[lunaru]

It bears repeating because this is a common mistake in inflation discussions: a decrease in inflation metrics means price increases are slowing down, it doesn’t mean that prices are going down （that would require a negative CPI print).

Also, this number is year over year, so the decrease just means the price increases between Oct 21 and Oct 22 are not as steep as between Sept 21 to Sept 22, which is not hard to achieve because Sept 21 to Oct 21 had a bigger month over month jump.

The right way to interpret this number is that high prices have plateaued a bit. Yes that means your groceries are going to be x% higher than in 2020. Short of deflation, they always will be.

[matwood]

And to add to your explanation, because inflation jumped so quickly and then slowed we'll eventually hit a YoY number that plummets. If milk is $4/gallon today and still $4/gallon 12 mos. from now, that's 0% YoY inflation.

This will inevitably lead to people saying the numbers are fake because milk used to be $2/gallon.

[throw0101a]

> If milk is $4/gallon today and still $4/gallon 12 mos. from now, that's 0% YoY inflation.

Conversely, if there was a one-time jump in a particular item, it will take a year before it gets 'removed' from the inflation numbers.

Extremely contrived example: if gas/petrol was $1/L in December 2021 (and generally in all of 2021), but $1.20/L in January 2022, then there will be a 20% YoY jump in inflation for the January number comparing Jan 2021 to Jan 2022.

Now if gas stays at $1.20/L in February 2022, it will still register as 20% YoY even though the price has not changed month-to-month. That 20% (YoY) is "stuck" in the system until January 2023 when we're comparing $1.20/L to $1.20/L.

A one-time jump can 'skew' the numbers if all you look at is YoY metrics.

[JumpCrisscross]

Which is partly what we’re seeing. CPI rose 0.4% MoM in October, or 4.8% seasonally adjusted. That’s above target, but better than YoY.

[fizx]

Really wish we reported the 4.8% number. Seems more reasonable for a monthly report to focus on the changes of the month.

[Bootvis]

I agree it's confusing. I think they do it to remove seasonality and the experts on the topic probably don't understand anymore why the rest of us think their way of reporting is confusing to lay people.

[treis]

Seasonally adjusted != multiply by 12. Prices naturally fluctuate throughout the year due to weather, consumer patterns, and business cycles. Seasonal adjustment is an attempt to account for those changes.

[JumpCrisscross]

> Seasonally adjusted != multiply by 12

My brain swapped annualised with seasonally adjusted. Sorry.

[reedjosh]

Beyond seasonal price fluctuations, wouldn't it be 1.04^12 = ~6% annually?

[Izkata]

0.4% is 0.004, so 1.004^12 = 1.049... or 4.9%

[orra]

I agree the annualizing the monthly figure would be handy, as an additional figure. Looking at annualized monthly figures, it was also apparent (say) six months ago, that the monthly annual figures would almost certainly continue to get worse.

[thunky]

Also note the four most recent (seasonally adjusted) monthly CPI numbers:

  Jul 2022: 0.0%
  Aug 2022: 0.1%
  Sep 2022: 0.4%
  Oct 2022: 0.4%

[soared]

It’s not really skewing anything though, since the price is 20% yoy?

[danielmarkbruce]

It is skewing if you are looking for an up to date change. It's like, is it better to get two points on a curved line and draw a straight line through them, or is it better to calculate the derivative and the the slope at a specific point?

[joshuahedlund]

That depends on how noisy or smooth the changes are. That's why it's valuable to look at both.

[danielmarkbruce]

It may be - but to the above poster's point - if gas went up 20% in Jan of this year and then stays flat... is it helpful to think of prices as "going up" ? It seems misleading.

[cwilby]

That literally leads to the conclusion that prices rose, in your example.

[zhte415]

It isn't, yet it is.

The price is still 20% you, and still 0% mom. If reported as inflation still at 20%, does that affect perceptions of inflation, and if so, expectations of inflation? Because expectations of inflation often turn out to be self fulfilling drivers of inflation.

Reported as inflation stable even if it is 20%? Better? Not that 0% is a great target, but that's a separate issue.

[bitshiftfaced]

Even in the early 80s after huge interest rate hikes, YoY CPI inflation stayed above 2% (until the mid 80s).

Rather than modeling it as "the price increases happened in a short period of time and then went back to normal," I think it's more likely that it happened more spread out and persistently, and perhaps still is going on. It's not going to jump to zero after some given month

[fleddr]

Honestly, I'm with those people.

