What the Fed JUST Said about Inflation CHANGES

this video you're going to learn when

the majority of businesses actually

expect inflationary pressures

to go away how long is it going to take

is it going to be a few months it's

going to be a few years

or somewhere in between let's get into

it right after i mentioned that if you

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again medkevin.com lemonade hey everyone

kevin here in this video we're going to

do a bit of a deep dive on what the fed

is

tracking in regards to inflation now

this gets a little granular but it's

really good to see because you want to

see

changes and specifically what they're

tracking it's really useful since a lot

of things move

when it comes to the fed people always

wonder kevin where do you come up with

these

big plans of why you say september and

october and why you

why you do options at a certain point of

this a lot of it has to do with just a

funnel of

all the things that research that we do

basically all pointing in the same

direction

so let's get into this and uh just do

some bottom aligns

here so really what i want to spend time

looking at here

are the impacts of supply chain

disruptions i know for example demand is

going to go

up at restaurants and hotels and

entertainment things like that

but i'm also looking at supply chains

well yeah supply chains and and

inflation are price impacts those are

important things so let's take a peek

here

for example when we see nationally that

contacts in several districts say that

supply chain disruptions push

costs higher and in some cases delayed

projects

that's really important because it's a

signal to us that in the future

we could see earnings reports actually

come

in worse than expected not just because

maybe

margins at companies fell but also

because

bigger sales or bigger upgrades or

bigger projects

just got outright delayed a delayed

big sale or big project at a company

doesn't show up in margin

but it shows up generally in lower

revenue and so

this is a way of potentially exploring

ah

okay so maybe that's why revenue missed

at a certain company because

they had trouble finding workers or

whatever this all helps us a lot

let's go ahead and get to some of the

big conclusions though here

this is the overall summary and what i

prefer to do is just go district by

district

so let's go ahead and start in boston

and see what we have over here

so in the boston area we've got and this

is the boston bank so

12 banks throughout we've got higher

labor demand wage increases were slight

to moderate a big concern is that

inflation is definitely coming

because wage wages must go up if it's

hard to find workers right

well we got slight to moderate in boston

for manufacturers

restaurant wages also went up they

didn't say moderate though just sent

went up and selected hourly workers

enjoyed wage increases of up to

whoa look at that 30 percent with

signing bonuses and enhanced recruitment

efforts mentioned with increased

frequency

that as well as some other benefits like

child care benefits

it's a big roadblock right now to

getting people back to work child care

30 increase in wages in some areas

that that is potentially inflationary

right and wages can be sticky they can

be here to stay

high demand low inventory in auto led to

modest increases

again we're just going for the

highlights and the bottom lines here

staffing issues this is still boston

here some

contacts perceived that generous

unemployment benefits were deciding or

the deciding factor

in holding back labor supply but others

expected at least a modest boost in

labor supply as vaccination rates

climbed

and infection rates decline this makes

sense as less people are getting sick we

feel more comfortable

about going out into the environment

going out back to normalcy that sounds

so

like bubblish like oh going back in the

environment just going back to normal

right

take a look at the new york sector

though an overwhelming majority of

contacts and construction and

manufacturing noted price increases and

businesses in

all sectors expect widespread hikes in

prices they pay

in the months ahead ouch

ouch that's uh you know that's certainly

inflationary right

what we're really looking for because we

know there's inflation what we're really

looking for

is when are we going to start seeing

changes when are we going to start

seeing this

inflect downwards and that's what's

important

where we start seeing companies saying

hey we got these big price increases but

we expect them to go down

for example here uncertainty about

future inflation was also cited as a

concern in planning

and formulating contracts it's a problem

all right let's get on over to

philadelphia contacts continue to note

severe supply chain disruptions

impacting most sectors

microchip shortages continue to limit

current and future production plans

and container shortages continue to

disrupt logistics

remember this is information that's put

together for

the may period so this is right around

may 25th is what they collected this for

so we're pretty close here this report

was prepared for information collected

on or before may 25th

yeah exactly all right so that's

philadelphia let's get on into

cleveland for prices rising input costs

were partly attributed to supply chain

challenges caused by suppliers

who did not have enough workers to meet

demand

that's interesting so now we have in in

cleveland

a blaming of not just cost increases

on rising input costs like resins metals

lumber packaging freight services

but also on the fact that hey if we

don't have enough workers we we just

have to raise prices because we can't

hit all the demand

makes a lot of sense one real estate

developer said that quotes from general

contractors were now valid

for only 10 days whereas before the

pandemic quotes were valid for 30 days

wow

because of materials that's and that's

something else

contact's now expected to take longer

than previously anticipated for these

supply chain issues to be resolved uh oh

see these right here these are the kind

of things that we want to be paying

attention to

when firms believe that inflation and

supply chain issues are going to last

longer we basically enter a more

potential

problematic scenario several contra

contacts believe there was a good deal

of pent-up demand that was being

released as government restrictions were

being eased now in the richmond district

take a look at this we get an

interesting note here first of all

several employees

also noted that rising wages for entry

level positions led them to raise wages

to retain more experienced staff so if

you raise wages for lower obviously you

gotta raise everyone else's right

those those things are important but but

