Jeremy Siegel: we need to get out of this yoy look at inflation ... 11 months of outdated data

[progree]

Last edited Fri Dec 16, 2022, 12:56 PM - Edit history (1)

Siegel: "We need to get out of this year-over-year look at inflation. Remember, when we get year-over-year, we're getting 11 months of old, outdated data, and only 1 month of new data, and in fact that 1 month contains data that [Powell] admits, particularly in the housing sector, is extremely lagged,"

Wharton professor Jeremy Siegel says he's disappointed in the Fed's hypocrisy on inflation, and that Jerome Powell will be cutting interest rates next year, Markets Insider, 12/15/22

* Wharton professor Jeremy Siegel is not happy with the Fed's hawkishness that was telegraphed at Wednesday's FOMC meeting.

* Siegel said the Fed is contradicting itself as it focuses on crushing wages that are spiking due to supply side issues.

* Siegel ultimately expects that the Fed will be cutting interest rates in 2023, not raising them.

Specifically, Siegel called out the fact that when inflation was rising after the COVID-19 pandemic due to supply-side issues, Fed chairman Jerome Powell insisted that inflation was transitory and did not act against it via interest rate hikes.

But now Powell is doing the exact opposite when it comes to structural supply-side issues that are plaguing the labor market.

"Now he's saying there's supply-side problems in the labor market that may raise wages, and we have to crush the wages in order to stop inflation. That's just totally inconsistent as a part of monetary policy," Siegel told CNBC on Thursday. "The Fed is not supposed to act on structural shifts on supply-side problems."

"I was very disappointed in Powell in his reasoning and his justifications for this overly tight policy. He acknowledged that the housing data is lagged, that housing prices are actually going down, but we're not going to see it until the middle of next year. So we're going to wait until the middle of next year before we decide whether we need to pause the rate hikes, even though we know it today?" Siegel said.

MORE: https://www.msn.com/en-us/money/markets/wharton-professor-jeremy-siegel-says-he-s-disappointed-in-the-fed-s-hypocrisy-on-inflation-and-that-jerome-powell-will-be-cutting-interest-rates-next-year/ar-AA15jPTt

I've been yammering in post after post here that it is completely and thoroughly idiotic, stupid, and asinine for the media to report only on the last month's number and the 12 months number (i.e. year-over-year). And to call the 12 month number the inflation rate when so much of it is ancient history. So I'm tickled ecstatic and I am tickled pink that somebody other than some message board rando like me thinks this too.

For example by emphasizing the last 5 months, which are far less dire than the 12 month numbers: "Today's report: Last 5 months, ANNUALIZED: CPI: 2.47%, CORE CPI: 4.72%". (The 12 months numbers are 7.1% and 6.0% respectively).

Edited to add: Last 5 months ANNUALIZED: PPI: 1.05%, CORE PPI: 1.51%
I also put it with My latest CPI megapost that gets into shelter and rentals

Albeit there's been an increasing trend in the PPI in the last 4 months, though not so much in the CORE PPI though the last month came in at 0.3 (roughly 3.6% annualized)

Edited to add: Since the producer price index has come up, here is the same thing for the PPI for convenience of reference

Producer Price Index (PPI), seasonally adjusted
http://data.bls.gov/timeseries/WPSFD4
2022 133.538 134.957 137.241 137.954 139.072 140.361 139.796 139.748 140.119 140.558 140.975 (index)
2022 1.2 1.1 1.7 0.5 0.8 0.9 -0.4 0.0 0.3 0.3 0.3 (1 month)
2022 2.7 2.8 4.0 3.3 3.0 2.3 1.3 0.5 -0.2 0.5 0.9 (3 month)
2022 10.2 10.5 11.7 11.2 11.0 11.1 9.7 8.7 8.5 8.1 7.4 (12 months)

The last 4 months are preliminary

CORE PPI - Producer Price Index, seasonally adjusted - Final demand goods less foods and energy -
http://data.bls.gov/timeseries/WPSFD413
2022 132.218 133.285 134.742 136.238 137.209 137.849 138.022 138.308 138.329 138.280 138.714
2022 0.8 0.8 1.1 1.1 0.7 0.5 0.1 0.2 0.0 0.0 0.3 (1 month)
2022 2.1 2.1 2.8 3.0 2.9 2.3 1.3 0.8 0.3 0.2 0.3 (3 months)
2022 9.5 9.8 10.0 10.1 9.8 9.2 8.5 8.1 7.5 6.7 6.2 (12 months)

The last 4 months are preliminary

[bucolic_frolic]

1. I never trust anything Siegel says because he is so right wing

Producer prices are telling a different story than CPI and we've escaped recession unless things change as my sources say no interest rate cuts in 2023, and that for investors growth has regained preeminence over value investing.

[progree]

2. I don't agree with everything he says, he does come across to me as cranky

And his quote implies that only the latest month matters. I hope he doesn't really mean that. There is just too much month-to-month volatility for one to make the latest one month number be the be-all-and-end-all measure of inflation.

But I stick to my guns in saying that we should not be declaring the rate of inflation as being what the 12 month number shows, and that we should be looking at the most recent n months AS WELL, where n is shorter than 12 months. And on the short duration end, more than just 1 month. I posted the CPI and PPI 3 month numbers as well as the 1 month and 12 month numbers.

Since you mentioned it, I posted the PPI and the CORE PPI numbers in the above post, so all this is somewhat together. I also added it to my "CPI Megapost" https://www.democraticunderground.com/10143007428#post2

He is not alone in talking about the problems with the housing numbers and how they distort the CPI either, or asserting that rents (and prices) are falling, which they are.

EDITED TO ADD: A lot of people on DU agree that that the Fed tightening as much as it has and is expected to continue to do is not the right response to supply chain issues etc. and that inflation has been coming down. And generally agree with the opinions expressed in the gray box excerpt in the previous post. Robert Reich, pretty much universally considered LW, also agrees on tightening being the wrong policy. I don't entirely agree or disagree on the policy issue, I'm somewhat in the middle on this. I do think it's going to get us in a recession. /END EDIT.

I don't trust anybody 100% regardless of ideological bias. I didn't know he was "so right wing", or frankly that he was right wing, but then there are pronouncements from some LW economists that I don't agree with either. There is such a thing as the goofy left -- go visit JackPineRadicals for that. I look at the quality of their data and argument primarily.

I realize someone who writes "Stocks For the Long Run" is probably regarded suspiciously by some around here, no matter what the reality is https://www.democraticunderground.com/111694222#post5 . But then I'm not into Grantholmian permabearism.