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U.S. wholesale prices rise scant 0.2% in December in sign high inflation might be starting to ease


hegemony
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I'm waiting for ration cards to come back in-style.

 

I went to Walmart this past Friday evening. Shelves were more bare than 2020. However no limits, on how much you could buy of certain items. Saw a couple of folks with attitudes, that someone got something before they did.

 

Yeah, I'm waiting for the fights to start. Will be worse than a Black Friday sale on TV's and Xbox's.

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Inflation has largely been driven by covid-related impediments to the supply chain.  This will resolve itself and, historically, doesn't give rise to an inflationary spiral.

 

On the other hand, residential real estate price hikes will ultimately play out in the greater economy.  The MA home we purchased 2 years ago was just reappraised for a refi and came in with 45% above our purchase price (essentially 20% annually for 2 successive years).  That's simply insane on the surface, but reflects a continuing short supply relative to demand, and a willingness of buyers to bite the increase, softened by low rates.

 

If mortgage rates ultimately climb by 2% (into a more "normal" 4%-5% range), there's finally going to be some giveback on real estate prices (I'll suggest 20%, maybe even 30%).  Fortunately, home prices haven't been stoked by the type of speculative buying on thin equity that was characteristic of the 2008 housing crisis.  Such a fallback may prove healthy for the overall market.  In any case, I don't see a new housing crisis on the horizon.

 

Bottom line, I believe it will be housing costs (which are high, even if there's some price softening) that will drive a lasting notch up in CPI.  Firms will ultimately have to hike wages to retain workers in light of a very low unemployment rate.  But overall price inflation will occur in a moderated fashion.    We're probably looking at settling in around 3%-4% annual inflation for the coming few years.

 

(That forecast and a buck will get you a small coffee at McD's)

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On 1/17/2022 at 5:40 PM, Burgerwars said:

Nobody told Target or Ralph's about this. I'm paying more for less stuff. Lots of empty spaces on shelves too.

 

Even if inflation does subside, prices don't come down. They'll probably stick at their higher levels.

Yep...cat litter is up 10% year over year at the bullseye for the same kind and weight.  At least they still ship for free...

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