As Corporate Media and Politicos celebrate 'inflation progress', what is happening today with Natural Gas is the true meaning of Transitory: how inflation works after itโs entrenched
Inflation as measured by the Consumer Price Index came in at 8.5% yesterday. Reviewing the data, food prices continued to jump, but gasoline and natural gas prices dropped sharply, and prices of durable goods coming off their crazy jump.
The ebb and flow of goods inflation is in the backdrop of inflation for services at a 40 year high--to 6.25%.
This is how inflation works and what I personally view the 'true' meaning of 'Transitory' to be: entrenched inflation cycling from category to category and popping up in different places, while backing off for a while in other places (temporarily) before continuing an upward trend.
Ok, with that small bit of preamble, look what the 'dropping' natural gas prices are doing:
Not to delve into politics but the conflict in Ukraine plays into this: the weather might force some EU members to abandon EU sanctions on Russia & ignore the US President's pressure.
As severe heat it hitting Europe now, it is forcing some European governments to cooperate with Russia in some way or another since severe heat increases the demand for cooling, which creates greater demand for electricity--necessitating the need for more energy sources--gas, coal, wind, nuclear, etc.
Additionally, this is when reserves are generally built up for the winter and heating, which is not going on now. Where will the additional natural gas come from as inventories decline? I am sure some will say the Gulf of Mexico, but we are in Hurricane season now, can production keep up?
For example: natural gas -3.6% for the month but still +30.5% year-over-year. They are saying prices are 'stabilizing' but these new prices are far and above where it was before.
Lumber and Wood is another category that illustrates a 'transitory cycle':
So what does it mean?
TL:DR Transitory is back on the menu as 'Whack-a-Mole' is played during these 'transitory cycles' caused by entrenched inflation cycling from category to category and popping up in different places, while backing off for a while in other places (temporarily) before continuing an upward trend.
