The August 2022 Consumer Price Index (CPI) print was released on September 13, 2022 and posted 8.3% year-over-year growth and shocked all who were talking. sure that inflation is due to slowing down. because all the demand destruction that the Federal Reserve has been trying to produce will start hitting the market. The markets did not react well to the higher-than-expected print with all major indexes down around 4-5% across the board. What’s worse, the reported 8.3% figure appears to be underreporting the actual level of price inflation that consumers are experiencing at the moment.
I think it’s safe to say that the basket of goods listed above can be considered essential goods for anyone trying to live a relatively comfortable life. When you see these numbers, it’s hard not to be completely offended that the Fed and Bureau of Labor Statistics will try to make you believe that prices are only up 8.3%. What’s even worse is that this annual print builds on a relatively high base set for August 2021. If you don’t understand, inflation starts feeding its ugly head in the summer of next year. 2021 and August of that year brought the figure 5.3%. 3.3% higher than the Fed’s historic 2% target.
These days, there are a lot of anti-inflation people trying to view today’s print as positive, saying things like, “Monthly growth is essentially flat. Inflation is starting to decelerate and we should see the full effects of the demand destruction begin to take effect in the coming months. “Your Uncle Marty thinks this is an extremely wishful thinking and there are two factors in particular that I think are seriously affecting the price drop; the depletion of the strategic petroleum reserve (SPR) and the fact that We are entering winter.
The draining of the SPR helped to artificially reduce inflation at the pump. With the SPR set to be fully withdrawn at some point next month, drilling crews are being pushed to their limits here in the US and the Biden administration is dead for not allowing any permits. No new drilling permits are granted, the oil supply side and the gas market are about to experience a big shock, which will put upward pressure on gas prices. Combine that with the fact that we’re entering the fall and winter months where energy needs start to increase dramatically as people start to heat up their homes and travel more for the holidays. , and it’s not hard to see that we may be in the eye of an inflationary storm. This focuses only on energy prices.
According to the world, energy prices, especially natural gas prices, are an important input in the food supply chain. With prices rising significantly earlier this year during the planting season, one shouldn’t be shocked to see rising food inflation slow in the markets by the end of 2022. To make matters worse, it seems unlikely. The US is trying to escalate things with China over their encroachment on Taiwan’s sovereignty.
There will be more sanctions in 2022 for consumers. If the US decides to continue with sanctions, it could exacerbate the inflation problem in two ways, making it impossible for Americans to access China’s manufacturing capacity and/or trigger a reaction with China. China by increasing military activity around Taiwan, thus making it difficult for international markets to access key computer chips manufactured by TSMC.
While a lot of people talking out there want you to believe that inflation is slowing, all I can see is that things that are growing are only going to make the problems we’re having worse. significantly more. Believe it or not, we could be in the eye of an inflationary storm.