Your explanation is fully technically correct, but the subsequent messaging that inflation is zero is a matter of not reading the room.

When an important item dramatically rises in price, this can have a massive impact on people. A dramatic drop in purchasing power or even businesses needing to close. It is impactful.

When the price continues to be high, the impact remains. The pain continues, the problem is not solved. The politically smart messaging is to say "we feel and acknowledge your continued pain, this is what we're going to do about it", not "Good news! Inflation is 0%."

Same with the opportunistic messaging of sometimes using MoM or YoY, whichever number looks better. When MoM inflation in October is 15% and 5% in November, you really shouldn't bring this as good news. The situation still got worse in the real world.

[lupire]

That's a different issue. "High prices" are a problem, but that's not what "inflation" measures. There is no way to report inflation (derivative of prices) that correctly reports "price/wage ratio", which is what people really care about.

[mattferderer]

How to set inflation expectations - "Inflation shoots up like a rocket & floats down like a feather."

[coding123]

It's bullshit because it's an average of everything that no one buys. My grocery bills have doubled since 2020, meaning my CPI was 100% over 3 years. I will not shut up as you and many others are trying to force me into accept it's 10% inflation.

[sn0wf1re]

The Canadian government provides a personal inflation calculator. You may see higher or lower personal inflation than CPI. https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020cal...

[0x445442]

Especially when their incomes didn’t double.

[Spooky23]

People who lack foundational skills in math are always vulnerable to being worried about witchcraft and conspiracy.

It’s a major reason why society spends so much on education. Stupid people make poor citizens.

[impulser_]

Don't be surprised when politicians use this to their advantage next year.

[olivermarks]

@matwood it is a disaster for working people regardless as wages are not keeping pace with the effects of inflation.

[KptMarchewa]

Month on month numbers are still slightly up.

[Am4TIfIsER0ppos]

If "inflation is transient" when is it going back to 2/gal?

[howenterprisey]

You're making the same mistake. If inflation is transient, the price _increase_ is transient, but the high prices remain. It would only go back to 2/gal if the high prices themselves were transient. Which I really hope is the case, but IDK.

[elgenie]

“Inflation” means “increase in price levels”. That’s it.

“Inflation is transient” fits prices increasing and then leveling out, and does not imply that every bit of price increase is balanced out one-for-one by immediate deflation afterwards.

As for gas prices, it’s going to depend on supply (including refinery capacity) and demand. The $2/gallon of April 2020 was an artifact of covid nuking demand.

[evancox100]

Transient inflation means the $4 / gallon milk prices stick around and don’t go any higher. Going back down to $2 would be deflation.

[thomastjeffery]

They effectively said, "The increase went down."

It would have been much clearer for them to say, "The increase has slowed."

[onion2k]

Or clearer still "The increase is smaller than expected."

[hanoz]

That this month's rate is smaller than expected is a completely different thing to it being smaller than last month's rate.

[mgkimsal]

It seems both are true in this case, but yeah, those two statements don't really mean the same thing.

[laweijfmvo]

This is like the 3rd derivative, right? e.g. we now have a slightly lower rate of acceleration towards the cliff than before?

[ac2u]

I think it's second derivative.

3rd derivative would be Nixon's:

>When campaigning for a second term in office, U.S. President Richard Nixon announced that the rate of increase of inflation was decreasing, which has been noted as "the first time a sitting president used the third derivative to advance his case for reelection."[2] Since inflation is itself a derivative—the rate at which the purchasing power of money decreases—then the rate of increase of inflation is the derivative of inflation, opposite in sign to the second time derivative of the purchasing power of money. Stating that a function is decreasing is equivalent to stating that its derivative is negative, so Nixon's statement is that the second derivative of inflation is negative, and so the third derivative of purchasing power is positive.

https://en.wikipedia.org/wiki/Third_derivative#Economic_exam...

[kdmccormick]

Second derivative:

  p = price
  t = time
  dp = change in price
  dp/dt = change in price over time = inflation
  d^2p/dt^2 = change in change in price over time over time = change in inflation over time = what we are talking about

[formerkrogemp]

Second derivative I think. Inflation is change in prices. Change in inflation is a second order derivative? I wish more Americans knew at least a little conceptually about derivatives. Personally, I need to review them. Anecdotally, the number of accountants that I've met that haven't progressed beyond middle school level math is depressing as well.

