Import prices are probably not that important, but interesting nonetheless. From Oxford Economics.
US Import Prices, June 2023
Issued: July 14, 2023 – Oxford Economics rapid reaction comment
(for immediate use)
Import price deflation continued in June
Import prices decreased in June and have now declined in ten of the last twelve months, helping to support consumer goods price disinflation. The monetary policy implications are minimal, as we expect the Fed to move ahead with a rate increase at July's meeting, but taken with CPI and PPI measures released earlier this week, June's report signals that inflation is moderating across the economy.
US import prices fell 0.2% m/m in June, led lower by a 0.4% decline in nonfuel prices which more than offset the modest increase to fuel prices. Over the prior 12 months, lower fuel prices had provided most of the impetus downwards, but the fall in core prices highlights that deflation is broadening out as global supply chain conditions ease further.
Headline import inflation dropped 0.4ppts to -6.1%, while core inflation rose 0.2ppts to -1.4% due to a larger 0.6% decline occurring in June 2022. While we expect import price declines to continue, they may be nearing the bottom of the deflationary trough, with base effects set to drop out of the equation from July onwards.
Yes, a central bank can suffocate an economy in a glorious war on inflation.
I wish the word "prosperity" popped up as often in macroeconomic circles as "inflation."
You can read some papers that make it seem as if prosperity is secondary to stable prices.
Of course, returning to prosperity will take more than a central bank--I do not blame the Fed for everything.
The obvious policy action being a national reform (if possible) on property zoning, or heavy federal inducements to cities to radically up-zone property and reduce impediments.
A general lightening of regs and taxes on productive behavior is a good idea too. But that is always true.
KE--any thoughts on whether the Fed, ala the Bank of Japan, should just sit on its balance sheet?
I don't like the balance sheet. If macroeconomists can't even agree on the policy bias at any given time on their existing convoluted policy tools, it seems like a bad idea to add another layer of even more convoluted tools. I would prefer that they reduce the balance sheet before raising rates.
This is super interesting. I really hope that policymakers figure out that we need to let people build more housing rather than crushing the economy every 10-15 years because "those darned housing prices won't go down for some reason!!"
FYI Add on:
https://truflation.com/
Now at 2.15% post-cycle low, still heading lower.
The chart sure makes it look like transitory inflation.
I confess to cherry-picking sources, but nevertheless...
Add on
Import prices are probably not that important, but interesting nonetheless. From Oxford Economics.
US Import Prices, June 2023
Issued: July 14, 2023 – Oxford Economics rapid reaction comment
(for immediate use)
Import price deflation continued in June
Import prices decreased in June and have now declined in ten of the last twelve months, helping to support consumer goods price disinflation. The monetary policy implications are minimal, as we expect the Fed to move ahead with a rate increase at July's meeting, but taken with CPI and PPI measures released earlier this week, June's report signals that inflation is moderating across the economy.
US import prices fell 0.2% m/m in June, led lower by a 0.4% decline in nonfuel prices which more than offset the modest increase to fuel prices. Over the prior 12 months, lower fuel prices had provided most of the impetus downwards, but the fall in core prices highlights that deflation is broadening out as global supply chain conditions ease further.
Headline import inflation dropped 0.4ppts to -6.1%, while core inflation rose 0.2ppts to -1.4% due to a larger 0.6% decline occurring in June 2022. While we expect import price declines to continue, they may be nearing the bottom of the deflationary trough, with base effects set to drop out of the equation from July onwards.
I really like that CPI-based estimate of land rents/how much poorer we are because we block housing production. I'm going to have to steal that!
Add on, update: The PPI is disinfaltin' too.
Excellent review.
Yes, a central bank can suffocate an economy in a glorious war on inflation.
I wish the word "prosperity" popped up as often in macroeconomic circles as "inflation."
You can read some papers that make it seem as if prosperity is secondary to stable prices.
Of course, returning to prosperity will take more than a central bank--I do not blame the Fed for everything.
The obvious policy action being a national reform (if possible) on property zoning, or heavy federal inducements to cities to radically up-zone property and reduce impediments.
A general lightening of regs and taxes on productive behavior is a good idea too. But that is always true.
KE--any thoughts on whether the Fed, ala the Bank of Japan, should just sit on its balance sheet?
I don't like the balance sheet. If macroeconomists can't even agree on the policy bias at any given time on their existing convoluted policy tools, it seems like a bad idea to add another layer of even more convoluted tools. I would prefer that they reduce the balance sheet before raising rates.
Well...
For me, the convoluted tool is trying to influence the economy through commercial bank lending. Rube Goldberg time.
As you know, it is commercial banks that expand the money supply, when printing money to make loans.
This happenstance arrangement of fractional reserves has morphed into the only accepted tool to tighten or loosen monetary policy.
I would like to see more discussion about money-financed fiscal policy, as mentioned by Stanley Fisher and Ben Bernanke.
Michael Woodford once wrote that federal deficits, in coordination with and expanding Fed balance sheet, are money-financed fiscal programs.
Scott Sumner says Michael Woodford is wrong.
So, if you are not confused, then you don't really understand the situation.
From my layman's point of view, Fed balance sheets de-lever taxpayers and are a form of mild stimulus. Hard to see a downside.
This is super interesting. I really hope that policymakers figure out that we need to let people build more housing rather than crushing the economy every 10-15 years because "those darned housing prices won't go down for some reason!!"