Today's ISM Prices Paid Number Predicts A 6.2% CPI In 12 Months

Tyler Durden's picture

For all those who looked at today's Priced Paid component of the ISM, and had a very bad feeling about what this signifies for not only corporate margins (one word: shrinkage), but broader inflation, we good news for you: you are absolutely right. A simple regression analysis of Prices Paid to CPI data indicates that the median CPI 12 months following a PP greater than 80 (such as this morning's 81.2) is over 6%! Which of course means that the far more volatile non-core components of the CPI will likely be surging at double digit rates by then. In other words, in one year, based on a simple historical regression, the US will well be on its way to inflation that will even leave the Chinese cowering in shame. And if consumers still refuse to leverage by then, then Al Jazeera will be covering riots (following the FTC's shut down of all US media) from our own back yard. If they do, on the other hand, and with $2 trillion in excess reserves, say hello to the Shazam moment.

John Lohman provides some humorous commentary on this otherwise very sad topic.

I sure am glad Bernanke has that whole “100%” thingy going because otherwise this morning’s ISM report would raise inflation concerns.  The table below compares the ISM’s Prices Paid Index with subsequent changes in the Consumer Price Index since 1950.  I realize that prior points in history may not have had the same levels of excess capacity and slack in the labor market that we currently have…but I’m 100% confident they didn’t have $2.5 trillion floating around either.

But not to worry.  Should inflation actually rise 6.2% over the next 12 months, the San Francisco Fed will exonerate Bernanke with a research paper attributing the entire rise in the CPI to snow.

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unwashedmass's picture


i'm sitting here watching the dollar sink, watching JPM nail the escape hatch of gold closed for anyone who knows what's going on, and its getting damn scary.

isn't there anyone who can stop Bernanke? when does Ron Paul get to grill him?

we're breaking .77

Racer's picture

Bernanke: The man who caused the Greatest Depression in History

Cdad's picture

Ain't that just a pisser?  It has me feeling mighty disappointed in my government, too.  It has me feeling really pissed off at one J. Dimon who doesn't think I should be bothered by his day in, day out assaults on American wealth because he  needs to move the S&P back to some respectable level determined between him and Ben Bernanke...who is providing all the excess dollars used to destroy dollars.

What a sweet Banana Republic Tree world I will be leaving for my sons to clean up. 

As for where the hell is Ron Paul, exactly.  Where is he?  What is he doing?  Polishing his desk?  So much talk from him that I actually put a little faith there.  I'm still waiting and wondering where he is.  Has he just decided it would be easier to let the Fed destroy itself rather than intervening on the intervener?

Frustration is running my dollar sinks inexorably towards nothing. 

tellsometruth's picture

here is his office number find out for yourself: 202-225-2831


I believe it is Feb, but Ben is not allowed under current rules to be subpoenaed to just the sub com..


Don't be afraid to call your reps office and get answers yourselves

duo's picture

The Ben Bernank => The Hose Mubark => end of dollar hegemony

captnKrunch's picture

There it is again.  Could someone please tell a newbie exactly how JPM is manipulating the price of gold and how everyone knows they are?

jm's picture

I am saying this out of genuine sympathy for some person that goes by "Phlox". I believe the insane Bastard erroneously singled her out as being me to her collegues.  I am not Phlox, and don't know Phlox.  I am not a journalist. I do value my privacy. 

If "Phlox" did say she was the author of my posts at some point, then she gets her deserts now.  Otherwise she should be left alone. 

franzpick's picture

PMs, grains, softs, materials XLB and other non-value-added equities all on a tear last hour, having a breakaway look on my screens, and Ben unprepared for his wish coming true and national discontent spreading worldwide and toppling crony leaders.

We are rotating thru our 6 months food, water and supplies FIFO basis, and none of our neighbors or friends know.  Just a few hundred thousand of you.

trillionaire's picture

What is the best way to protect yourself against this?  Thoughts?

trillionaire's picture

Oh, and has Hugh Hendry addressed inflation lately?  Is he still US Treasuries and Unilever type stocks?

HarryWanger's picture

Which of course means that the far more volatile non-core components of the CPI will likely be surging at double digit rates by then.

That's not correct as this chart is showing CPI numbers INCLUDING food and energy. This chart is not showing core numbers.

Tyler Durden's picture

So here is a math question (of that type that supposedly should be made redundant by Captcha...but there's an app for everything these days): if Core CPI grows at 2% and has a 50% weighting in CPI, what is the growth rate left for food and energy inflation, also assuming a 50% weighting (keeping it simple).

FOC 1183's picture

i'll take a shot at 10.4, but honestly, i suck at captchas

d00daa's picture

Wanger?  WANGER???


You don't even understand what TD just posted, do you???


You're getting schooled here.  It is painfully obvious that even simple math is over your overly-enlarged head.  Run on back to Yahoo Finance like a good little bitch.

HarryWanger's picture

Core CPI is at 0.1%, correct? 

Two points: 1) as pointed out the chart above is not reflecting core CPI. Therefore, there can be no double digit percentage point core CPI. The chart is reflecting Headline CPI. 2) Another math question, how to get from 0.1% to 2% core, is an increase of ____? In other words, highly unlikely any time soon.

So based upon the correct view of the chart reflecting Headline CPI, it is likely we will see the Core CPI at 0.2% within four months.

Tyler Durden's picture

Even better.  So core CPI at 0.4% or whatever in one year. What does that leave for everything else? Hint:

As World Becomes Zimbabwefied, Cotton Futures Surge 17% In One Month

Here's another math question: What is 17% annualized?