[roflyear]

No, acceleration is going down. Not a lower rate of acceleration. The second implies acceleration is still increasing, but at a slower rate. What is actually happening is we're decelerating (so we're still going fast, meaning inflation is high, but inflation is going down...)

Without trying to be mean, I would also argue your framing is also poor as some inflation is not bad.

To put it in context, if current trends hold we'll expect 3-5% inflation yoy. That is not awful. Higher than last decade or so but we have had super low inflation for a long time. Averaging out, inflation over the last decades, even including the recent high inflation, will still be pretty low, around 3%.

[Dylan16807]

The velocity has slowed.

Also there isn't a cliff, there's only speed bumps for going too fast. At least if movement=inflation.

On the other hand if the "cliff" is supposed to be a specific level of inflation, then we didn't just slow down, we're walking away from it.

[dragonwriter]

There's no cliff (at least for this to be the third, or even second, derivative with regard to.) Its not like there is a magic bad nominal price level.

[dllthomas]

Right, the cliff is when people lose confidence in the dollar, which probably has a lot to do with the inflation rate, changes in the inflation rate, and the duration over which we've seen what sort of behavior (... and probably a lot of other things) but not much to do with the actual price level itself.

If we average 2%yoy every single decade for the next 300 years, people will probably have a lot of trust in the dollar in the decade following. If we hit that same price level tomorrow, people will rightly flip. $1700 milk either way, but in one case we'd expect $1700 milk the following day and in the other we'd expect the dollar to plummet further from the shock of it.

[bilsbie]

What would the fourth derivative of inflation be? I can’t get my brain to work for that.

[kdmccormick]

Since inflation is a 1st derivative of price, 4th derivative of inflation would actually be a 5th derivative of price. It'd be like: "The increase of the acceleration of the rate of price increase is slowing."

Definitely not a statement that I would be able to visualize :)

[germandiago]

Well explained. Idk for english-speaking countries or your country of origin but the average spanish is an absolute illiterate in economy.

These explanations are very necessary so that people develop an intuition of what is going on.

[giantg2]

Many Americans are illiterate on numbers and the economy too. I still remember the classic example that a burger chain released a 1/3 pound burger to compete with another chain's 1/4 pound burger, and many people thought the 1/4 pound was bigger...

Edit: there are some people saying it's a myth, or not a complete picture. Looks like we don't have the data. But my point is that we aren't very good with numbers or economics.

https://www.scientificamerican.com/article/fractions-where-i...

https://www.stlouisfed.org/on-the-economy/2018/september/how...

[dsfyu404ed]

>Many Americans are illiterate on numbers and the economy too

Many more pretend to be less literate than they are for ideological reasons.

>still remember the classic example that a burger chain released a 1/3 pound burger to compete with another chain's 1/4 pound burger, and many people thought the 1/4 pound was bigger.

This trope needs to be taken out back and shot. It wasn't that people didn't get it. It's that it was poorly marketed and the difference between 1/3 and 1/4 isn't enough to make people go to a burger chain that was dying due to low and variable quality when they could just go to McDicks and get a reliable 1/4lb.

[giantg2]

There's certainly more than just the number confusion, but I specifically remember the case study we were looking at included a survey where a sizeable number of respondents said 1/4 was bigger than 1/3.

[moron4hire]

I don't know anything about this particular one, but just because it's a case study in a textbook doesn't mean it's true. There are lots of untruths that get propagated long after they've been debunked.

[dcow]

But they’re citing a survey where people literally didn’t get it. That, if not made up, factually supports the claim that some people really do think 1/3 is less than 1/4.

I really liked the 1/3 pound “thickburgers”. I don’t think it was just some dying chain trying to spread rumors about how stupid people didn't understand their marketing and that’s why they “died” (they’re still very much alive last I checked).

[giantg2]

Sure, but there's nothing presented to debunk this so far. So far all the "testimony" shows it to be true, but it could be propaganda.

The larger point is that it does demonstrate what the actual data shows - that the US has a sizable portion not good at math/fractions or finance.

[Forgeties79]

I’ve always thought this was somewhat apocryphal/a myth. Did it actually occur?

[hwbehrens]

It's hard to find contemporaneous evidence, because it was apparently revealed by an internal company focus group, but here's [0] the page from the company themselves with the claim.

