The PPI has risen over 7% over the past 12 months while the CPI has risen over 5% over the same period. Used car and truck prices have risen 45% over the past 12 months. Anyone know what is going on in this market? Meanwhile, I have been trying to get a couple pair of khaki pants but my retailers - Banana republic and the Gap -, are getting kind of cheap with the coupon codes. Until recently, on most days, you could find a code to get like 40% off. I think the Fed is going to get busy sooner than expected.
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What, printing trillions of dollars creates inflation?
Yeah but how many years does it take? It is not like the Fed just started pumping money into the system
It’s different now though - QE mainly caused financial market inflation because those dollars went into institutions and stayed there. Now we have:
1) Helicopter money in the form of COVID relief, which bypasses the institutions and goes straight to consumer demand
2) Massive decrease in spending on travel, dining, out, etc. which has freed up cash to spend on groceries, housing, and cars
3) Supply collapse due to COVID driving up prices of everything - labor’s higher, freight’s higher, commodity shortages all around (see ThighStop becoming a thing)
4) A Fed that has conditioned people to think it won’t raise rates to knock down inflation
Well consumers will always be lagging behind inflation. Also with it already being known that the Fed is targeting for 2023 rate increase, it is just a matter of time that wages will catch up.
Also, noting how these variants are and firms' outlook on sourcing probably had some effect too.
If you look at rents nationwide, the increase is staggering. You used to be able to get a relatively great deal compared to a gateway city in a secondary market like Dallas, Charlotte, Atlanta. Now everything is $1,800+ for a 5-10 year old apartment and if you want to live in the "hot" neighborhoods, you're likely paying $2k+. Used to be a $500-$700 delta between the top of the secondary apartment market and the bottom of the gateway market so you could effectively save yourself $6-8k per year in housing costs alone. Now that delta has shrunk you're basically paying the same (especially when factoring in a car).
Even looking at smaller markets like Chattanooga or Virginia Beach, as a remote worker it was a steal to live in these locations. Still a relatively great deal especially if you keep your salary but no doubt about it this is feeding into inflation for those local to the market who don't have a $100k tech job. I would bet in the past 3 years rents in these area's have gone from $1k to $1,500 for a newish 1 bedroom. I don't know if this is related to Covid and the Fed as much as there is enough of a remote work diaspora to drive rents up nationwide.
We talk about it all the time in development meetings. We've had a decade worth of rent growth in the SE in the past four months or so. Crazy to live through.
This sounds about right to me. In tier-2/3 cities (so basically non-finance cities like NYC/SF/LA/Boston/Chicago), a luxury 1BDR was typically between 1200-1400 when I first started my career. Nowadays, even in places like Dallas/Houston/Atlanta, I think $1600-$1800 or so is the new norm for luxury 1BDR in a good (but not necessarily even the most popular) neighborhood for yuppies, so $1400-$1500 sounds about right for a solid 1BDR in a non-luxury building
This is true - I live in the more expensive part of a LCOL city in the southeast and two years ago my rent was like $1,800 for a 2BR and now it’s $2,100 and I’ll be facing another raise in rent in 7 months. It really pisses me off - they make it cheaper if I switch into a different 2BR for a new lease, but that is such a pain in the ass, I’m not doing that, so I suck it up and just pay the increased rent.
It’s a luxury building with amenities and valet trash and stuff in prime location. I guess this is just the price for all that.
I saw Class A 1 bedroom apartments in Virginia Beach of all places for $1,800+. At that point I think I'd take the far more interesting coastal cities for a couple hundred more per month.
How odd! I suggest a $4 trillion bill to investigate the cause of this rise in prices.
The only way to find out would be to spend another $4-6T
Went to McDonald’s for the first time in years in a HCOL city... saw a McDouble selling for $3. That shit was $1 like seven years ago!
u got McFucked
Yep. I got a Tesla Model 3 in December and it has APPRECIATED since I purchased it. Even my old Jeep was appreciating in 2020. I bought a second home ~3 weeks ago and its price was probably 20% higher than I would have paid a year ago.
I assume there are varying reasons for different assets rising the way they are. There are definitely Covid winners and losers and I'm generally a winner, but still, the ramifications of this kind of inflation is pretty bad for consumers.
In general, Millenials have gotten f*cked as a generation. Graduating college into the Great Recession, home prices surging right when they are ready for family formation, and they probably will get little-or-diminished retirement benefits.
Rising car prices are more due to a chip shortage than any marketwide phenomenon but agree on everything else
I'm actually one of the few believers that thinks the fed is right in expecting inflation to come down towards the end of the year / beginning of next. Majority of inflation was caused by strained supply chains. Used cars and trucks made up close to 40% of the latest prints. Signs of this already beginning to come back down to earth. Don't think we'll have prices decrease significantly, but do expect inflation to drastically slow in the coming months.
If you and they are wrong, they are going to be way behind the curve. As a result, the tightening might need to be aggressive.
Agree. And that is why multiple fed speakers have said risk is to the significant upside surprise
I closed on a house in June. The Redfin/Zillow "estimate" is already up like $15-20k.
To act like the past year and a half are in any way comparable to previous decades of Fed policy is painfully ignorant. They printed over 40% of all USD in existence in the last 18 months. There's so much excess cash in the market the reverse repo has gone over $1 TRILLION. The government is paying people almost twice the minimum wage via unemployment currently, so there's a mass exodus from the lower end of the labor market when the choice is do nothing for $15-16/hr vs work for maybe $17-20/hr (or in some cases less than what unemployment offers). This is compounded even more by the people who refuse to take vaccines that certain jobs are beginning to mandate and would rather collect unemployment than comply. Businesses will have to continue to raise what they're willing to pay vs unemployment to attract a shrinking labor pool of willing workers and those costs will be passed directly to consumers.
You can't have people not to work but still be handed purchasing power for nothing in return and expect prices not to increase. It's basic supply & demand economics:
If you think things are weird to watch now wait till that "Infrastructure" bill passes. This is just the beginning. Try to recall how the Fed and other regulators were talking about how everything was fine right up until it wasn't leading into the Great Recession. This is no different.
Commodity supercycle gang checking in - economy is fukt
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