Inflation Monitor – June 2015

 

inflation monitor - June 2015


 

IAG Inflation Monitor – June 1, 2015Inflation Monitor
Index Value 1mo change 1yr change 5yr change Inflation Score
Economic Inflation
Consumer Price Index (CPI) 237.81 0.51% -0.04% 9.00% 1
Producer Price Index (PPI) 192.9 1.15% -7.26% 4.38% 1
1 Yr Treasury Bill Yield 0.24% 0.01 0.14 -0.13 2
10 Yr Treasury Note Yield 2.42% 0.14 -0.18 -0.78 2
Real Interest Rate 0.28% -0.15 2.31 1.93 4
US 10 yr TIPS 0.50% 0.32 0.13 -0.76 2
Capacity utilization 78.10 -0.13% -1.26% 5.83% 2
Industrial Production Index 105.10 -0.07% 1.37% 15.96% 3
Personal Consumption Expenditure Index 12,295.01 1.11% 3.97% 21.65% 3
Rogers International Commodity Index 2678.97 -2.41% -2.55% -9.16% 3
SSA COLA 0.00% 1.70% 3
Median Income $51,939.00 1.81% 3.25% 3
Real Median Income $51,939.00 0.35% -4.56% 3
Consumer Interest in Inflation Stable 3
IAG Inflation Composite Strong Deflation 1
US GDP 17693.30 0.16% 2.11% 18.84% 3
S&P 500 2108.58 -0.16% 8.29% 94.63% 5
Market Cap to GDP 125.70% 121.20% 74.30% 5
US Population 321,062 0.05% 0.73% 4.03% 2
IAG Economic Inflation Index*  Mild Deflation 2
Housing Inflation
Median Home price 228,700.00 4.24% 7.88% 30.99% 4
30Yr Mortgage Rate 3.84% 0.17 -0.35 -1.05 4
Housing affordability 164.90 -3.90% -2.19% 2
US Median Rent 799.00 4.31% 16.64% 4
IAG Housing Inflation Index* Mild Inflation 4
Monetary Inflation
US Govt debt held by Fed (B) 2,793.40 0.94% 26.47% 259.70% 1
US Debt as a % of GDP (B) 102.59% -0.16% 0.84% 13.92% 2
M2 Money Stock (B) 11,889.2 -0.72% 5.83% 38.91% 4
Monetary Base (B) 3,955.23 -2.95% 0.67% 94.57% 3
Outstanding US Gov’t Debt (B) 18,152.056 0.06% 3.13% 42.11% 4
Total Credit Market Debt (B) 59,045.73 0.56% 3.42% 14.00% 4
Velocity of Money [M2] 1.50 0.13% -2.41% -13.74% 1
US Trade Balance -40,879.00 20.42% 10.32% -0.04% 1
Big Mac Index Expensive 1
US Dollar 96.99 1.68% 20.58% 11.91% 1
IAG Monetary Inflation Index* Mild Deflation 2
Energy
Electricity (cents / KW hour) 12.35 2.07% 0.90% 3
Coal (CAPP) 52.75 -0.58% -12.93% -18.34% 1
Oil 60.73 27.88% -39.10% -29.56% 1
Natural Gas 2.89 11.23% -39.71% -26.60% 1
Gasoline 2.14 4.29% -27.82% -10.79% 1
IAG Energy Inflation Index* Strong Deflation 1
Food and Essentials
Wheat 512.63 -3.37% -29.10% 1.76% 1
Corn 357.13 -5.08% -31.06% -4.89% 1
Soybeans 949.38 -2.40% -37.15% -5.04% 1
Orange Juice 121.93 -2.06% -24.08% -11.93% 1
Sugar 12.01 -8.67 -32.41% -21.09% 1
Live Cattle 152.58 1.87% 10.84% 71.05% 3
Cocoa 3116.50 15.26% 5.07% -3.66% 4
Coffee 136.08 -33.83% -23.12% 0.35% 1
Cotton 64.99 3.00% -30.99% -22.80% 1
Stamps $0.49 0.00% 6.52% 11.36% 4
CRB Foodstuffs Index 369.98 6.41% -17.47% 1.06% 1
IAG Food and Essentials Inflation Index* Strong Deflation 1
Construction and Manufacturing
Copper 2.75 0.22% -9.00% -18.40% 2
Lumber 296.00 33.94% -12.14% -2.98% 1
Aluminum 0.77 -7.23% -6.10% -20.62% 2
CRB Raw Industrials 470.17 0.35% -13.42% -7.51% 1
Total Construction Spending (M) 1,006,060.00 4.09% 4.76% 20.85% 4
ISM Manufacturing Index 52.80 2.52% -5.04% -9.43% 2
IAG Construction & Manufacturing Index* Mild Deflation 2
Precious Metals
Gold 1,185.70 0.02% -8.22% 0.42% 2
Silver 15.96 -1.13% -16.82% -14.45% 1
IAG Precious Metals Inflation Index* Strong Deflation 1
Innovative Advisory Group Index
IAG Inflation Index Composite* Mild/Strong Deflation 1 / 2