It wasn't revealed at all until the founder's memoirs in 2007, and it wasn't reported widely until this [1] 2014 article.

0: https://awrestaurants.com/blog/aw-third-pound-burger-fractio...

1: https://www.nytimes.com/2014/07/27/magazine/why-do-americans...

[turrican]

Sadly, it is true. The chain was A&W:

https://awrestaurants.com/blog/aw-third-pound-burger-fractio...

[sillyquiet]

this is a 'haha Americans so dumb' myth that's been blown up - it's the result of a NY Times article that outline a private restaurant chain focus group result.

So tldr; some people in a private focus group questioned the value of a 1/3 pound burger over the same priced 1/4 pound burger. It's not indicative of any system numerical illiteracy.

I will add there were no actual data released - it's solely based on an anecdote from a A&W restaurant executive.

https://skeptics.stackexchange.com/questions/28745/did-aw-cu...

[A4ET8a8uTh0]

I was exposed to this myth in my youth as various European nations described their misadventures in the US of A or encounters with Americans and as a result came to US with wrong expectations. Now that I live here, things a little more clear to me. It is a nation of more than 350 million people ( depending on how and who you count ). Even a small percentage of certifiable idiots will be very well represented in terms of absolute numbers.

I would not say Americans in general are dumb though. I would say that:

1) they are under-educated ( and then we can also get about the quality of education for those that were educated ) 2) they are very heavily propagandized

[bnralt]

Even more than that, the accounts we get claim that some of the people in the focus group said the 1/3 pound burger was smaller than the quarter pounder. Even if those claims are accurate, it's possible they were looking at the diameter, since the 1/3 pounder has two smaller patties stacked on top of each other, while the quarter pounder is one large patty.

Most places that report on this say that the third pounder was cheaper and that Americans preferred the taste, but they didn't buy it because of the name and their poor math skills. But its name was changed to "Papa Burger," and it still didn't become the quarter pounder killer it's portrayed as.

[giantg2]

Since you bring up the name change... didn't it sell better after the name change?

But of course my point was never about the burger. It was just that many aren't good with numbers and finance (in the edit with the links).

[bleuchase]

Stupid people exist. It’s happened. In fact, it’s a pretty easy mistake to make if you don’t understand fractions. 4 > 3.

[coding123]

And since we don't know the context they could have shown a closer up burger, or heck, taller burger that is 1/4 and a 1/3 next to each other but further away or stepped on at which point they were asked, what's bigger?

Also, the 1/4 or 1/3 is referring to the raw, uncooked meat only. So in theory you can add 1400 lbs of lettuce to make something larger than my car. (Which is terrible, since lettuce is where you pick up all the disease these days - everyone here should order all their food without any lettuce)

[lordnacho]

I have a degree in it and I often don't feel that I know anything. For a guy who did a lot of STEM economics is a pretty odd subject in many ways. A mixture of interesting insights, strange models, and a lot of soft talk.

[nashashmi]

Also it is worth mentioning that part of the major reason accounting for inflation is car price. It’s going down now as chip makers produce more and prices go down further.

[onlyrealcuzzo]

It's also going down because it's a debt market and financing is more expensive w/ used car interest rates at 9% instead of 4% and new cars at 5% instead of 0%...

[bryanlarsen]

I expect the number of car sales in the US to go down significantly like it has in Europe. Interest rates are one major factor, but another is the electric transition. Anecdotally I know quite a few people that aren't buying new vehicles right now. They're the kind of people that buy a new car every 10 years or so, and are delaying their purchase or buying used. They realize it's a bad idea to buy a new gas car but aren't yet ready to buy an electric car because they don't understand them yet, they're too expensive, have a massive backlog, or don't come in the style/variant they want.

[massysett]

Why is it a bad idea to buy a new gas car? ExxonMobil is not going to stop pumping oil out of the ground.

[bryanlarsen]

My reasons: in 10 years time most local gas stations will be closed, 95% of the demand for used cars will be for electrics and 97% of the supply will be gasoline so the car will only have its scrap metal value.

But most people aren't thinking that far ahead. They just know I can recharge my car for $10 but it costs them $100 to refill theirs. They know that electricity prices are a lot more stable than gas prices.

