If there is no inflation why are 25% of small businesses raising prices???????

Discussion in 'Wall St. News' started by S2007S, Apr 9, 2011.

  1. S2007S


    Here we are again, another day another article showing you how the small business owner has to pass on the higher prices to the consumer. As we all know Bubble ben only pays attention to the core consumer price index which of course excludes food and energy. What else is new, keep ignoring it and telling everyone there is no inflation, just like he says there was no recession and that the sub prime mortgage crisis was contained. How many more lies are we going to hear.

    Inflation Hits Main Street: Small Businesses Raising Prices
    Published: Friday, 8 Apr 2011 | 3:55 PM ET
    Text Size
    By: John Melloy
    Executive Producer, Fast Money

    If the drug store in Dillon, South Carolina founded by Ben Bernanke’s grandfather was still around today, it might be raising prices.

    More than a quarter of small businesses are raising prices, or plan to soon, the highest amount in 28 months, according to the latest survey by the National Federation of Independent Business.

    The net percent of small firms that are actually raising prices is five percent, the first positive reading for this survey since the aftermath of the credit crisis. The net percent that “plan” to raise prices jumped to 21 percent in February from 19 percent in January, according to the poll of thousands of small businesses released earlier this week. Since 1986, the percent “planning” to raise prices has been a reliable leading indicator of the number that end up actually raising prices.

    The steep positive slopes of these series lead us to believe we will see further advances in the April data,” said Joe LaVorgna, Deutsche Bank chief U.S. economist, in a report Friday that cited the NFIB data. “It’s going to be increasingly difficult for the Fed to argue that inflation expectations are stable. To do so will eventually strain their credibility.”

    Large multinational conglomerates — who have the ability to hedge — can handle higher commodity prices resulting from the Fed's reflation play. But when it hits small business, the largest source of employment in this country, maybe it’s time for the Fed to rethink its position, economists and investors said.

    The Fed chief is watching the core consumer price index, which excludes rising food and energy prices, but includes collapsing housing prices, as a benchmark for inflation. In the past, the central bank has not watched food and energy prices because they tend to be volatile. The survey from the NFIB, whose typical membership employs five people and reports average annual revenue of $350,000, is saying that food and energy matter more this time, because they’re doing nothing but going up.
    Beyond the money

    Federal Reserve Bank of Dallas President was the latest member of the central bank to stray from Bernanke’s steadfast commitment to the second round of quantitative easing in place until the end of June.

    “Indeed, it may well be that we should consider curtailing what remains of QE2,” said Fisher, a voting member of the FOMC, at a conference Friday. “There is the risk that we might breach our duty to hold inflation at bay.”
  2. piezoe


    I've read this elsewhere, and it makes absolutely no sense whatsoever. In my opinion, when something does not make sense you should question it. The only thing that makes sense to me, and it is rather self evident, is that excluding food and energy from the inflation calculation saves the government untold billions in inflation indexed entitlements and perhaps makes it somewhat easier for the Treasury to pull the wool over our foreign creditors eyes.

    Isn't it curious how, 18 months, ago we were subjected to endless threads proclaiming deflation was just around the corner, when in reality it was inflation that was around the corner, as anyone with a lick of sense and paying any attention at all to central bank policy knew all along?
  3. Maybe "Inflation" was the dirt they were shoveling in to fill the "Deflation" hole.... :D
  4. +1
  5. Ya they may have thrown in a few corpses down there at the same time...
  6. -2
  7. It's not left out. It's only left out by Fed policymakers, as in, they decide to leave it out when considering where inflation is going. It has no effect on price levels used for calculating entitlements. Furriners certainly don't pay any attention to any index less food and energy.
    The actual index used by the Fed is the Personal Consumption Expenditures Index Less Food and Energy. The current level of the PCE without and with food and energy included are almost exactly the same, because over time they do wind up in the same place. The year over year changes for the two are very different, though, with the PCE less food and energy a lot smoother.
    All that aside, the Fed's use of the PCE without food and energy means they're making a judgment call that current changes in these prices won't feed through, which is silly. I remember years ago the commuter bus company adding a fuel surcharge to the ticket and never revoking it even after fuel prices came down, to take just one example.
  8. piezoe


    Well, damn, Trefoil. Thank you for an intelligent -- sounding at least-- detailed explanation. I'm going to be nice here, and assume you are correct.