HarryWanger's picture

At that point we would see a Headline CPI in the neighborhood of 2.0-2.2%.

Regarding cotton futures surging, you would have made the worst call in the world had you applied that same annualized logic to oil prices in spring '08. Hell, oil should be somewhere around $300/barrel right now, using, of course, your method of annualizing one month into the future.  

tellsometruth's picture

just look for the coordinated collapse of credit and bail dumb dumb, then BUY THE FUCKING DIP!

figuringitout's picture

Try 12% in "Volatiles" to reach the 6.2% CPI number for 12 months out.


.50 * 0.2% + x * 0.5 = 6.2 where X is the "Volatile" CPI Growth Rate.

Tyler Durden's picture

See that's funny. But you forget: Ben Ali was also hoping for a reversion to the mean. And as for 2008, how much money was Ben Bernanke printing on a weekly basis?

StychoKiller's picture

Yeah, but fortunately, that's only Silver Eagles -- oh wait...

Vampyroteuthis infernalis's picture

Harry, what happened in the past has no relevance at this point in time. It is water under the bridge. Helicopter Ben is printing now on top of about 2.5 years of prior printing. It is accumulating quickly.

My basic question is are you trying to look stupid? Has your vegan diet finally taken its toll?

FOC 1183's picture

Since Harry's calculator isn't working, we'll help him out.

rounding food & energy weighting to 25% for simplicity:

(0.004 x 75%) + ( X x 25%) = 0.062

X = Food & Energy = 23.6% = unhappy campers

tarsubil's picture

This matches my observations of the price of a gallon of milk (up 35% in the last year).


But like the trolls will tell you, that is offset by grandma's house losing value. Grandma is so happy.

Misean's picture

I got a few grand that'll take the other side of that bet. You in?

tellsometruth's picture

the current snow sh!t storm surly will be used for all involved in the current ponzi markets as an excuse for sh!tty numbers in Q1, and possible the biggest haul in silver ever in a month

Vampyroteuthis infernalis's picture

Maybe Helicopter Ben and Timmay can drop their pants and sit on that snow. It would be the same shock everyone else feels while at the supermarket.

Whats that smell's picture

 Yahoo teck ticker has H. Davidowitz on again- this guy sees the truth.


Robslob's picture

So 6 more months of "party on Garth" for the U.S. markets.

Cool...still have time to cash out my IRA before it is confiscated!


Oh regional Indian's picture

Non-core items... F2

Food and fuel.

What a joke CPI is. An official 6.2 will mean riots well before 12 months.

anyways, i think it'll be 6.2 in 3 months or less. 

End game times are so rife with potential for massive change.


unwashedmass's picture


i think gas 4.5 lights the fuse. people won't be able to afford to go to work.

Oh regional Indian's picture

Yup. unless .giv gives people gas coupons next.

Possible. Anything is possible.


pvzh's picture

Could they get to the place where riot is matter with these gas prices? It makes little or no impact to riot in the middle of nowhere (aka suburbs).

blindfaith's picture

Americans are dummer than...damn I can't thing of anything.

Fear not, the gumermint will change the components in the CPI to reflect the number they want the media to spoon feed Americans.  Since Americans insist on being out of touch, they will buy it hook, line, and sinker.

AND...Americans will do nothing, nothing about anything until everyone is homeless and hungry in the streets...and then I am not sure they will do anything then.

sushi's picture

It will be blamed on the Chinese currency peg and then used as a rationale to attack Iran in order to bring democracy to Malta and prevent near term abortions in Kansas.

Regardless, Ben will continue to print.

Circlehook's picture

I think a large enough group with calibrated pitchforks could take care of the problem.  My pitchfork is calibrated to .308!  ;-)

tellsometruth's picture

what do you think would happen if people had a march and open carried (where legal), how would citizens and the police react to eachother... Americans have tons of guns, supposed to help ensure a free society, and yet egypt is succeeding (currently) without them...

Circlehook's picture

The ability and right to carry a gun mitigates an oppressive  force.  It's almost like nuclear war.  Mutual destruction can be assured for all.  So, cooler heads prevail.

On the other hand, citizens without guns only invites oppression by those who have them.

The full script in Egypt has yet to play out.  How many of those citizens, do you think, wish they had guns? 

MachoMan's picture

What happened to the black panthers?

blindfaith's picture

Please...look what happened at Kent State?  You think people have forgotten about that?  I am sure the panthers haven't.

All you gun toting folks will fold like a house of cards when the swat team surrounds your house. 

I would dearly love to hear, read some real intelligent answers and ideas for solutions, not bla bla bla from Clint Eastwood.

MachoMan's picture

What?  That the troops fired randomly and ended up hitting people?  None of whom were brandishing firearms at the time?

Under what scenario are there enough security forces in any united states locale that could remotely affect a million man march of gun toting americans?  Even if they called the troops back, what do you think would occur?  Simply put, the security forces are not going to do a damn thing and we know it...  their best chances, at that point, are to play nice with the new leaders and seek a position of authority in the new regime.

I do not avocate violence unless under extreme conditions...  nothing that we are close to...  especially because it is unnecessary to uproot many of the evils that plague us...

tellsometruth's picture

eeek!  Please help warn others...


Even though it may be futile at least say you spoke out...some here could do some good



william the bastard's picture

This is the end of QE. Rate ramp just ahead.


Johnny Lawrence's picture

When the market crashes, so too will commodities.  Inflation problem solved.