[hotdogrelish]

I agree with your general sentiment, but I think this timeline doesn't necessarily extrapolate well for the United States. The average age of a vehicle on the road in the US is about 12 years - aftermarket suppliers as well as oil/gas companies have a very strong incentive to plan that far ahead in order to keep up with the demand. Especially given that the quantity of gas vehicles on the road will be, as you say, such a large percentage of the market.

[bryanlarsen]

Miles/year of old cars is a lot less than new cars. So demand for gas in 10 years might be about half of what it is now. Some stations will still do well, but a lot of marginal stations will disappear.

[navalsaini]

Fuel can also be delivered at ones home or people can install their own fuel tanks that can last a few refills. Just a thought.

[colinmhayes]

Gas exploration is way down. No gas production won't stop, but supply growth seems to be completely stalled while demand is not due to developing countries continuing to get richer. Gas will likely continue to be expensive as we transition away from fossil fuels.

[twobitshifter]

Gas prices ice bans and global warming. If you buy a gas car today, I wouldn’t expect much in terms of resale value.

[nemo44x]

Hopefully that helps with new car pricing. Dealers are still selling well above MSRP.

[Der_Einzige]

Car lots need to be knocked down a peg or ten. Car sales folks are the scummiest folks on earth and they have been empowered by this disaster of a market for too long.

The overwhelming majority of car sales people know almost nothing about cars. That's already how you know that their industry is basically useless.

It's also extremely predatory. Anyone trying to pay a 30K mark up on a rav4 prime is being swindled (even if they think they're not). You (the sales person) should prevent obviously stupid car sales (or shit like 25% apr hellcats to US soldiers), but of course not, they're greedy!

[nemo44x]

I don't buy cars often but it seems like the last decade or so, the major dealers anyways, don't play a lot of games like they used to. They put a decently fair price out there and can maybe knock a bit off but with some much information about cars today (CarFAX, BlueBook, searching online) it's really difficult to swindle people. So they just list a fair price and go from there.

They make a lot of their money today selling warranties, service packages, and financing.

I was looking a few weeks ago and the sales associate mentioned that it's starting to come down but they've just struggled so much at getting enough inventory that people were willing to bid up from MSRP. He advised me it's still a bad time to buy a car and that next year will probably be better.

[staringback]

They are only selling well above MSRP because people are willing to buy well above MSRP

[nemo44x]

Well, yeah. There was an imbalance in the market between the supply of cars and the demand from consumers for cars. People were willing to spend more than ever, especially with super low interest rates making it nearly free to borrow money.

[alooPotato]

Anyone else feel like this is such a dumb way for the general public to track inflation. Like, a simple line chart with the X axis being time and the Y axis being the price of a basket of goods would be so much clearer

[randomdata]

Is inflation (meaning CPI figures) meant for the general public? It's a useful economic tool, but not very relevant to the average Joe. I would think expansion of cost of living is what the general public is interested in, and for that they have to track their spending, and can do so in any way they see fit.

[alooPotato]

I'm in the general public. Basically anyone not in finance or economics I'd consider to be the general public. It's still important to know the trend to know how and where to invest your resource.

[randomdata]

If you're utilizing the inflation figure, are you really the average Joe, and if you are utilizing that information are you really going to stop with the headline figure? Inflation is more nuanced than is captured in a single variable.

[alooPotato]

It's prob the reason the average Joe doesn't look at inflation - because its presented in the worst way possible.

I'm not trying to be the best investor or anything like that - but knowing the basic inflation trend I think would be useful to a large % of the population.

[boppo1]

That's why we don't use it.

[danielmarkbruce]

This isn't right. It could in fact mean prices are going down.

Had we just reported a month on month -0.4% instead of 0.4%, the yoy rate would have been reported as 6.9%. A headline of 6.9% would mean prices are actually going down.

[meragrin_]

Anything positive YoY means prices have gone up overall over the last year. For prices to have gone down in general over the last year, the YoY would have to be negative. A headline of 6.9% would mean prices have gone up.

[colinmhayes]

You're just talking about different time frames. Yearly inflation can be positive and prices can also be lower than they were last month. Ergo prices are going down but inflation still positive.

[danielmarkbruce]

The slope of price v time would be going down if they'd posted 6.9% yoy.

The discussion is around how the numbers should be interpreted. There isn't confusion around what they have literally reported.

[dcow]

Nope. You are continually overlaying data with different X axis and trying to draw conclusions and sound authoritative and it’s just sloppy and irresponsible.