take a look at this

we got prices going up for goods and

service producers

but check this out a furniture store

said that they were unable to pass along

increased costs because of online

competition

and the msrp pricing in contrast

a small appliance manufacturer was able

to pass along price

increases because others in the industry

face similar rising input costs and

we're also raising prices

so that's really interesting so in

certain sectors

it's almost impossible to raise prices

because there's just too much

competition online

but in others where everybody is

increasing or jacking up their pricing

like i would imagine used cars or like

this example small appliances

well in that case all right easy peasy

raise those prices

so kind of a real interesting tug and

pull that we're getting in markets here

let's see what else we have here retail

many retailers reported that supply

chain disruptions such as shipping and

production

delays were limiting inventories we know

that this is in

a richmond demand exceeded supply

atlanta several contacts anticipate that

labor shortages will abate this

fall but there is a great deal of

uncertainty about how much supply will

materialize

supply of people or stuff hold on let me

let's read this in context here no this

is all in employment

so they okay so in other words they're

saying they think they're going to get

more workers

but they're not sure exactly if they're

going to get enough workers

so you might still have that wage price

pressure in the future

opportunities to offer remote work for

some positions have removed geographic

barriers allowing employers broader

access for talent

right wage pressure picked up in april

through mid-may

what else prices here input costs went

up this is pretty much the same

no surprise here in atlanta relatively

the same atlanta i

mostly the focus here was really on uh

pricing and inflation in terms of what

we highlighted

and really finding things that are

different commentary that's different

now here's an interesting one in chicago

we hear that many manufacturers

said that unlike usual they were

able to raise prices with little

pushback

as people anticipated higher

prices that's interesting

uh all right then we have consumer

prices moved up moderately due to

largely

increased costs in response they were

there were reports of some retailers

limiting operating hours or trying to

cut costs

by renegotiating leases you know i've

actually seen this with like 24-hour

fitness for example it's not 24 hours

anymore like out here it just like

they just close at 9 p.m and i'm like

really come on

it's not 24-hour fitness anymore anyway

uh

then uh supply chain issues had worsened

here we go

they expected little improvement through

the end

of the year oh so really here

they're expecting this supply chain

issue

to really last in chicago through the

end of the year so really getting a

mixed picture in terms of when that

supply chain issue is really going to

clean up dramatically now in the saint

louis district a similar argument

regarding prices going up especially

autos but take a look at this these

contacts attribute the price increases

to high demand and reduce supply due to

input shortages however

these prices are expected to stabilize

before the

end of the year so it's really the end

period that last half of 2022

i'm sorry 2021 and the beginning of 2022

that's going to be our real

tell for for pricing and what kind of

activity we have

like if i were going to draw the chart i

would really say

okay so here we go this right here is

q1 through let's go q4

of 2021 this is the 2021 half

this is 2022 over here

i would say our inflation adjustment

period

is really this section here where

finally we start seeing through the end

of q2

the end of q2 2022 and

starting in q3 21 in this range right

here we really start seeing

inflation pressure start moderating in

minneapolis contacts

also talked about being able to pass

markups along to

customers something else we want to pay

attention to

in kansas city on pricing we saw

that about 80 percent of contacts

expected these factors

to persist for 12 months or less 80

percent

think the pressures are going to last

less than 12 months

that's pretty big so here we go when do

we think inflation is going to

end folks the inflationary pressures

everybody seems to be agreeing that

they'll probably

be gone or faded by mid 2022

12 months or less 80 percent i guess i

shouldn't say

everybody it's 80 okay so that's kansas

let's get into the dallas sector for

prices price pressures

uh intensified input costs surged

there were several reports of higher

prices for fuel and other input costs

we want expectations though compared

with the year end 2020 business contacts

have revised

upward their expectations for input and

selling prices

price increases in 2021. so in texas

expecting to increase

prices through 2021 as well san

francisco

no real outlook other than yo prices are

going up for grocers and

restaurants and it kind of sucks right

now also there's a note that the drought

is certainly not helping in california

this is for the san francisco board

residential construction activity has

continued to expand at a brisk

pace although construction still failed

to meet high demand

in other words still a massive lack of

building in california

that's not a surprise though that's why

i'm running for governor in california

to try to actually solve the massive

imbalances that we do have in california

but there you have it i have to say

let's do a little summary there we

i mean we've got a pretty good time

frame here it seems like

most of the fed districts are expecting

hey look if we can hold firm

we can get through certainly the next

three to six months when we start to see

maybe inflation curve down but certainly

the next 12 months

then we should expect to see inflation

kind of vanish again that's at least

according to the federal reserve's beige

book

i'm inclined to believe this that it's

not going to be quick and i want to be

very clear when i say september october

for

inflation expectations going down i'm

not saying

all of a sudden we're high exp inflation

and then we're at zero

no no i'm saying uh inflation's doing

this

and then it's like oh we're starting to

trend down like still high we're

trending down right

the stock the reason that matters though

is the stock market cares about changes

in trends

when the trend line changes that's when

the stock market starts pricing in the

change in the expectations

and if those trend lines change again

those are the inflection points that you

want to pay attention to

anyway that's a breakdown of the base

book for you thank you so very much for

watching and folks

we'll see you next one