECRI.

The December USFIG annualized growth rate, which smooths out monthly fluctuations, climbed to 31.8 percent from 27.3 percent in November, which was revised higher from an original 26.8 percent.

[HenryTo]

According to the ECRI, deflationary pressures are certainly off the table. But higher, sustained inflation is still elusive - again, suggesting that the Fed will remain on hold for at least the rest of this year:
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US inflation pressure up but still non-issue--ECRI

Thu Jul 2, 2009 9:40am EDT

NEW YORK, July 2 (Reuters) - U.S. inflation pressures rose in June, continuing to come off 51-year lows touched earlier this year but still indicating that inflation is not an issue for the economy, a research group said on Thursday.

The Economic Cycle Research Institute's U.S. Future Inflation Gauge (USFIG), designed to anticipate cyclical swings in the rate of inflation, rose to 81.9 in June from a downwardly revised 79.7 in May, which was originally reported as 79.8. "The USFIG has now risen for three straight months, but isstill not far above March's 51-year low," said Lakshman

Achuthan, managing director at ECRI. "Deflation worries should clearly have dissipated, but it is still too soon to predict a decisive upswing in U.S. inflation." The gauge was pushed higher in June primarily due to inflationary moves in commodity prices, Achuthan said. The index's annualized growth rate, which smooths out monthly fluctuations, jumped in June to minus 18.5 percent from minus 27.1 percent in May, which was revised lower from minus 26.9 percent.

[HenryTo]

FYI - ECRI's FIG signaling a reversal from the latest deflationary trends - but chances are that the Fed will remain on hold for at least the rest of this year:
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US inflation pressures up from 50-yr lows-ECRI
Fri Jun 5, 2009 9:43am EDT

NEW YORK, June 5 (Reuters) - U.S. inflation pressures continued to rise in May from March's 50-year lows, indicating that current steady economic growth should ease fears of both deflation and hyperinflation, a research group said on Friday.

The Economic Cycle Research Institute's U.S. Future Inflation Gauge (USFIG), designed to anticipate cyclical swings in the rate of inflation, rose to 79.8 in May from 78.1 in April, which was revised lower from 78.2.

The group's inflation gauge hit a 51-year low in March, suggesting that policy makers would continue to focus on economic growth as inflation is not an imminent concern. "The USFIG has risen for two straight months after hitting a 51-year low in March, warranting neither deflation worries
nor fears of an inflationary upsurge at this time," said Lakshman Achuthan, managing director at ECRI.

The gauge was pushed higher due to inflationary moves in measures of commodity prices and vendor performance, Achuthan said. The May USFIG annualized growth rate, which smooths out monthly fluctuations, climbed to minus 26.9 percent from 33.8 percent in April, which was revised lower from minus 33.7 percent.

[HenryTo]

FYI - ECRI's FIG still new 51-year lows:
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US inflation pressures rise slightly in April-ECRI

NEW YORK, May 8 (Reuters) - U.S. inflation pressures rose slightly in April after hitting a 51-year low in March, indicating policymakers should continue to focus on economic growth, a research group said on Friday.

The Economic Cycle Research Institute's U.S. Future Inflation Gauge (USFIG), designed to anticipate cyclical swings in the rate of inflation, rose to 78.2 in April from revised 77.9 in March.

"The USFIG is still near March's 51-year low, affirming that inflation is far from being a near-term concern," said Lakshman Achuthan, managing director at ECRI.

The gauge was pushed up by inflationary moves in measures of vendor performance, loans, commodity prices and labor market conditions, partly offset by a disinflationary move in a measure of interest rates, Achuthan said.

The USFIG annualized growth rate, which smooths out monthly fluctuations, fell in April to minus 33.7 percent from a revised minus 38.0 percent in March.

[HenryTo]

Latest ECRI Future Inflation Gauge reading:
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NEW YORK, April 3 (Reuters) - U.S. inflation pressures fell again in March to a new 50-year low, indicating continued declines in consumer prices, a research group said on Friday.

The Economic Cycle Research Institute's U.S. Future Inflation Gauge (USFIG), designed to anticipate cyclical swings in the rate of inflation, slipped to 79.3 in March from 81.0 in February, revised higher from 80.9.

The reading was the lowest since June 1958, when it stood at 79.3.

"The USFIG is now at a new 50-year low and remains in a clear cyclical downswing, asserting that inflation is still a non-issue," said Lakshman Achuthan, managing director at ECRI.

The gauge slid lower due to weaker labor market conditions and higher interest rates. That was partly offset by positive contributions from higher commodity prices, Achuthan said.

Still, the USFIG annualized growth rate, which smooths out monthly fluctuations, edged higher in March to minus 35.9 percent from minus 36.7 percent in February.