The instantaneous slope would be negative if the last month happened to observe a slight decrease, true. But the slope of the line between last year and this year would be positive.

Both statements can be true:

1. prices just fell slightly since last month

2. prices have risen overall since last year

EDIT: you edited your comment I’m not going to update mine.

[danielmarkbruce]

Same x axis - time. CPI is a time series, you get a point every month. Everyone is trying to draw conclusions, it's the point of this thread.

>> The instantaneous slope would be negative if the last month happened to observe a slight decrease, true

This is sloppy. It's fine, it's a forum, we aren't writing academic papers.

Nobody is trying to figure the slope of the straight line between the two points, that's what is already reported.

Yes, both can be true.

[dcow]

Sigh. Obviously we’re talking time here. The scale on the X axis, the interval that appears on the graph between two points, is different if every unit is a month vs a year. Months and years are different units of time.

IDK… nobody is really trying to figure out how to interpret the data. People were just commenting that “declines to X%” actually still means that it’s gone up YoY and not that it’s declining YoY and here you are yelling that actually it is declining because recently it went down. Which is false, YoY.

[lottin]

Year-over-year inflation doesn't tell us anything about whether prices are going up or down right now.

[giantg2]

No historical data is going to tell us the future. But it can give us an idea of the trend, which is useful since in a large system like the economy the trend tends to change relatively slowly as compared to individual compentents.

[lottin]

A statistic is only useful if you know how to interpret it. Case in point: you can have double digit year-over-year inflation, while simultaneously falling prices for the last 11 months.

[giantg2]

This doesn't make sense. Falling prices for what? CPI is a measure of cost of a basket of goods. You can't have net aggregate falling prices and a rising CPI unless you are measuring different prices.

[danielmarkbruce]

CPI up 20% month on month in month 1. CPI down 1% month on month for the remaining 11 months. That would result in what they are saying.

[giantg2]

Ah, so not mismatched prices/goods, but mismatched temporally.

[msoad]

Inflation over the last year was 7.7% - if the October rate holds for a year, it will be under half of the last years inflation rate coming in at 3.6%

That’s the number that matters in a forward looking instrument like the market

[la64710]

Which businessman in their right mind will decrease the price of their products because of cost decrease? Not unless there is intense competition. Because of that for large scale monopoly business like commodities once the prices go up it may not come down again.

[Green_man]

I may be missing something, but if there is no competitive pressure/monopolistic market, why would these businesses need the excuse of inflation/cost increases to increase their prices? Wouldn't we expect prices to have gone up before inflation?

Or is this a specific criticism of a regulatory blind spot for reigning in market power? Monopolies can get away with price increases now, but they wouldn't normally?

[massysett]

The argument is that they had market power before, but were afraid to exercise it for political reasons or because they feared enforcement action. Now, with inflation, the company has an excuse to raise prices, but now they're raising them only partly due to increased costs, and partly as an exercise of their market power.

[smileysteve]

What is "before inflation"? Deflation is bad it means you should keep your dollars instead of investing them.

[lupire]

Do you buy less food when interest rates on your investments are higher?

[jliptzin]

If you sell commodities that is literally the opposite of a monopoly

[rzimmerman]

Yes the YoY number is useful for getting rid of seasonal variations. The monthly CPI is also noisy. But when there’s a big spike over a few months (like we had 8-16 months ago) YoY won’t go down meaningfully for at least a year.

This is actually great (if noisy) news. 2 months of 0.4% CPI increase is equivalent to 5% yearly inflation. But the YoY is still high because it was much worse 8-12 months ago.

I hadn’t even considered that people will think low numbers are a lie because prices don’t go down. But of course (sadly) you’re right.

[lupire]

The seasonality aspect is a distraction when inflation is so volatile due to all the pandemic craziness.

[ajross]

> The right way to interpret this number is that high prices have plateaued a bit.

This part is true.

> that means your groceries are going to be x% higher than in 2020

But this part jumps right back into the much bigger fallacy that inflation represents a change in value and not price! Sure, groceries are higher in price, just like your assets are higher in value (on average) and your wages are higher (on average).

But in any case, your notion that inflation isn't instantaneously halted is a little spun. In fact month-to-month CPI change for October is 0.4%, which corresponds to about 4.9% per year. That's higher than we've seen for most of the last decade, but not a number most people would consider "high" in the sense of "disruptive to economic activity".