* If you would like a description of terms, calculations, or concepts, please visit our Inflation monitor page to get additional supporting information. We will continually add to this page to provide supporting information.

* Our Inflation Score is based on a proprietary algorithm, which is meant to describe the respective category by a simple number. The scores range from 1-5. One (1) being the most deflationary. Five (5) being the most inflationary. These scores are meant to simplify each item and allow someone to quickly scan each item or section to see the degree of which inflation or deflation is present.

* We have also added our own indexes to each category to make it even easier for readers to receive a summary of information.


Inflation Monitor Summary – Composite Ranking

Inflation Monitor Summary

 

* The Inflation Equilibrium is a quick summary for the whole data series of the inflation monitor. If you don’t like statistics, this is the chart for you.


 

Inflation Monitor – June 2015 – Introduction

It is officially summer and most markets are becoming more quite. This is of course excluding the ongoing crisis in Greece. They must love the attention because they have been dragging out this “crisis” since 2011. Everyone involved in this mess (on both sides) has a reason to kick the can down the road forever, but forever will not last that long. Greece has call for a referendum vote from the people. We will find out what the people want next week.

While the US markets have been quiet, there have been some disturbing signs cropping up in some of the economic indicators that we follow. These are: the velocity of money, PPI, and market cap to GDP. While many of the numbers listed above show deflation, these three are especially concerning. One interesting and potentially inflationary sign is a sharp pickup of the Baltic dry Index.

Enjoy this month’s Inflation Monitor – June 2015.

Kirk Chisholm

 

As always, please contact me with any questions or to send your feedback. Thank you for reading.

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Inflation Monitor Monthly


 

Charts of the Month

Inflation Expectations Vs Actual Inflation

We will start the charts off with one from the FRED blog. This one compares actual inflation with the expected inflation by the public. If you have been reading this Inflation Monitor for a while, you know that inflation is less important than inflation expectations. The expectations of the consumer tends to reinforce the current trend.

inflation expectations



Leading Indicators

Dr. Copper

Dr. Copper is still weak. There is too much global supply of copper for this to get much traction. However, this seems to be true for many commodities.

dr copper 06.15

Financials

Financial are still going strong.

financial sector

The bottom XLU to XLF ratio tends to rise in times of uncertainty. Although a rising rate environment may be skewing it away from utilities.
S&P 500 Financials

 


US House Prices

house prices to income

This Ratio is based on median household incomes and median home prices.. I have compared Boston to the 3 most expensive cities. The other end of the spectrum was Detroit, MI, Saginaw, MI, and Decatur, IL.


Jobs– Union Membership Trends

As of 1964 this is what percentage of union jobs the country had

Union Membership in 50 states in 1964

As of 2014, this is the number of union jobs the country had.

Union Membership in 50 states

I can’t say that I’m surprised. The US has become more of a service economy than a manufacturing economy. I’m sure when the TPP trade agreement is passed, more union jobs will disappear as well. Of course, that is just speculation. I couldn’t possibly know what is in the bill… that would be illegal. However, if it is anything like NAFTA, this trade agreement will also be a problem for unions.


PPI vs CPI

Not a good sign when the PPI turns down. At least it took a breather this past month. We will find out soon if that trend is going to continue.