[HenryTo]

ECRI Future Inflation Gauge readings declining rapidly from a global standpoint. Time for the Euro Zone to continue to ease and for Japan to ramp up its monetary base and potentially go back to a zero interest rate policy:

http://seekingalpha.com/article/104684-ecri-worldwide-inflation-continues-to-recede

[HenryTo]

ECRI Future Inflation Gauge readings from across the world. Definitely time for the UK to ease, and for the ECB to start moving soon:

http://seekingalpha.com/article/98389-ecri-future-inflation-indexes-indicate-that-worldwide-inflation-is-receding

[rffrydr]

The flipside, many more than that are getting gas cards--backdoor COLA from the old days. $3 gas should cure that however.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Anecdotal story: ACS (Affiliated Computer Services) imposed a merit increase freeze for the 3Q and rumor is that this will extend into 4Q. Many folks are still being the "good soldier" and are just glad they have a job going into Thanksgiving of this year.
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US inflation pressures fall to a six-year low - ECRI
Fri Sep 5, 2008 9:41am EDT

NEW YORK, Sept 5 (Reuters) - U.S. inflation pressures fell in August to a six-year low, driven by disinflationary moves in measures of commodity prices, labor market conditions and vendor performance, a report said on Friday.

The Economic Cycle Research Institute's U.S. Future Inflation Gauge (USFIG), designed to anticipate cyclical swings in the rate of inflation, fell to 109.3 in August from 112.4 in July.

The reading was the lowest since July 2002, when the index stood at 108.2.

"With the USFIG falling to a fresh 73-month low, underlying inflationary pressures are now falling even more rapidly," said Lakshman Achuthan, managing director at ECRI.

"This inflation outlook from the FIG is in line with the fact that business cycle recessions always kill inflation as discretionary spending comes under pressure."

The USFIG annualized growth rate, which smooths out monthly fluctuations, took a dive to negative 11.0 percent from minus 7.5 percent in July, revised up from negative 7.6 percent.

[Odysseus]

Inflation seems to always begin as an event. It was oil shock in the early 70's and oil shock in the 2000's. If central banks fund the shock and increase the money supply, you get demand pull inflation.

The cost push side of the equation now kicks in. Labor WILL demand to be compensated. We are only now seeing the beginnings of labor unrest.

I know that the old unionized manufacturing jobs, a large percent anyway, have been moved overseas but try outsourcing your plumber, civil servant, teacher, fireman, policeman and truck drivers.

Cost push is coming in the U.S. and Europe and no doubt profit margins will revert to the mean once again. Inflation has a nasty feed back cycle.

Just a thought.
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Psychic with Alzheimers. I can predict what I will forget.

[HenryTo]

The FIG is supposed to have a mean lead time of 11 months and a median lead time of 9 months at inflation cycle turns, so we will see. Also, their FIG's annual growth rate for the Euro Zone has been rising and are now near cycle highs so their indicator is not "broken," so to speak.

When it comes to inflation expectations, the Fed talks a lot about "anchoring" expectations - that is, as long as households believe in the long-term credibility in the Fed, then long-term inflationary pressures (i.e. spiraling inflation) will not be high since households:

1) Won't be asking for dramatic wage increases
2) Would be saving and investing - as opposed to spending because they believe higher prices will wipe out their savings in the future

Moreover, the inflation numbers are inherently backward looking. With a slackening and flexible labor market (as opposed to Europe's), and with housing prices coming down, it is difficult to see what will trigger demand-drive inflationary pressures going forward. The Fed has to look forward, not backwards. Also, the largest chunk of headline inflation is coming from higher oil, natural gas, and now coal prices. A bunch of Berkeley economists wrote a paper discussing that most of the food inflation over the last 12 months has actually coming from higher energy prices, and not increasing food prices such as in corn, wheat, etc. That's because the end-product is infinitely more complex than what is harvested in the fields. Transportation costs also need to be taken into acount as well.

As I discussed in our commentaries, to the extent that inflation is being caused by energy prices - and to the extent that it is being caused by supply constraints - the Fed actually needs to ease to create incentives for energy companies to increase capital spending or for folks like CalPERS to help spawn new industry in alternative energy areas such as biofuels, solar power, and so forth. This is a position advocated by Jack Treynor and I think it makes a lot of sense. In other words, the easing in the FFR is actually deflationary for future energy prices. The transmission mechanism here is the capitalistic/flexible U.S. economy - this logic only works here and not in most other countries - simply because there aren't as many entrepreneurs (as a % and in an absolute sense) in other countries - and who can be so innovative.

My main concern is that the Fed may be losing credibility among Americans in general, but as long as there is "slack" in the labor markets, these guys won't be able to "reinforce" this viscious cycle by asking for higher raises, etc. By the time they can, the headline CPI number should have come down already (note that even if oil prices stay at $90 a barrel this time next year, energy CPI would still decline). My guess is that the Fed is still willing to "trade off" a year's worth of high headline inflation for long-term sustainable growth for the next few years at least.

[rffrydr]

He initiated a buyback program when his stock was already up 5 fold. Careful with those guys, they've got the pedal to the medal.

I agree about the "core" rate becoming a lie; however as Henry says, at 100 dollar oil next christmas inflation will be zero.
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Today is the Tomorrow you worried about Yesterday!

[BlueDaze]