[anyonecancode]

I think of it like the accelerator pedal on a car. A decline in inflation means the foot has eased up on the accelerator some, but the car is definitely still moving forward.

[WanderPanda]

You mean a negative CPI growth / CPI decline, right? With a negative CPI stuff would be free + we would be getting money on top (on average) :D

I think the best way to understand it is to just look at the index itself [1] and not the first or second derivative.

[1] https://tradingeconomics.com/united-states/consumer-price-in...

[kelnos]

Sure, but this is still exactly what we want to see. If the target is 2%, YoY metrics moving in that direction is a positive step.

The only thing we can hope for is that, as inflation numbers continue dropping back toward "normal", wage increases will eventually catch up and make those already-higher prices less difficult to swallow. Of course, it never works out that neatly.

[amanj41]

Couldn't some goods in the basket be slightly negative while others are positive? For example if rent went down relative to last year's baseline but groceries, gas, etc were all very much up.

[citilife]

The number is largely manipulated anyway. It's more complex than even this because you have to account for price elasticity. They are giving oil a very wide fluctuation, for instance.

I've been tracking my expenses since 2015 and they're up around ~50% since then, for effectively the same food (eggs, bread, meat, etc). I eat ~2800-3000 calories per day (which I also track) and that's been consistent.

According to BLS it should be up only 27%, but everyone knows that's just not true. Remember ~1 year ago when the administration was calling prices "transitory", that means they're claiming a larger elasticity in prices so inflation doesn't look bad because they believe they'll come back down (soon).

[danielmarkbruce]

You could just say: CPI is up 0.4% month-over-month. It gets reported.

[sonthonax]

As a general consumer, the slowdown in the erosion of my earning power is welcome news. My gamma hedging hedging costs have never been lower.

[Victerius]

For the mathematically inclined among us, dp/dt is still positive. It's d^2p/dt^2 that is slightly negative.

[contravariant]

Though the mathematically inclined should also know that we're not looking at dp/dt, we're looking at p(t) - p(t-T).

The difference is important, especially because we're looking at a yearly increase every month. The derivative of the annual inflation is not d^2p/dt^2 but (dp(t)/dt - dp(t-T)/dt).

[queuebert]

Anyone who's ever had to numerically estimate second and higher derivatives from noisy data can appreciate how difficult the Fed's job is.

[redox99]

Not really.

It means CPI_oct22 - CPI_oct21 < CPI_sep22 - CPI_sep21

d^2p/dt^2 isn't necessarily negative.

[OscarCunningham]

'Inflation is slower now than it was this time last year.'

[Victerius]

Oh, right. I mixed it with month-on-month inflation.

[compumike]

For the mathematically inclined, here is a graph of 1/p over the past year:

https://totalrealreturns.com/s/USDOLLAR?start=2021-11-10&end...

or over a longer time period: https://totalrealreturns.com/s/USDOLLAR

(this site is my side project)

If "p" is the relative price level index (CPI-U in this case), then "1/p" represents the relative purchasing power of a single dollar over time -- explained on homepage in more detail.

[fakethenews2022]

Many words for something that can be explained by a single cumulative CPI graph.

[fakethenews2022]

Of course it probably needs a second graph under it of 2% cumulative CPI for comparison.

[Ar-Curunir]

I.e. the rate of price increase has slowed, not the price increase itself

[maratc]

Prices are still increasing, and they are still increasing fast. It's just that recently, they increased even faster than now.

[FollowingTheDao]

And I find it hysterical that the 10 year Bond dropped 4% because of this. They think this is the peak, as in the Fed will stop raising interest rates and inflation will only get lower from here.

A good time to but the 10 year Bond IMHO.

[datalopers]

Why would you suggest buying a bond on the exact day that yields just plummeted.

[FollowingTheDao]

It is funny to me that this does not make sense to you.

Do you think I should have bought it when the price peaked?

What I am saying is that the "market", which is now controlled by AI reading newsprint, is wrong and that 10 Year Bonds will increases again.

[datalopers]

I don’t think you understand how bonds work. However I do agree that yields will increase and this is temporary.

[FollowingTheDao]

?

You don't think I know how bonds work? Yet you agree with me?

[NavinF]

> the "market", which is now controlled by AI reading newsprint

You might as well say "I don't understand how bonds work". It's fewer words.