CPI, PPI and historical retrospective

Recent signals in the US economy. In October, the Consumer Price Index for All Urban Consumers increased by 0.4% in seasonally adjusted terms and by 7.7% in the last 12 months, unseasonably adjusted. Index for all items except food and energy increased 0.3% in October (SA); increased 6.3% during the year (NSA).

12-month percentage change, Consumer Price Index, selected categories, October 2022, unadulterated… Source: U.S. Bureau of Labor Statistics

Final demand Producer Price Index rose 0.2% in October. Prices of final demand goods increased by 0.6% and the final demand services index decreased by 0.1%. The final demand index increased by 8% in the 12-month period ending October.

PPI in final demand components, 1-month percentage change, October 2022… Source: U.S. Bureau of Labor Statistics

 Annual inflation in the US slowed in the 4th month in October, falling to 7.7%, the lowest level since January, and fell short of the 8% forecast. This also marks a decrease compared to 8.2% in September. Energy cost increased by 17.6% in September to below 19.8% due to gasoline (18.2% to 17.5%) and electricity (15.5% to 14.1%) . A slowdown was also seen in food (from 11.2% to 10.9%) and used cars and trucks (from 7.2% to 2%). On the other hand, prices for housing (from 6.6% to 6.9%) and fuel oil (from 58.1% to 68.5%) increased more rapidly. Compared to the previous month, CPI was 0.4%, below the expectations of 0.6%. Shelter contributed more than half (0.8%) of the increase, and gasoline rose 4% after falling in the previous 3 months. At the same time, medical care services (-0.6%) and commodity costs (0%) drove the CPI down. Still, the numbers continued to point to strong inflationary pressures and broad price increases throughout the economy, particularly in the services sector, while commodity prices benefited from some improvements in supply chains.

United States Inflation Rate. Source: U.S. Bureau of Labor Statistics, Trading Economics

 Historical retrospective

-20th century. The 20th century has far exceeded expectations for progress, with the newly discovered powers of a hundred years ago being developed, refined, and applied on a large scale.

In developed countries, electric power for industry and home fueled by coal, oil, gas and nuclear power plants has become universally available. And with that power came every conceivable gadget and gadget to make life easier and more enjoyable: radio, television, vacuum cleaner, refrigerator, washing machine, microwave oven, record player, tape recorder, food processor, just to name a few.

Other ideas that would develop, advance, and dominate thought throughout the 20th century-questionable ideas that would arguably transform society dramatically for the worse-have already been proposed. The dark side of human nature was very clear.

At the turn of the century, feelings of anarchy and revolution were in the air, fueled by the revolutionary 'scientific' socialist philosophy of Karl Marx. Marx's theories would dominate the 20th century, leading to decades of ideological conflict between the West, largely represented by the United States, and the Soviet Union.

In addition to the uncertainty that added to the general mood of optimism in 1900, the political situation in Europe was deteriorating. The Industrial Revolution was not only fueling peaceful developments: the mechanics of war were also advancing.

Even Churchill could not have foreseen the madness of several years when the majority of Europe would actually commit suicide in the First World War, destroying the flower and imperial claims of an entire generation. This war eventually became global and covered 32 countries. Its root cause lay in the intense nationalism, political and economic rivalries, military alliances, and major armament that had prevailed in Europe since 1871, which coincided with the emergence of Germany as a major world power. The cost of the war was enormous: 47 million military and civilian deaths and a direct cost to the warring parties of $146 billion.

The age of mass destruction had begun and technology developed rapidly as it progressed.

The “war to end all wars” was replaced by a chaotic and confused period, including the great depression of the 1930s, with all the deprivation and hardship that came with it. This inevitably led to an even bigger fire - another world war that required the renaming of the first. This time has easily been described as the most devastating war in history: the direct expenditures of the 61 countries involved (three-quarters of the world's population) are estimated to easily exceed $1 trillion, with more than 55 million military and civilian deaths. The most horrific event ever was the Holocaust, when six million Jews were exterminated in Nazi concentration camps. However, the use of rockets and atomic bombs, first seen during this war, was also important; They were harbingers of worse things to come.

