I feel it… but don’t see it??
Inflation remains a mathematical mystery though felt by many of us in different ways. The classic government definition excludes food and energy which in reality make up most of our cost concerns.
The Consumer Price Index has stayed steady and performed below the 2% Fed target benchmark. Some are more concerned about deflation than inflation.
If you have children in college, tuition is obviously rising and inflation hits hard. Health insurance premium continue to rise though the rate on increase has slowed.
Beef prices reached record highs this summer while many physical commodities have retreated in the last years. Oil had traded above $100 recently before the swan dive to five year plus lows.
Eggs doubled in cost when the avian flu forced the harvesting of chickens to prevent the spread of disease. The lesson to be learned is that individual prices move and no broad boost is at hand.
Price is relative.. it is important to compare prices using a baseline value.
Commodities Conundrum
The S&P has tippled from the 2009 extreme lows…300%. Stocks as a group have jumped while commodities stalled out at the 50% recovery before the latest downfall. Resources are driven by supply and demand with the US Dollar strength playing a role in the depression drop.
A fun exercise compares the soft commodity complex price records made in the 1970s to equivalent value needed to make new highs today. Check hout this nifty tool:
INFLATE-ONATOR Tool: http://data.bls.gov/cgi-bin/cpicalc.pl
Coffee Record $3.40 pound in 1977 would be $14.04 in 2015
Orange Juice Record $2.20 pound in 1978 would be $8.03 in 2015
Cocoa Record $5400 ton in 1977 would be $21,139 in 2015
Sugar Record $.66 pound in 1975 would be $2.92 in 2015.
This basic price adjustment calculator with a 3% per year price hike shows how far to go to really reach records.
