tag:blogger.com,1999:blog-2830084253401570472.post8992624959118129307..comments2024-03-28T09:22:36.967+13:00Comments on Offsetting Behaviour: JawboningEric Cramptonhttp://www.blogger.com/profile/15831696523324469713noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-2830084253401570472.post-86364446100652389142010-08-23T15:56:25.287+12:002010-08-23T15:56:25.287+12:00Yeah, fair enough :) You got me on a Friday after...Yeah, fair enough :) You got me on a Friday afternoon :DJames Hoganhttps://www.blogger.com/profile/05832675898178869721noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-50861822479162282722010-08-23T00:16:13.806+12:002010-08-23T00:16:13.806+12:00@James - I think that's a ways away from the i...@James - I think that's a ways away from the initial concern: regulatory price increases having wealth effects that threaten deflation.Eric Cramptonhttps://www.blogger.com/profile/15831696523324469713noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-31282810075689794962010-08-20T16:22:20.243+12:002010-08-20T16:22:20.243+12:00It depends on how you're measuring price chang...It depends on how you're measuring price change and who's consumption you're looking at. <br /><br />The CPI captures large components of the things which the Household sector spend their cash on. Most of the major items of consumption spending are capture but not all of them. It doesn't capture the price effects of some large gobs of expenditure on goods and services consumed by the household sector, like owner-occupied imputed rent from housing capital assets, amounts spent on education or on health (drop "GDP Sources and Methods" into Stats NZs search bar). A better measure of the full price change occurring within the household sector is the Private Final Consumption Expenditure implicit price deflator in the National Accounts (tables 5.1-5.3 in http://www.stats.govt.nz/~/media/Statistics/Browse%20for%20stats/GrossDomesticProduct/HOTPMar10qtr/gdp-Mar-2010-all-tables.ashx)<br /><br />For the year ending March 2010, annual household price inflation was 1.9%, which on a seasonally quarterly basis (table 5.2), did actually become negative at the aggregate level (suggesting there were some LARGE declines which offset the increases in some household consumption items).<br /><br />Then take a look at what's happening with prices for capital goods and what's happening with prices in capital items - there prices have been falling for quite a few quarters. A good thing if you're trying to invest in productive capital, but pretty horried if you're selling productive capital items.<br /><br />Across the economy as a whole (table 5.2), March 2010 was the first quarter for the previous four that experienced any of the price inflation which the Reserve Bank or commentators could be yahooing about. The previous three quarters had been showing nothing about except falling overall prices measured on a quarterly basis.James Hoganhttps://www.blogger.com/profile/05832675898178869721noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-15389718652660903702010-08-20T15:04:39.690+12:002010-08-20T15:04:39.690+12:00I'd buy generalized deflation IF CPI expectati...I'd buy generalized deflation IF CPI expectations were roughly zero plus GST plus effects of emissions trading. But they're a lot more than that. iPredict has Dec 2010 as 54% likely to top 4.2% inflation (annual increase); 75% likely to top 4.2 in March quarter 2011; 87% likely in June 2011. I don't quite know how you get deflation with CPI numbers like that.Eric Cramptonhttps://www.blogger.com/profile/15831696523324469713noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-24323990507938921932010-08-20T13:51:38.265+12:002010-08-20T13:51:38.265+12:00Hi Eric,
I'm with David on this one.
On th...Hi Eric,<br /><br />I'm with David on this one. <br /><br />On the production side, Manufacturing sales are falling, down 7% form last year (table 1, next link). Labour returns from manufacturing, salaries and Wages, are falling, with large decreases in the capital equipment producing industries (table 19: http://www.stats.govt.nz/~/media/Statistics/Browse%20for%20stats/EconomicSurveyofManufacturing/HOTPMar10qtr/esm-mar10qtr-tables.ashx). Service industries look to be fairing a bit better from the GDP figures.<br /><br />Partial pictures on business profit, like Balance of Payments, balance on investment income, are half of last years values (Table 8 http://www.stats.govt.nz/~/media/Statistics/Browse%20for%20stats/BalanceOfPayments/HOTPMar10qtr/bopiip_Mar10qtr_all_tables_v2.ashx), and perspectives on investment activity, like from the Overseas Trade by Broad Economic Group (http://www.stats.govt.nz/~/media/Statistics/Browse%20for%20stats/OverseasTradeIndexesVolumes/HOTPMar10qtr/otiv-mar10qtr-all-tables.ashx) at the lowest values in 4 years. <br /><br />With retail trade in the large manufacturing areas of Wlg & Chch declining, while Auckland and agriculture areas like Waikato are significantly up (table 11, http://www.stats.govt.nz/~/media/Statistics/Browse%20for%20stats/RetailTradeSurvey/HOTPJun10qtr/rts-jun10qtr-tables.ashx), on top of other measures of production, investment and profit, this is looking like a very regionally patchy recovery with significant business under-investment and declining profitability in some areas.<br /><br />The deflation David is worried about I think is real when you look indicators of economic activity, cut by region and what's been happening across the industries.James Hoganhttps://www.blogger.com/profile/05832675898178869721noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-24211347865398233922010-08-19T20:39:52.133+12:002010-08-19T20:39:52.133+12:00Rates going up is more a change in relative prices...Rates going up is more a change in relative prices than inflation per se - things provided by local councils have become more expensive as compared to other things. This may be due to something like Baumol's cost disease (less productivity increase in the service sector, but they still have to compete for workers, so cost relative to productivity goes up when coupled with monopoly provision).<br /><br />That said, the MPS note did specifically point at local body rates as something that has been out of whack. Of course, don't expect Auckland's to drop anytime soon...they've an amalgamation to pay for. And Christchurch gets to choose between two bad options. And Dunedin has a stadium to pay for....Eric Cramptonhttps://www.blogger.com/profile/15831696523324469713noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-84661529842346242982010-08-19T17:52:40.101+12:002010-08-19T17:52:40.101+12:00What I cant follow is how much inflation is actual...What I cant follow is how much inflation is actually deflation. Given wages are pretty much static when my rates go up yet again I have less money to spray around, when my ACC levies go up same result.<br />It annoys me immeasurably that my interest rates have to go up because I have less money to spend because of increased costs that I have no hope of passing on.<br />Why wont Bollard take into account the deflationary impact of regulatory increases in prices rather than given us a double whammy.Davidnoreply@blogger.com