During the post-war stalemate between the United States and the Soviet Union - the ideological Cold War - a unique arms race developed in which each power bloc sought to outdo the other in destructive capacity. It can be said that missile technology has skyrocketed and warheads' destructive capacity has skyrocketed - literally.

The atomic bomb was replaced by the even more devastating hydrogen bomb, and scientists continued to develop hideous means of chemical and biological warfare. By the 1950s, humanity had coined the term suspect killing—meaning that all life could be wiped out—and then moved into the completely unnecessary realms of overkill.

On a brighter note, only in this century have we moved from the horse and carriage era to the automobile and airplane age, and into the space age where man actually walked on the moon. We have moved from the age of technology to the age of information, to the digital age that surprises us with its potential.

Yes, we can routinely send men into space on roaring pillars of fire and then safely send them back. We can put powerful and complex satellites into orbit. We can send space probes to distant planets and send extraordinary pictures with incredible clarity. We can see farther into the outer reaches of our universe than ever before. However, we still cannot solve the oppressive poverty that enslaves increasing numbers of people.

The most surprising and remarkable advances in medicine can make the blind see, the deaf hear, and the lame walk again. We are in the process of mapping the human genome – learning where each gene on each chromosome fits in our DNA and how each affects our health, intelligence and longevity.

The rapidly evolving science of genetics promises to answer every possible need, while also raising a multitude of ethical questions we are ill-equipped to answer. We've already cloned Dolly the Sheep. How far behind could the first human clone be? Yet sickness and ill health still abound.

Martin Gilbert, author of A History of the Twentieth Century, sums up the situation as follows: “There has not been a year in the twentieth century without death, conflict, turmoil and destruction in many parts of the world. But at the same time, not a year has passed without effort and initiatives to move forward on the path of cooperation and mutual benefit.”

-21st century

2000: The .com bubble. The dot-com bubble was a stock market bubble in the late 1990s, a period of great growth in the use and adoption of the Internet. Between 1995 and its peak in March 2000, the Nasdaq Composite stock market index rose 400%, but fell 78% from its peak in October 2002, giving up all its gains during the bubble.

2008: The global financial crisis began with cheap credit and easy lending standards fueling a housing bubble. When the bubble burst, banks held trillions of dollars in worthless investments in subprime mortgages. The Great Recession that followed cost many people their jobs, savings, and homes.

2020: Kovid. In early 2020, SARS-CoV-2, the virus that causes Kovid-19, hit the world. The first documented case in the US was a traveler who landed in Seattle from Wuhan, China, on January 15. It was only later that public health officials realized that SARS-CoV-2 had begun to spread in the community.

By March, the world was forced to take the outbreak seriously as countries began enforcing stay-at-home orders. As civilians struggled to find childcare, work from home and immunology 101, epidemiologists began to react and businesses closed.

2022: Russia's war against Ukraine, global inflation. While Russia, a leading energy exporter, occupied Ukraine illegally, a coalition of developed and developing countries declared their support for Ukraine and decided to support Ukraine against the invaders. In the measures taken to support Ukraine, there were not only weapons, but also sanctions aimed at economic collapse of Russia.

The most important sanction for the modern world was the ban on Russian oil and gas. This has caused the prices of such commodities to skyrocket, pushing the CPI to new highs for most of the world's countries. Another factor that contributed to the rise in inflation was Ukraine's inability to export agricultural products. This caused fertilizer prices to rise and the overall price of food to rise.

Now inflation is high in the global order and central banks are raising interest rates to rein in inflation as much as possible.

2023: global recession? According to a recent Bank of America survey, 77% of fund managers say a global recession is likely next year – the highest level since the Covid era, reaching roughly 90% in April 2020, while investor allocation to cash has been around for a long time.

About 92% of fund managers surveyed, of 309 panelists managing $854 billion in assets, predict the economy will be marked by stagflation or below-average growth and above-average inflation next year. It is thought that the Central Bank may force it to further hinder growth with additional interest rate hikes.

Conclusion? In terms of progress, the world has seen much more since the last century than in our history. Progress has been used in both ideological and technological ways, both good and bad.

The important thing to keep in mind is that no matter the amount of turmoil, conflict and death, humanity never ceases to move forward.

Kaynak: Tera Yatırım-Enver Erkan
Hibya Haber Ajansı