PPI vs CPI

Consumer Price Ratio (CPI)

consumer price ratio


 

Europe

Are you worried about the Grexit, the Brexit, Frexit, or some other catchy name? Apparently, most people are less worried than you might think. Maybe the public is finally realizing what the politicians already know… This is all political theater. The can will be kicked again.

Europe Economic Policy Index

 

China

Apparently, no one is worried about China. Am I the only one? The problems seem very obvious to me.

economic policy uncertainty index China

 


 

Gas Prices in Massachusetts

Massachusetts gas prices look like they are falling if you compare colors from this month and last, but it is hard to tell when the price scale changes. The top of the scale stayed the same and the bottom rose $0.08. Gas prices should be continuing to drop, but they are not. Regardless, in the past month gas prices have continued to rise.

 

Massachusetts gas prices

Gas Prices in the US

 

California is still out of touch with the rest of the country. I guess that may always be true. The price scale for the US map has changed from last month as well, so don’t compare the colors.

 

US Gas Prices

 


Food Stamps (SNAP) in 5 states including Massachusetts

This trend also holds true for most of the other states as well. I cannot say that I am surprised. I suppose when these numbers start to decline, it might be a good sign the economy is on a solid footing.

Food Stamps Massachusetts

 


Currency Relative Valuations to Gold

Gold prices are they strong or weak?

Gold priced in us dollars 06.15

Gold Priced in Euros

Gold priced in Euros 06.15

Gold Priced in Yen

Gold priced in yen 06.15

Gold Priced in Canadian Dollars

Gold priced in Canadian dollars 06.15

Gold Priced in Australian Dollars

Gold priced in Australian dollars 06.15


Bonds

US Treasuries

US Treasuries 10 Year Yield 06.15

 


 

Baltic Dry Index

The Baltic Dry Index has picked up in the past month, but it still has a long way to go. Could this be a sign of life?

baltic dry index 06.15

 


 

Capacity Utilization

Still no signs of slowing…

capacity utilization 06.15

 


 

I hope you enjoyed this month’s Inflation Monitor. See you next month.

Cheers,

Kirk Chisholm

 

 

Kirk Chisholm

 


 

The IAG Inflation Monitor – Subscription Service

We are initially publishing this Inflation Monitor as a free service to anyone who wishes to read it. We do not always expect this to be the case. Due to the high demand for us to publish this service, we plan to offer it free for a while and when we feel we have fine tuned it enough, we do plan on charging for access. Our commitment to our wealth management clients is to always provide complimentary access to our research. If you would like to discuss becoming a wealth management client, feel free to contact us.

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IAG inflation monitor

 


Sources:

  1. Federal Reserve – St. Louis
  2. U.S. Energy Information Administration
  3. U.S. Post Office
  4. National Association of Realtors
  5. The Economist
  6. The Commodity Research Bureau
  7. Gurufocus.com
  8. Stockcharts.com
  9. GasBuddy

* IAG index calculations are based on publicly available information.

** IAG Price Composite indexes are based on publicly available information.


 

About Innovative Advisory Group: Innovative Advisory Group, LLC (IAG), an independent Registered Investment Advisory Firm, is bringing innovation to the wealth management industry by combining both traditional and alternative investments. IAG is unique in that we have an extensive understanding of the regulatory and financial considerations involved with self-directed IRAs and other retirement accounts. IAG advises clients on traditional investments, such as stocks, bonds, and mutual funds, as well as advising clients on alternative investments. IAG has a value-oriented approach to investing, which integrates specialized investment experience with extensive resources.

For more information, you can visit: innovativewealth.com

About the author: Kirk Chisholm is a Wealth Manager and Principal at Innovative Advisory Group. His roles at IAG are co-chair of the Investment Committee and Head of the Traditional Investment Risk Management Group. His background and areas of focus are portfolio management and investment analysis in both the traditional and non-traditional investment markets. He received a BA degree in Economics from Trinity College in Hartford, CT.

Disclaimer: This article is intended solely for informational purposes only, and in no manner intended to solicit any product or service. The opinions in this article are exclusively of the author(s) and may or may not reflect all those who are employed, either directly or indirectly or affiliated with Innovative Advisory Group, LLC.