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Hedge Fund Manager Kyle Bass Estimates U.S. Inflation at 12%

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JOSHUA CAPLAN

15 Jun 20212

1:10

Appearing Tuesday on CNBC’s Squawk Box, hedge fund manager Kyle Bass estimated that the United States’ inflation rate is approximately 12 percent.

A transcript is as follows: 

REBECCA QUICK: As someone who is looking to invest in the market, what do these higher numbers mean? What does that mean for the Fed?

KYLE BASS: When you look at the inflation numbers, these are chain-weighted inflation numbers. These are numbers that are designed to be artificially be low. If you look at a non-chain-weighted index of inflation, we think it’s running about 12 percent, and with short term interest rates still at zero, that means people who have money in the bank, in their savings, are losing 5 to 12 percent of their purchasing power annually. We have 34 percent more money in the US system than we did 14 months ago. Of course we’re going to have inflation and it’s going to be significant.

“Investors and savers and retirees need to think about how to maintain the purchasing power of their capital,” Bass concluded.

NY Fed Sees Manufacturing Prices and Inflation Expectations Rising Sharply

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JOHN CARNEY

15 Jun 202172

2:26

Factories in New York are paying up for inputs needed to make their products and successfully passing along the higher costs to customers, a survey by the Federal Reserve Bank of New York showed Tuesday.

The prices paid and prices received indexes in the New York Fed’s “Empire State” manufacturing survey both hit record highs in May. In June, both indexes moved only slightly down from those highs.

Nearly 81 percent of manufacturers said they paid higher prices in June, down slightly from 83.5 in May. Nine-tenths of a percentage point said they paid lower prices, up from zero in May. A smaller share, 36.8 percent, said they were able to increase prices, down from 39.3 percent in May. Just 3.5 percent said their selling prices declined.

Expectations for inflation remain high. The share saying they expect to pay more for inputs ticked down to 70.2 from 70.5, with the share expecting lower prices inching up to 6.1 from 3.6 percent. The share expecting to charge more actually increased to 50.9, three points higher than May. Just 5.3 percent expect lower prices six months ahead.

In a separate report, the Department of Labor on Tuesday said that materials and components for manufacturing rose 2.4 percent in May. That is lower than the 4.1 percent in March and 3.9 in April, which were record highs in Producer Price Index data going back to 1973. Excluding those months, May’s reading was the highest since January of 1980.

Manufacturing activity grew solidly in New York State, the New York Fed’s survey indicated, although at a slower pace than in recent months.

There are also indications that manufacturers are having trouble hiring workers despite an 8.2 percent unemployment rate. Only 23.5 percent of manufacturing businesses reported a higher number of employees and 11.2 percent reported fewer employees. Nearly 45 percent said they anticipate adding workers over the next six months and just 3 percent anticipate smaller payrolls.

Many businesses have said they believe bonus jobless benefits are holding people back from accepting jobs.

U.S. Manufacturers Battered by Third Month of Biden Inflation

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JOHN CARNEY

15 Jun 20211

2:56

The U.S. manufacturing sector is getting battered by high levels of inflation of the costs of inputs that businesses are struggling to pass on to consumers.

The prices of materials and components used by manufacturers rose in May by 2.4 percent compared with April, a blazing hot level of inflation rarely experienced before the current bout of rising prices.

The index for materials and components rose by 2.7 percent in June of 2008 but quickly plummeted. Prior to that, you have to go all the way back to December of 1979 to find monthly inflation numbers for factory inputs running higher than two percent.

This is the third consecutive month of materials and components inflation above two percent. It would be the fifth consecutive month except for a tiny tip to 1.94226 percent in February.

The last time we had five or more consecutive months of this index running at two percent or more was all the way back in the Nixon administration when it ran above 2 percent from December 1973 until August 1974.

Costs are rising for food manufacturers, nondurable goods makers, and especially durable goods manufacturers. Materials for durable goods rose 4.3 percent in May, 8.7 percent in April, and 7.7 percent in March. These have run above two percent since December. Never before have prices risen more than 4 percent for three months running. The 8.7 per jump was the highest ever recorded and the 7.7 percent was the second highest.

The prices manufacturers are paying to market their goods are also escalating, rising by 0.8 percent in April and 1.7 percent in May. Shipping prices for manufacturers rose 2 percent in May, 0.6 percent in April, and 1.4 percent in March.

The manufacturers have passed on only some of these higher costs. U.S. businesses were raised prices of durable consumer goods 0.8 percent in May and April following a 0.5 percent rise in March.

Prices of materials and components were battered last year by the pandemic but they were actually falling for most of 2019 after peaking in October 2018. Because of the earlier dips, the year-over-year figures are jaw-dropping. Compared with May 2020, the index for all materials and components for manufacturing is up 21.4 percent. The index for durable goods materials is up 44.1 percent.

These numbers come from the Department of Labor’s Producer Price Index, which includes only domestically produced materials and components. It also includes materials and components exported to foreign manufacturers.

Poll: More Americans Hold Joe Biden Responsible for Rising Inflation than Donald Trump

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WENDELL HUSEBØ

15 Jun 2021338

1:42

A poll indicated Monday more Americans hold President Joe Biden responsible for rising inflation than Former President Donald Trump.

When the Trafalgar Group asked likely general election voters, “Who do you hold most responsible for rising inflation?” 39.0 percent blamed Biden, while just 17.7 percent named Trump.

Another 14.4 percent holds Congress responsible and 17.9 percent did not know.

The poll also discovered Democrats hold Biden more responsible than Trump for inflation by 5.8 percent. Republicans on the other hand, held Biden responsible by a greater margin of 52.7 percent.

The concern of inflation, which hurts the poorest Americans by making the few dollars they possess worthless in terms of purchasing power, comes as the Consumer Price Index increased five percent in May from a year ago, the fastest rise since 2008.

The index is used to measure a basket of consumer goods and services purchased by households and is correlated with inflation.

Some economic analysts contend inflation could go on for longer than expected because of the combination of very low interest rates, pent up consumer demand for goods and services, a particularly large budget deficit, and the release of excess savings built up by stimulus payments.

The Trafalgar Group poll was conducted June 6 – 7 with 1073 respondents of likely general election voters with 95 percent confidence.