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Lag effect makes inflation look higher, expert - 14 Nov 2024

David Bahnsen, Chief Investment Officer at The Bahnsen Group says that the inflation data doesn’t reflect the reality of prices on the ground.

Source

BBC

Length

00.01.57

Subtitles

Date produced

14 November 2024

No - see transcript below

L002

Reference

Transcript

[David Bahnsen] …was up 2% month over month and 2.6 year over year which was exactly in-line with consensus and as long as the shelter number, which represents close to 40% of CPI is 5% year over year, that I think it’s totally unhinged from reality. Nobody in their right mind believes that market rents on new leases are going up 5%. It is the lag effect of the way they track it that is adding about 50 bases points. The Fed knows this, the PCE, which weights shelter much lower is now reflecting the same thing. So I think they can feel pretty good about that and you see it in the bond yields as well which are really stayed quite level and even as the tenures come up over the last month, month and a half, inflation expectations are largely not, it’s most been a real growth expectations.

[Interviewer] So, if you think the inflation data we’re looking at is … a bit behind the curve, what do you make of this week’s unemployment data? What does that tell you where we stand right now with the labour market?

[DB] It’s very important for weekly jobless claims and monthly BLS, so you take three week, in the case of claims, or three month, in case of BLS averages, because there’s lumpiness that we’ve seen all year. And time and time again when it looks like the weekly claims are going to break out above 250 or when they were going to drop below 220, as you get three week averages it smooths itself out and we really do appear structurally set at a pretty benign level on weekly claims. I worry that won’t hold into the future but nevertheless right now it’s hard to have a narrative other than, that there is a reasonably benign average atmosphere on the job side. My bigger concern is longer term, which is labour participation, I still continue to be very distraught over the number of people leaving the labour force.

Task

Listen to the video, then answer the questions.

  • Watch the video (without the transcript or subtitles).

  • Observe how speakers stress words and fit them together to form sentences.

  • Note timestamp for unclear speech, confusing words or phrases or perhaps where the speaker is a little too fast.

  • Watch again (with transcript or subtitles) and check against your noted timestamp: is it any clearer? What is unclear: a word, phrase or the structure?

  • Answer the questions before expanding and viewing answers.

  • Any doubts, contact your mentor.

  • Nobody in their right mind believes that market rents on new leases are going up 5%.

  • Lag means the delay between the reported number, which reflects past, rather than current, reality.

    Lag = fail to keep up with another or others in movement or development.

  • … adding about 50 bases points.

  • Bond yields:

    … and you see it in the bond yields as well which are really stayed quite level …

  • Behind the curve (especially of a business or politician) means lagging behind current thinking or trends.

  • Unevenness in the labour market; fluctuations.

  • Break out = exceed 250 points

  • Smooth out = things will settle down, no big rises or falls

  • My bigger concern is longer term, which is labour participation…

  • The speaker uses distraught (to mean very worried and upset) as he is extremely concerned by long term effects.